Statement of Management's Responsibility (SMR): When a Philippine Corporation May File Unaudited Financial Statements
A Statement of Management's Responsibility (SMR) is the signed statement in which the officers of a company take responsibility for its financial statements. Under SEC Memorandum Circular No. 4, Series of 2026, a stock or non-stock corporation with total assets or total liabilities of ₱3,000,000 or less no longer needs audited financial statements for the SEC. It files financial statements with an SMR signed under oath instead. Larger corporations, and those in regulated groups, still need an external audit.
Read the full text: SEC Memorandum Circular No. 4, Series of 2026, January 20, 2026 (Securities and Exchange Commission)
What is a Statement of Management's Responsibility (SMR)?
The SMR is a short signed statement that goes with a company's financial statements. In it, the officers say that management is responsible for the financial statements.
For a small corporation that files without an audit, the SMR carries more weight. No auditor's report stands behind the figures. The sworn statement of the officers does.
Which corporations may file financial statements without an audit?
SEC Memorandum Circular No. 4, Series of 2026 raised the audit threshold under the Revised SRC Rule 68. The rule is now this:
A stock or non-stock corporation with total assets or total liabilities of more than ₱3,000,000 must file audited financial statements.
A corporation at or below ₱3,000,000 does not need audited financial statements for the SEC. It files financial statements with an SMR signed under oath.
The old line was much lower. Under Section 177 of the Revised Corporation Code, only a corporation with total assets or total liabilities of less than ₱600,000 could file financial statements certified under oath by its treasurer or chief financial officer.
Who must sign the SMR?
The circular names the officers who sign:
For stock and non-stock corporations: the Chairman of the Board, the President or Chief Executive Officer, and the Treasurer or Chief Financial Officer, all authorized by the board.
For a One Person Corporation: the President and the Treasurer.
The SMR must be signed under oath. For other duties of a One Person Corporation, see our guide on OPC compliance in 2026.
Which small corporations still need an external audit?
Size alone does not decide it. The exemption does not apply to:
entities in Groups A, B and C under Part I, Section 3(B) of the Revised SRC Rule 68; and
entities that the SEC finds to be vested with public interest.
These must have audited financial statements whatever their size. They must also check which auditor they may engage; see our guide on SEC accredited auditors.
The SEC also keeps the power to require an audit from an exempt corporation when this is needed for investor protection, enforcement or the public interest.
Which financial statements does the ₱3,000,000 threshold cover?
The new threshold applies to financial statements for fiscal years ending on or after December 31, 2025. A fiscal year that ended earlier follows the threshold in force at the end of that fiscal year.
So a corporation that closes its books on December 31, 2026 tests its total assets and total liabilities against ₱3,000,000 as of that date.
What should a small corporation do before it files an SMR?
Take these steps in order:
Check total assets and total liabilities at the end of the fiscal year. If either one is more than ₱3,000,000, an external audit is required.
Check if the corporation belongs to Group A, B or C, or is vested with public interest. If so, an audit is required.
Have the board authorize the officers who will sign.
Prepare the financial statements and the SMR, and have the SMR sworn.
File them with the SEC on or before the corporation's deadline. Our guide on SEC reportorial requirements lists what to file and when.
Missing the deadline has a cost. See our guide on the late AFS filing penalty.
What happens if the SMR or the financial statements are wrong?
The circular states that inaccurate or misleading statements are subject to the penalties under the Securities Regulation Code and the Revised Corporation Code. The officers who sign should read the figures, and the corporation should keep complete books and supporting records.
The circular amends an SEC rule only. It does not speak for the BIR, banks or other regulators, which have their own rules on audited financial statements. The Tax Code, for one, requires corporations whose gross annual sales, earnings, receipts or output exceed ₱3,000,000 to have their books audited yearly by an independent CPA (Section 232(A)).
Frequently asked questions
Is an SMR the same as an auditor's report?
No. The SMR is management's own statement. An auditor's report is the opinion of an independent auditor on the financial statements.
Does the ₱3,000,000 test look at assets only?
No.
It looks at total assets or total liabilities. If either one is more than ₱3,000,000, the corporation must file audited financial statements.
Can an exempt corporation still have its financial statements audited?
Yes.
The circular removes the SEC requirement for small corporations. It does not stop a corporation from having an audit, for example when a bank or an investor asks for audited financial statements.
Does a One Person Corporation also file an SMR?
Yes.
A One Person Corporation at or below the threshold files an SMR too. Its President and its Treasurer sign it.
Sources
SEC Memorandum Circular No. 4, Series of 2026, January 20, 2026 (Securities and Exchange Commission)
Republic Act No. 11232 (Revised Corporation Code), Section 177
Revised Securities Regulation Code Rule 68 (Securities and Exchange Commission), Part I, Section 3(B)
National Internal Revenue Code of 1997, as amended, Section 232(A)
Looking for an accredited external auditor?
Our assurance practice is accredited with the SEC and BSP (Class C) and with the Cooperative Development Authority (CDA) as an external auditor, and audits financial statements for SEC and BIR filing. See our audit and assurance services.
You can also email info@aureadalaw.com or call (02) 8812-9990.
Related guides
This article is general information as of its publication date, not legal advice, and does not create a lawyer-client relationship. For advice on your situation, consult a lawyer.
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