Know what is dueRecurring requirements and document requests are coordinated through a consistent monthly rhythm.
How to Choose an External Auditor for Your SEC AFS
Home / BGB Insights / BGB Articles
BGB Articles · Audit & Assurance
How to Choose an External Auditor for Your SEC AFS
A practical guide for Philippine business owners on selecting a qualified auditor for your Audited Financial Statements—before the BIR and SEC deadlines arrive.
Quick answer
First, check if you need an audit. Under SEC Memorandum Circular No. 4, Series of 2026, a stock or non-stock corporation must file audited financial statements with the SEC if its total assets or total liabilities are more than ₱3,000,000 (up from ₱600,000), starting with fiscal years ending on or after December 31, 2025. The BIR runs a separate test: gross annual sales or receipts above ₱3,000,000. If you need an audit, pick a CPA with current Board of Accountancy (BOA) accreditation, SEC-accredited if your company is in a covered group, and willing to put the scope, timeline, and fee in a written engagement letter. Engage them before your fiscal year ends.
Every year, many Philippine business owners rush to find “someone who can sign the AFS” a few weeks before the deadline. That is risky: the BIR, the SEC, banks, and investors all rely on the auditor’s report. This guide gives you the decision path and the steps in order. You don’t need an accounting background to follow it.
Basic terms, in plain language
- Financial statements (FS): your company’s yearly “report card.” It shows what the business owns, what it owes, and whether it earned a profit or took a loss.
- Assets: what the business owns or is owed, such as cash in the bank, receivables (money customers still owe you), inventory, equipment, vehicles, and property.
- Liabilities: what the business owes others, such as loans, unpaid suppliers, taxes payable, and advances from owners.
- Audited financial statements (AFS): financial statements examined by an independent CPA, who issues a signed report saying whether they are fairly presented.
- Statement of Management’s Responsibility (SMR): a sworn statement, signed by the company’s officers, that management is responsible for the financial statements. If your company is below the SEC audit threshold, you file your FS with an SMR instead of an audit report.
Example: a corporation with ₱2.5M in total assets and ₱1.2M in total liabilities is at or below ₱3M on both counts, so under the SEC rule it files FS with an SMR (unless it is in a covered group, explained below). If either total goes above ₱3M, it files AFS.
Step 1. Decide if you need an audit
The SEC and the BIR use separate tests. Work through both. Meeting either one means you need an audit for that agency.
- SEC test: total assets or total liabilities. Look at your year-end balance sheet. If total assets OR total liabilities are more than ₱3,000,000, you must file AFS with the SEC. If both are ₱3,000,000 or less, you file FS with a sworn SMR instead. (SEC MC No. 4, s. 2026, applicable to FS for fiscal years ending on or after December 31, 2025.)
- SEC exception: covered groups. Companies classified as Group A, B, or C under Revised SRC Rule 68 (for example, public or listed companies and SEC-regulated entities such as secondary licensees), plus companies the SEC declares vested with public interest, still need an audit regardless of size. Foreign branches, representative offices, and regional headquarters have their own thresholds (generally ₱1,000,000).
- BIR test: gross sales or receipts. If your gross annual sales, earnings, receipts, or output exceed ₱3,000,000, the Tax Code requires an independent CPA to audit your books, and the AFS is attached to your Annual Income Tax Return. This test uses sales, not assets.
- Result. If you pass either test, continue to Step 2. If you pass neither, you may not need an audit this year. Banks, investors, or grantors may still ask for one, so check before you decide.
| Regulator | What triggers audited FS | Rule to check |
|---|---|---|
| SEC | Total assets or total liabilities of more than ₱3,000,000 (stock and non-stock corporations). At or below: FS with a sworn SMR. Groups A, B, C and public-interest entities: audit regardless of size. | SEC MC No. 4, s. 2026 amending Revised SRC Rule 68 (was ₱600,000) |
| BIR | Gross annual sales, earnings, receipts, or output of more than ₱3,000,000. | National Internal Revenue Code, Sec. 232(A), as amended |
Old FS, old rule: fiscal years that ended before December 31, 2025 still follow the threshold in effect at that time (₱600,000).
Step 2. Check the auditor’s credentials
- PRC license: the CPA who signs must hold a valid Professional Regulation Commission ID.
- BOA accreditation: CPAs and firms in public practice must hold a current Certificate of Accreditation from the Board of Accountancy. Ask for the certificate number and validity period.
- SEC accreditation (only if you are in a covered group): companies in Groups A, B, or C under Revised SRC Rule 68 must use an SEC-accredited external auditor in the right category. Most ordinary SMEs are not covered. If yours is, check the SEC’s list of accredited auditors.
- Relevant experience: ask whether they have audited businesses in your industry and of your size.
Step 3. Put the scope in a written engagement letter
The engagement letter is your contract with the auditor. It should state:
- Period and framework. The fiscal year covered and the accounting framework used (for example, PFRS, PFRS for SMEs, or PFRS for Small Entities, depending on your size).
- Deliverables. The independent auditor’s report, the audited statements and notes, and any supplementary schedules needed for BIR and SEC filing.
- Your responsibilities. Management prepares the FS, provides the records, and signs the representation letter and the SMR.
