New SEC Rule Update 2026: What Businesses Need to Know About the Increased Audit Threshold

Yasser Aureada
6 days ago
3 min read

Updated for Philippine Businesses | January 2026

Running a business in the Philippines just got a little easier—especially for small and growing companies.

The Securities and Exchange Commission (SEC) has officially increased the audit threshold under its latest issuance, SEC Memorandum Circular No. 4, Series of 2026.

This update reduces compliance costs for many corporations while maintaining accountability and transparency.

If you own, manage, or advise a business, here’s a clear and practical guide to what this change means for you.

What Is the SEC Audit Threshold?

The audit threshold determines whether a company is required to submit audited financial statements to the SEC or may submit unaudited financial statements instead.

Previously, corporations with assets or liabilities above ₱600,000 were required to undergo an audit. Under the new rule, this threshold has been significantly increased to reflect current economic conditions and to support MSMEs.

What Has Changed Under the New Rule?

New Audit Threshold: ₱3,000,000

Under the amended rules:

Corporations with total assets or total liabilities of more than ₱3,000,000→ Audit is required
Corporations with total assets or total liabilities of ₱3,000,000 or below→ Audit is not required→ Submission of unaudited financial statements with a Statement of Management’s Responsibility (SMR) is allowed

This applies to:

Stock corporations
Non-stock corporations
One Person Corporations (OPCs)

Who Still Needs an Audit Regardless of Size?

Even if your assets or liabilities are below ₱3 million, audited financial statements are still required if your company falls under:

Group A, B, or C corporations (as defined under Revised SRC Rule 68), or
Entities vested with public interest, such as regulated entities or those with fiduciary responsibilities

Updated Definitions: Micro vs. Small Entities

Micro Entities

Assets or liabilities: ₱3 million or below
May use:
- Income tax basis, or
- PFRS for Small Entities (PFRS for SEs)
Must still submit:
- Statement of Financial Position
- Statement of Income
- Notes to Financial Statements
- Statement of Management’s Responsibility (SMR)

Small Entities

Assets or liabilities: Above ₱3 million up to ₱100 million
Audit is required
Must comply with full financial reporting standards

What Is the Statement of Management’s Responsibility (SMR)?

For companies exempt from audit, the SMR replaces the audit report.

It is a sworn statement confirming that:

Financial statements are accurate and complete
Proper internal controls are in place
Management assumes full responsibility for the financial information submitted

Who Must Sign the SMR?

Stock & Non-stock Corporations:Chairman, President/CEO, and Treasurer/CFO
One Person Corporations (OPCs):President and Treasurer

SEC-prescribed templates are available under Annex A.1 and A.2.

When Does This Take Effect?

Applies to financial statements covering fiscal years ending on or after December 31, 2025
Effective 15 days after publication in the Official Gazette or a newspaper of general circulation

Why This Matters for Businesses

Lower Compliance Costs

Audit fees can be expensive. This reform directly benefits micro and small businesses.

Easier Doing Business

Simplified reporting requirements allow owners to focus on operations and growth.

Continued Accountability

Although audit requirements are relaxed, management remains legally responsible for truthful and accurate reporting.

What Should Businesses Do Now?

Review your total assets and liabilities
Determine whether you are audit-exempt or audit-required
Prepare an SMR if exempt
Consult your accountant or corporate secretary
Ensure accuracy—penalties still apply for false or misleading statements

Final Takeaway

The SEC’s updated audit threshold is a pro-business reform that balances regulatory oversight with economic reality. For many MSMEs, this means lower costs, less paperwork, and greater flexibility—but also greater responsibility for accurate financial reporting.

If you are unsure how this rule applies to your company, seeking professional advice is strongly recommended.