SEC proposal forces top auditors on big gov’t projects

Large government contractors may soon be required to hire top-tier government-accredited auditors under a draft memorandum circular seeking to boost oversight, protect investors, and curb corruption in high-value contracts.

The Securities and Exchange Commission (SEC) said Monday that it has proposed stricter accreditation rules for auditing firms and external auditors, raising qualification standards, expanding scrutiny of government contractors, and tightening grounds for denial of accreditation.

“The proposed guidelines seek to strengthen the accreditation framework and protect the public’s interest by expanding oversight for government contractors, elevating qualification and track record standards, and providing a more rigorous evaluation process, among others,” the SEC said. 

The draft circular, issued on 1 April, specifically requires corporations awarded a single government contract of at least P100 million—or combined contracts totaling P150 million in a year—to engage Group A SEC-accredited auditors until project completion.

These companies must also submit notarized schedules detailing project descriptions, costs, and status, all verified by an auditor’s report.

Track record standards for auditors are also being raised under the proposal. 

Group A auditors must now have at least five corporate clients with assets of P100 million each, up from P50 million, while Group B auditors are required to serve five clients with P50 million in assets each, up from three clients at P20 million. 

Group C applicants must handle five clients with assets of P5 million each, instead of three. 

The SEC said these measures are meant to ensure that only auditors with sufficient experience handle regulated entities.

The proposal also expands grounds for outright denial of accreditation. In addition to existing criteria such as gross negligence or lack of independence, auditors could now be denied accreditation for misrepresentation during evaluation or for issuing unqualified opinions despite material misstatements. 

Other grounds include six or more material findings in a single financial statement or failure to maintain independence, including cases where auditors directly prepare the financial statements.

Public comments on the draft are being accepted until 15 May via email at secoga@sec.gov.ph.