Amendments to the Application of Audit Thresholds Under Revised SRC Rule 68
Executive Summary
The Securities and Exchange Commission (SEC) issued Memorandum Circular No. 04, Series of 2026, titled “Amendments to the Application and Definition of Terms under the Revised SRC Rule 68 in relation to the Adjustment of Audit Thresholds". The Revised Corporation Code and the Securities Regulation Code authorize the SEC to prescribe, amend, and revise audit and financial reporting requirements for corporations under its supervision. The existing audit threshold of ₱600,000 in total assets or total liabilities under Revised SRC Rule 68 no longer reflects prevailing economic conditions or the current definition of micro enterprises, resulting in disproportionate compliance costs for small corporations.
In line with national MSME policy and the government’s ease‑of‑doing‑business objectives, the SEC approved an increase in the audit threshold to above ₱3,000,000, thereby reducing unnecessary regulatory burden while maintaining effective regulatory oversight. This revision was approved by the Department of Finance on 18 November 2025, which concurred that the proposed adjustment supports economic growth while emphasizing the need for strengthened compliance monitoring and accountability of certifying officers where audited financial statements are not required.
Accordingly, in the exercise of its rule‑making authority under Section 74 of the Revised Corporation Code, the Commission hereby amends the relevant provisions of Revised SRC Rule 68, particularly the Application and Definition of Terms, to give effect to the revised audit threshold.
Section 1. Amendment to Part I, Section 1(A) of the Revised SRC Rule 68
Part I, Section 1(A)(i)(a)-(b) of the Revised SRC Rule 68 is hereby amended to read 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 (₱3,000,000), as prescribed under the Revised Corporation Code of the Philippines (RCC) 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 (₱3,000,000), as prescribed under the Revised Corporation Code and any of its subsequent revisions, or such amount as may be subsequently prescribed.
Section 2. Coverage of Audit Requirement
Corporations with assets or liabilities at or below the audit threshold are exempt from submitting audited financial statements and shall instead file unaudited financial statements with a sworn Statement of Management’s Responsibility (SMR) signed by authorized officers. Management assumes full accountability for accuracy and completeness, and misleading or false submissions remain subject to penalties and possible audit requirements when necessary for public interest or investor protection. This exemption does not apply to entities classified as Groups A, B, or C or those deemed by the Commission as vested with public interest, which remain subject to mandatory audits regardless of size.
Section 3. Amendment to Small and Micro Entity Definitions
Pursuant to the amendment of Section 2 on the audit threshold, the definitions and reporting requirements for Small and Micro Entities 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 (₱3 Million) but not exceeding One Hundred Million Pesos (₱100 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 (₱3 Million); xxx
b) Micro entities have the option to use as their financial reporting framework either the income tax basis or PFRS for SEs, 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
Section 4. Transitionary Provision
The amended threshold shall apply to financial statements covering fiscal years ending on or after December 31, 2025. Corporations with fiscal year-ends prior to the effectivity of this Circular shall comply with the audit threshold in effect as of the close of their respective fiscal year.
Section 5. Repealing Clause
All other provisions of SRC Rule 68, circulars, orders, and memoranda inconsistent with this Circular are hereby amended or repealed accordingly.
