SEC audit threshold P3 million is now the updated benchmark under a new Securities and Exchange Commission (SEC) issuance aimed at reducing compliance costs for micro, small, and medium enterprises (MSMEs). The policy change increases the exemption threshold for submitting audited financial statements (AFS), which the regulator said is intended to make corporate reporting requirements more proportionate to company size while maintaining accountability through certified submissions.

Under the updated rule, qualifying corporations are allowed to file certified financial statements instead of audited reports, provided that specific officers sign a required declaration affirming responsibility for the accuracy and integrity of the documents.

SEC audit threshold P3 million: What changed in the filing requirement

The SEC raised the threshold covering corporations exempt from submitting audited financial statements to those with total assets or total liabilities not exceeding PHP 3 million.

Previously, the exemption applied only to corporations below a much lower level, meaning a larger set of MSMEs had been required to secure external audits even for relatively small-scale operations. The change effectively expands the number of companies eligible for audit exemption, a move widely viewed as lowering annual administrative and professional service costs.

This shift was issued through an SEC memorandum circular, which outlines the updated requirements for stock and nonstock corporations.

SEC audit threshold P3 million: Who is covered by the exemption

The SEC clarified that both stock and nonstock corporations may qualify under the updated threshold, as long as total assets or total liabilities fall within the PHP 3 million ceiling.

Companies covered by the exemption are not automatically relieved of financial reporting obligations. Instead, they must continue submitting annual financial statements, only now these may be certified financial statements rather than audited ones.

In other words, the reporting obligation remains, but the form of assurance changes from third-party audit to management certification under oath.

One-person corporations and signatory requirements

The updated rules also outline who must sign the required declaration for different corporate structures.

For corporations covered by the threshold, financial statements must be accompanied by a Statement of Management’s Responsibility (SMR). This document confirms that management assumes full responsibility for the truthfulness and completeness of the submitted information.

For one-person corporations, the signatures required are structured differently from multi-person corporations, reflecting the legal nature of the entity and its responsible officers.

SEC audit threshold P3 million: Certified statements and accountability safeguards

The SEC stressed that while the new threshold reduces audit-related expenses for smaller firms, it does not eliminate corporate accountability.

Companies under the SEC audit threshold P3 million must still submit financial statements that are properly prepared, certified, and signed under oath by authorized officers. The SEC emphasized that signatories bear responsibility for the accuracy and completeness of the data submitted.

This requirement is intended to preserve regulatory oversight and discourage misrepresentation, even when a company is exempt from audited reporting.

Why the SEC is updating the threshold

Regulators have long recognized that audit costs can represent a significant recurring burden for MSMEs, particularly for micro and small enterprises with limited revenue and staffing.

By increasing the audit exemption ceiling, the SEC’s policy seeks to:

• Reduce unnecessary compliance costs for small entities

• encourage formalization and continued corporate registration

• improve ease of doing business while maintaining reporting discipline

The revised approach also aligns corporate compliance thresholds more closely with current economic conditions.

Implications for MSMEs and corporate compliance planning

The SEC audit threshold P3 million may have practical implications for thousands of registered entities nationwide. Companies that previously needed to engage external auditors annually may now reassess their reporting process and budget requirements, depending on whether they qualify.

However, compliance officers and business owners are advised to confirm their eligibility carefully. The threshold is based on assets or liabilities, and not on income alone. Misclassification or improper filings may still result in regulatory issues.

In addition, some businesses may still choose to undergo audits voluntarily, especially if audited financial statements are required by:

• banks for loan applications

• investors for due diligence

• suppliers or partners for credit terms

• government or bidding requirements

Maintaining documentation and internal controls

Even without an external audit, certified statements must still be backed by reliable records. MSMEs are encouraged to maintain proper bookkeeping, receipts, and documentation to support figures submitted to regulators.

The SEC policy does not eliminate the need for accurate accounting it only changes the assurance mechanism for corporations below the prescribed threshold.

For official SEC circulars and filing guidance, readers may refer to the SEC website: https://www.sec.gov.ph/

Areas Affected / Advisory

• No specific locations were identified.

What the Public Should Do

MSME owners and corporate officers should review their latest balance sheet to determine whether their total assets or total liabilities fall within the updated PHP 3 million threshold. Companies that qualify may adjust their compliance planning, but should still ensure the timely submission of complete financial statements along with the required Statement of Management’s Responsibility.

Businesses should coordinate with their accountants or corporate secretaries to confirm correct filing procedures, proper signatories, and formatting requirements under SEC rules. For those unsure about classification, it may be prudent to seek professional guidance to avoid filing errors. Stakeholders are also encouraged to follow official SEC advisories for updates on corporate compliance thresholds and reporting rules.

Disclaimer

This article is for general informational purposes only and is based on publicly available news and regulatory updates. Requirements, thresholds, and filing procedures may change through subsequent SEC issuances or clarifications. For the most accurate and updated guidance, readers should consult official SEC announcements and applicable legal or accounting professionals.