In an en banc decision dated 28 January 2025 in Securities and Exchange Commission v. 1-Accountants Party-List (G.R. 246027), the High Court affirmed the authority of the SEC to accredit external auditors and auditing firms engaged by corporations issuing registered securities and possessing secondary licenses.
The ruling is a resounding recognition of the SEC’s statutory mandate. The Supreme Court held that the SEC is authorized to exercise not only express powers, but also those which are implied from or necessary and incidental to the effective exercise of its express powers to achieve the objectives and purposes of the law.
Section 5 of the Securities Regulation Code empowers the SEC “to regulate, investigate, and supervise the activities of persons” to ensure compliance with the SRC.
Thus, the SEC does not regulate the accountancy profession itself, but rather the specific activity of external auditing within the capital markets.
Accreditation is how the SEC ensures that financial statements presented to the investing public are reviewed by auditors who are knowledgeable not only of the law but also of the spirit of international best practices. This is the backbone of market integrity, and the SEC must implement this seriously.
With the power to accredit external auditors comes the corresponding authority to penalize those who fail to comply with the law and SEC rules and circulars.
Auditing firms and individual auditors that commit material misrepresentations in their reports, exhibit negligence in the conduct of their audits, or issue unqualified opinions despite material deficiencies or misstatements in the financial statements will be held liable by the Commission.
The SEC now holds the management jointly responsible with the auditors for such misstatements and deficiencies.
Auditors do not exist solely to serve their clients. When they issue an unqualified opinion, they are vouching to the public for a company’s financial truth.
Auditors who issue unqualified opinions despite glaring inconsistencies in financial statements, or worse, those who deliberately conceal material information or misrepresent facts cannot escape liability. The SEC will not hesitate to prosecute violators under the SRC and other applicable laws.
Let it be emphasized: the SEC stood its ground even after an initial denial and the Supreme Court ultimately granted the Commission’s second motion for reconsideration, an extraordinary remedy reserved only for matters of the highest public interest.
The High Court’s final ruling sends a clear message: accreditation by the SEC is a legitimate, necessary, and robust regulatory mechanism, not a mere formality. It is a critical safeguard for market discipline, financial integrity, and public trust.
Compliance with the SEC regulations is not optional. The Commission will continue to uphold its mandate with unwavering resolve—promoting quality control, transparency, and accountability in the financial environment, protecting the investing public, and ensuring the continued development of the Philippine capital markets.