In the Philippine business landscape, transparency and accountability are not just ideals—they are legal and strategic necessities. One of the most effective ways to uphold these values is through audited financial statements (AFS). These reports, examined by independent Certified Public Accountants (CPAs), provide assurance that a company’s financial position and performance are presented fairly, accurately, and in compliance with Philippine Financial Reporting Standards (PFRS).
Why Audited Financial Statements Matter
Audited financial statements serve a dual purpose: compliance and credibility. On the compliance side, they fulfill requirements set by the Bureau of Internal Revenue (BIR) and the Securities and Exchange Commission (SEC). On the credibility side, they reassure stakeholders—investors, creditors, regulators, and employees—that the company’s financial data can be trusted.
Audits also reduce risks of fraud, misrepresentation, and costly errors. By evaluating internal controls, auditors often uncover weaknesses that management can address to improve efficiency. In this way, audits are not just about meeting legal obligations but also about strengthening business resilience.
Who Is Required to Submit Audited Financial Statements?
SEC Requirements (2026 Amendments)
Under SEC Memorandum Circular No. 4, Series of 2026, the audit threshold has been significantly updated:
- Stock and Non-Stock Corporations with total assets or liabilities exceeding ₱3 million must submit audited financial statements. This rule applies to fiscal years ending on or after December 31, 2025.
- Corporations below this threshold must file unaudited financial statements accompanied by a Statement of Management’s Responsibility (SMR), signed under oath by the President and Treasurer (for OPCs) or top officials (for regular corporations).
- Branches, Representative Offices, and Regional Operating Headquarters (ROHQs) of foreign corporations remain required to submit audited FS.
This is a major change from the previous ₱600,000 threshold, easing compliance for micro-enterprises and streamline reporting.
BIR Requirements (2026 Updates)
- Revised Audit Guidelines (RMO No. 1-2026): Following the suspension of field audits in late 2025, the BIR resumed operations with stricter, standardized procedures to ensure fairness and transparency.
- AFS Requirement: Businesses with annual gross revenue exceeding ₱3,000,000 must submit audited financial statements with their tax filings.
- Businesses registered under eFPS or eBIRForms must file electronically with audited FS attached.
The BIR also lifted its stop-audit order in January 2026, signaling stricter enforcement and increased issuance of electronic Letters of Authority (eLAs) for tax audits.
Filing Deadlines
SEC:
- AFS must be filed within 120 days from the end of the fiscal year.
- For corporations with a calendar year ending December 31, the deadline is typically April of the following year.
BIR:
- Annual Income Tax Returns (AITR) with attached AFS must be filed on or before April 15 of the following year.
- Filing is mandatory through eFPS or eBIRForms, unless exempted.
Penalties for Non-Compliance
SEC Penalties:
- Late filing of AFS and GIS results in monetary fines ranging from ₱10,000 to ₱50,000 depending on the delay and type of corporation.
- Repeated non-compliance may lead to suspension or revocation of corporate registration.
BIR Penalties:
- Late filing of ITR with AFS incurs a 25% surcharge on the tax due, plus 12% interest per annum and compromise penalties.
- Failure to submit audited FS may trigger a tax audit investigation and higher compliance risks.
Final Thoughts from Account It Right
Audited Financial Statements (AFS) are more than a compliance requirement—they are a cornerstone of business credibility. With the 2026 SEC and BIR amendments, thresholds have been raised to ease burdens on micro-enterprises, but enforcement has become stricter for larger entities.
At Account It Right, we help businesses stay compliant, prepare accurate financial statements, and avoid costly penalties.
Sources: Manila Bulletin | Bureau of Internal Revenue | Philippine News Agency