SEC to streamline accreditation of external auditors

The Securities and Exchange Commission (SEC) is poised to roll out by next month a one-stop shop for the accreditation of external auditors for the financial sector, covering entities regulated and supervised by the Bangko Sentral ng Pilipinas (BSP) and the Insurance Commission (IC).

The initiative is in line with the SEC’s cooperative arrangement with the regulators, including the Philippine Deposit Insurance Corp., which all work under the inter-agency government body, the Financial Sector Forum.

“External auditors are valuable partners in promoting the integrity of financial reports and transparency in the financial sector,” SEC chair Emilio 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,” he added.

In a notice dated July 19, the SEC released for public comment the draft guidelines on the adoption of a framework for accreditation and selection of external auditors.

Under the proposed guidelines, the SEC will handle the acceptance, processing and approval of applications for accreditation of external auditors supervised by financial sector regulators. 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 based on 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 category A can audit issuers of registered securities, issues with a class of securities listed for trading in an exchange, and public companies. These 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 regulator’s specific requirements.

The accreditation will be valid for five years or for a shorter period that the financial sector regulators may prescribe, unless suspended or delisted.