The Securities and Exchange Commission (SEC) issued Memorandum Circular (MC) No. 4, Series of 2026 regarding the Amendments to the Application and Definition of Terms under the Revised Securities Regulation Code (SRC) Rule 68 in Relation to the Adjustment of the Audit Threshold.
Cognizant that the existing audit threshold of less than Six Hundred Thousand Pesos (Php 600,000.00) in total assets or total liabilities set under the Revised SRC Rule 68 pursuant to the Revised Corporation Code of the Philippines (RCC), no longer reflects the current economic conditions nor the present-day definition of micro-enterprises under the Philippine law, the SEC increased the audit threshold to above Three Million Pesos (Php 3,000,000.00) total assets or liabilities of corporations to align to the SEC’s financial reporting requirements with the National Micro Small Medium Enterprises (MSME) policy, to support ease of doing business, and to reduce unnecessary regulatory burden without compromising oversight.
The issuance specifically amended Part I, Section 1(A)(i)(a) and (b) of the Revised SRC Rule 68 as follows:
A. Application of this Rule
(i) This Rule (together with subsequent official pronouncements, interpretations, and rulings on accounting and reporting matters which may be issued by the Securities and Exchange Commission, hereinafter referred to as the “Commission”) states the requirements applicable to the form and content of financial statements required to be filed with the Commission by corporations which meet the threshold, as follows:
a) Stock corporations with total assets or total liabilities of more than Three Million Pesos (P3,000,000), as prescribed under the Revised Corporation Code of the Philippines (RC) and any of its subsequent revisions, or such amount as may be subsequently prescribed;
b) Non-stock corporations with total assets or total liabilities of more than Three Million Pesos (P3,000,000), as prescribed under the Revised Corporation Code and any of its subsequent revisions, or such amount as may be subsequently prescribed.
MC No. 4, Series of 2026 likewise provided for the coverage of audit requirement stating that corporations with total assets or total liabilities at or below the Php 3,000,000.00 shall not be required to submit audited financial statements (AFS); but shall submit financial statements (FS) accompanied by a Statement of Management’s Responsibility (SMR), signed under oath.
The SMR shall be attested to by the Chairman of the Board, President or Chief Executive Officer, and Treasurer or Chief Financial Officer, all duly authorized by the Board of Directors for stock and non-stock corporations. For One Person Corporations (OPCs) the SMR shall be signed under oath by the President and Treasurer.
In the absence of the authorized signatories in either case, the Board of Directors may expressly delegate such authority to a specific officer or director vested with equivalent authority. Said signatories shall assume full responsibility for the accuracy, completeness, and truthfulness of the submitted financial statements, such that incomplete, inaccurate, false, or misleading FS shall be subject to penalties under the provisions of the SRC and RCC, without prejudice to the SEC’s authority to require AFS when necessary for investor protection, regulatory enforcement, or matters of public interest.
The coverage exempts the following which remain subject to mandatory audit requirements, irrespective of their total asset or liability size considering the nature of their regulatory obligations, and the degree of public interest they represent:
i. entities classified as Group A, Group B, or Group C under Part 1, Section 3(B) of the Revised SRC Rule 68; and
ii. Corporations that the SEC may determine as vested with public interest pursuant to the provision of the RCC through subsequent regulations.
Finally, pursuant to the amendment of Section 2 of MC No. 4, Series of 2026 on the audit threshold, the definitions and reporting requirements for Small and Micro Entities in Part I, Section 2 A (iii) and (iv) of the Revised SRC Rule 68 are hereby revised as follows:
(iii) Small Entities
a) Small Entity are those that meet all of the following criteria:
1) Total assets or total liabilities exceeding Three Million Pesos (P3 million) but not exceeding One Hundred Million Pesos (P100 Million). If the entity is a parent company, the said amounts shall be based on the consolidated figures; …xxx”
(iv) Micro Entities
a) Micro entities are those that meet all of the following criteria:
1) Total assets or total liabilities at or below Three Million Pesos (Php 3,000,000.00); xxx
b) Micro entities have the option to use as their financial reporting framework either the income tax basis or PFRS (Philippine Financial Report Standard for SEs (Small Entities, provided however, that the financial statements shall at least consist of the Statement of Management’s Responsibility signed under oath, Statement of Financial Position, Statement of Income and Notes to Financial Statements, all of which cover the two (2) year comparative periods, if applicable. xxx
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