- Timeline. Dates for the document request list (“PBC” list), fieldwork, draft review, and report release, all set to meet your filing deadlines.
- Fees and exclusions. What the fee covers, and what is billed separately (for example, catch-up work or extra schedules).
Step 4. Plan backward from the BIR and SEC deadlines
- BIR first. For calendar-year taxpayers, the AFS is generally attached to the Annual Income Tax Return due on or before April 15.
- Then the SEC. The AFS filed with the SEC must carry the BIR “received” stamp or, for eAFS filers, the BIR confirmation. For FY2025 reports, SEC MC No. 9, s. 2026 set May 29, 2026 as the SEC eFAST deadline for December 31 year-ends. Companies with other year-ends generally file within 120 days after their fiscal year ends. The SEC announces the schedule every year, so confirm it each year on sec.gov.ph.
- Start before year-end. Early engagement leaves time for inventory counts, bank and customer confirmations, and adjustments. Late engagements usually mean higher costs and rushed work.
Step 5. Understand how audit fees are set
Audit fees depend on the work required, not just your revenue. The main factors are assets, transaction volume, number of accounts and branches, the condition of your records, internal controls, prior audit history, and how close the deadline is.
BGB indicative range
Audit & Annual Financial Statements: ₱20,000–₱85,000 when the scoped package is AFS with ITR (that range covers the agreed package, including the ITR work in scope).
ITR filing with unaudited FS (no statutory audit / AFS): ₱10,000–₱25,000.
ITR filing only (no statutory audit / AFS): ₱5,000–₱15,000. For clients who only need annual income tax return preparation and filing.
Regulated, first-year, or complex audits are assessed separately. Final fees are confirmed after scoping, and government fees and third-party costs are separate. Request an audit scope.
When to get help
Talk to a CPA if you are near the ₱3M line, if your books are behind, if you are not sure your company falls in Group A, B, or C, or if this is your first audit.
How BGB helps with Audit & Annual Financial Statements
BGB examines annual financial statements in line with auditing standards. We assess the entity, agree the scope in writing, and deliver a clear engagement you can stand behind—built on bold integrity, stewardship, and partnership.
Frequently Asked Questions
What is the SEC audit threshold in 2026?
More than ₱3,000,000 in total assets or total liabilities, under SEC Memorandum Circular No. 4, Series of 2026 (signed January 20, 2026). It applies to FS for fiscal years ending on or after December 31, 2025. The old threshold was ₱600,000.
What if my corporation is at or below ₱3 million?
You file your FS with a sworn Statement of Management’s Responsibility instead of audited FS, unless you are in Group A, B, or C or have been declared vested with public interest. The BIR test (gross annual sales or receipts above ₱3,000,000) is separate, so check both.
Do I need an SEC-accredited auditor for my small corporation?
Usually not. SEC accreditation is required for entities in Groups A, B, or C under Revised SRC Rule 68, such as public and listed companies and certain SEC-regulated entities. Most SMEs may engage any CPA with current BOA accreditation for public practice.
When should I engage an external auditor?
Ideally before your fiscal year ends. That leaves time for inventory observation, confirmations, and adjustments before the April 15 BIR deadline (calendar-year taxpayers) and the SEC filing schedule for that year.
Can I change auditors this year?
Yes. Inform your current auditor, give the new auditor access to prior-year reports and working papers where needed, and allow time for opening-balance procedures in a first-year engagement.
Official sources & references
- SEC Memorandum Circular No. 4, Series of 2026 (January 20, 2026). Subject: Amendments to the Application and Definition of Terms under the Revised SRC Rule 68 in Relation to the Adjustment of the Audit Threshold. Sets the threshold at more than ₱3,000,000 in total assets or total liabilities, introduces the SMR for companies at or below it, and applies to fiscal years ending on or after December 31, 2025. Available from the Securities and Exchange Commission at sec.gov.ph (Memorandum Circulars, 2026).
- SEC Memorandum Circular No. 9, Series of 2026 (February 13, 2026): filing of annual financial statements and the General Information Sheet, including the May 29, 2026 eFAST deadline for December 31 year-ends. Available at sec.gov.ph.
- Revised SRC Rule 68 (Securities Regulation Code): financial reporting requirements and the Group A, B, and C classifications. Available at sec.gov.ph.
- SEC eFAST (online filing of AFS and GIS): efast.sec.gov.ph
- National Internal Revenue Code of 1997, Sec. 232(A), as amended: books audited by an independent CPA when gross annual sales, earnings, receipts, or output exceed ₱3,000,000. Bureau of Internal Revenue: bir.gov.ph (Annual ITR and eAFS).
- Professional Regulation Commission / Board of Accountancy (CPA licensing and accreditation for public practice): prc.gov.ph
Articles and summaries are for general information only and are not a substitute for advice based on a taxpayer’s specific facts. Official SEC and BIR issuances and current regulations should always be verified before reliance.
Last updated: October 27, 2026 (checked against SEC MC No. 4 and No. 9, s. 2026)
Connect with BGB
Your Growth. Our Stewardship.
Tell us about your business and what you need to get done. BGB will review your situation and propose a clear, scope-based engagement—with integrity, stewardship, and partnership.
