SEC: Firms must disclose fees paid to external auditors

January 14, 2025 | 12:00am

MANILA, Philippines — To boost transparency and accountability in the reporting of financial and operational results, the Securities and Exchange Commission (SEC) is now requiring publicly listed companies to disclose fees paid to their external auditors.

Through the issuance of Memorandum Circular 18, Series of 2024, the SEC has provided the guidelines on the disclosure of fee-related information of external auditors.

The guidelines will apply to the annual financial statements (AFS) of companies for the period ending Dec. 31, 2024 and thereafter.

It covers public interest entities such as listed companies, issuers which have sold a class of its securities, and public companies or firms with assets of at least P50 million and have 200 or more holders of at least 100 shares of a class of equity securities each.

Also covered are firms in the process of filing their financial statements for the issuance of any class of instruments in a public market, holders of secondary licenses issued by the SEC, Bangko Sentral ng Pilipinas and Insurance Commission, and such other corporations that the SEC may consider in the future as public interest entities.

Companies covered by the guidelines are mandated to present in two-year comparative format specific fee-related information as a supplement to their AFS.

The required disclosure includes fees paid or payable to, or as agreed with, the external auditor or audit firm and network firms for the audit of financial statements on which the external auditor expresses an opinion.

The SEC requires that fees charged to the covered company and its related entities where it has direct or indirect control and are consolidated in the financial statements on which the external auditor or audit firm will express an opinion be presented in a two-year comparative format.

It said that any fees charged to any other related entities directly or indirectly controlled by a covered company for the services by the external auditor or audit firm or a network firm are also subject to the new disclosure guidelines.

“To enhance transparency relevant to external auditors’ independence and align the commission’s rules on fee disclosure requirements with the Code of Ethics for Professional Accountants duly adopted in the Philippines, the commission, in its resolution dated Dec. 26, 2024, resolved to issue these guidelines,” the SEC said.

The commission warned that failure to comply with the guidelines would result in the imposition of penalties after notice and hearing, as prescribed under the Revised Securities Regulation Code Rule 68 and the consolidated scale of fines and penalties of the SEC.