THE Securities and Exchange Commission (SEC) has required listed companies and other public interest entities to disclose fees paid to external auditors in their annual financial statements (AFS) starting with the reporting period ending Dec. 31, 2024.
The new requirement is mandated under SEC Memorandum Circular 18, series of 2024 that was released on Dec. 26, 2024, in line with the code of ethics for professional accountants.
Covered entities include listed companies, issuers of securities registered under Section 12 of Republic Act 8799, or the Securities Regulation Code (SRC), and public companies with at least P50 million in assets and 200 shareholders holding at least 100 shares each.
The requirement also applies to companies filing financial statements for public offerings, holders of secondary licenses issued by the SEC, Bangko Sentral ng Pilipinas and the Insurance Commission, as well as other corporations classified as public interest entities by the SEC.
Under the regulator’s guidelines, companies must provide a two-year comparative disclosure of fees paid to external auditors and their network firms for auditing financial statements.
These include fees charged to related entities under direct or indirect control and consolidated in financial statements audited by the same external auditor.
Additionally, any fees paid by other related entities controlled by the covered company for external auditor services must be disclosed.
If the fees paid to an external auditor account for over 15 percent of their total fees for two consecutive years (fee dependency), this must also be reported, including the year the dependency arose.
Exemptions apply to subsidiaries wholly owned by other public interest entities preparing consolidated financial statements that include the required disclosures, the SEC said.
Non-compliance with these guidelines will result in penalties, following notice and hearing, as outlined under the Revised SRC Rule 68 and the SEC’s schedule of fines.
Be the first to comment