The SEC on January 20 issued Memorandum Circular No. 4, Series of 2026, amending Revised Rule 68 of Republic Act No. 8799, or the Securities Regulation Code (SRC), by significantly raising the audit threshold.
Higher threshold set
Under the new rule, both stock and nonstock corporations with total assets or liabilities not exceeding P3 million are exempt from submitting audited financial statements as part of their reportorial requirements.
Before the amendment, only corporations with assets or liabilities below P600,000 qualified for audit exemption, a level the SEC said no longer reflected the operating realities of micro enterprises.
SEC rationale explained
Audited financial statements can be costly and administratively demanding, particularly for small firms operating with limited capital and manpower.
SEC Chair Francis Lim said the reform recognizes the constraints faced by micro enterprises and allows them to focus resources on growth rather than compliance.
“By allowing the submission of certified financial statements in lieu of audited ones, we are making compliance more proportionate,” Lim said.
Accountability preserved
Despite the exemption, the SEC emphasized that oversight remains intact. Firms below the audit threshold must submit financial statements accompanied by a Statement of Management’s Responsibility (SMR).
For stock and nonstock corporations, the SMR must be signed under oath by the board chair, president or chief executive officer, and treasurer or chief financial officer. For one person corporations, the president and treasurer must sign.
Responsibility assumed
Signatories will assume full responsibility for the accuracy, completeness, and truthfulness of the submitted financial statements.
Penalties remain
Any incomplete, inaccurate, false, or misleading statements will be subject to penalties under the SRC and Republic Act No. 11232, or the Revised Corporation Code, without prejudice to the SEC’s authority to require audited statements when needed for investor protection or public interest.
The higher audit threshold applies to financial statements covering fiscal years ending on or after Dec. 31, 2025.
Key exclusions noted
The exemption does not apply to entities classified under Groups A, B, and C of Revised SRC Rule 68, including publicly listed firms, financial institutions, securities intermediaries, and large nonstock nonprofits deemed vested with public interest.
The SEC’s move recalibrates compliance requirements to better match company size—lightening the load for micro enterprises while maintaining safeguards for investors and the public. —Ed: Corrie S. Narisma
