MANILA – The Securities and Exchange Commission (SEC) announced in a statement on Tuesday that it will soon handle the accreditation of external auditors across the financial sector to promote the ease of doing business in the country.
In a notice dated July 19, the Commission released for public comment the draft Guidelines on the Adoption of Centralized (One-Stop-Shop) Framework for Accreditation/Selection of External Auditors of the Securities and Exchange Commission, Bangko Sentral ng Pilipinas (BSP) and Insurance Commission’s regulated and supervised institutions.
The SEC intends to roll out the initiative next month in line with its cooperative arrangements with the Bangko Sentral ng Pilipinas (BSP), Insurance Commission (IC) and Philippine Deposit Insurance Corporation under the auspices of the Financial Sector Forum.
Under the proposed guidelines, the SEC will handle the acceptance, processing and approval of applications for accreditation of external auditors of institutions supervised and regulated by the country’s financial sector regulators. Nevertheless, the BSP and IC will have to concur with the approval of applications pertaining to external auditors of their supervised institutions, as applicable.
External auditors will be classified into three categories according to the institutions they will be allowed to audit.
For instance, external auditors under Category A can audit universal/commercial banks, foreign banks and branches or subsidiaries of foreign banks, and banks, trust departments and trust corporations with additional derivatives authority for the BSP.
For the SEC, external auditors under the Category A can audit issuers of registered securities, issues with a class of securities listed for trading in an exchange, and public companies. Meanwhile, such auditors can extend their services to insurance companies, reinsurance companies, and mutual benefit associations for the IC.
Covered institutions will be required to appoint external auditors belonging to the same or higher category. The SEC, BSP and IC may require an institution to appoint an external auditor from higher categories as part of their supervisory action.
The qualification requirements will vary according to the category applied for and depending on the concerned financial sector regulator’s specific requirements.
Lead partners and engagements quality control reviewers of audit firms appointed by covered institutions will be subject to the same selection process and, accordingly, included in the list of accredited/selected external auditors.
The accreditation will be valid for five years or for a shorter period that the financial sector regulators may prescribe, unless suspended or delisted for gross negligence in the conduct of an audit, material misrepresentation in reports, failure to comply with regulatory and reportorial requirements, unjustified refusal to submit documents in connection with an ongoing investigation and other grounds.
External auditors whose existing accreditation with the SEC will expire on or before December 31, 2019 will be given a one-year extension to allow them to engage in the audit of 2019 financial statements.
“External auditors are valuable partners in promoting the integrity of financial reports and transparency in the financial sector,” SEC Chairperson Emilio B. Aquino said.
“The proposed one-stop-shop framework for the accreditation of external auditors will not only streamline the application process on the part of independent auditors and audit firms but also improve the ease of doing business in the country, in general.”
The proposed Guidelines are available on the SEC website. All interested parties are invited to submit their comments, recommendations, suggestions, and inputs to the Office of the General Accountant at the 3rd Floor, Secretariat Building, Philippine International Convention Center Complex, Pasay City or through email at secoga@sec.gov.ph, by August 5, 2019. (PR)
