The Securities and Exchange Commission (SEC) has issued Memorandum Circular No. 26, Series of 2026, amending the accreditation framework for auditing firms and external auditors of SEC-regulated entities and other covered corporations. The amendments strengthen accreditation requirements, expand coverage to certain corporations with government contracts, impose stricter audit-quality standards, and clarify the grounds for conditional accreditation, outright denial, suspension, and revocation.
SEC Memorandum Circular No. 26, Series of 2026 amends Part I, 3.B and Part I, 5 of the Revised Securities Regulation Code (SRC) Rule 68, as well as Annex 68-A on the quality of audit work. It also builds on SEC Memorandum Circular No. 20, Series of 2019, which established the centralized accreditation and selection framework for external auditors and auditing firms.
A significant change is the express inclusion of corporate general contractors with government contracts within the accreditation framework. The Circular also introduces a new filing requirement for corporations holding government contracts, through a notarized schedule of government contracts to accompany their audited financial statements.
KEY PROVISIONS
- Government Contract Coverage: Corporate general contractors holding government contracts (procurement of goods, consulting services, and infrastructure projects involving national government agencies, GOCCs, GFIs, SUCs, and LGUs) must engage SEC-accredited independent auditors under designated categories. Subcontracting does not relieve general contractors of compliance responsibilities.
- Stricter Suspension and Revocation: Accreditation may be suspended, revoked, or modified (after notice and hearing) for acts warranting outright denial, repeated regulatory violations, aiding/inducing violations, fraudulent practices, or failure to comply with SOAR requirements.
| Category Group | Contract Value Thresholds (Government Contracts) | Track-Record Requirements (At Application) |
| Group A | Single contract > ₱750M OR Cumulative contracts > ₱1B | At least 5 corporate clients with total assets of at least ₱100M each |
| Group B | Single contract ₱400M–₱750M OR Cumulative contracts ₱500M–₱1B | At least 5 corporate clients with total assets of at least ₱50M each |
| Group C | General covered entities (outside Group A/B thresholds) | At least 5 corporate clients with total assets of at least ₱5M each |
QUALITY OF AUDIT WORK AND CONDITIONAL ACCREDITATION
The SEC reviews the audited financial statements of at least two clients (selected via a risk-based approach) from the applicant’s certified client list, as well as regulatory monitoring findings and SOAR Inspection results.
| Accreditation Outcome | Condition & Criteria | Limit / Extension Rules |
| 5-Year Accreditation | No material findings in evaluated financial statements for Groups A and B. | Standard full term. |
| Conditional Accreditation | Single material finding per financial statement (Groups A & B). Applies to specified disclosure or supporting doc deficiencies in Group C. | Max 3 consecutive times per category; subsequent eligible applications face outright denial. |
| Downgraded Conditional B / Group C | Two material findings in Groups A & B may result in downgraded Conditional B or Group C options. | Subject to qualification thresholds. |
| Outright Denial Grounds | Gross negligence, lack/loss of independence, misrepresentation/concealment, 6+ material findings in single financial statement, 5th offense with same client, or refusal to provide records. | Conditional accreditation unavailable. |
PRACTICAL IMPLICATIONS
- Auditing Firms & Partners: Must reassess client portfolios, documented track records, independence safeguards, and quality control history to prepare for substantive financial statement reviews. Existing Group B or C auditors may apply for an upgrade only after one year from accreditation grant.
- Government Contractors: Must verify their contract thresholds and engage an appropriately accredited auditor. They are required to prepare a notarizedSchedule of Contracts with the Government (disclosing project description, agency, cost, status, start date, and expected completion) covered by an Auditor’s Report.
EFFECTIVITY
| Milestone | Applicability / Timeline |
| Audits of Financial Statements | Applies to annual or interim financial statements for fiscal periods ending on or after June 30, 2027. |
| General Provisions | Takes effect 15 days after publication in the Official Gazette or two national newspapers. |
| Date of Issuance | September 1, 2026 (Makati City). |
CONCLUSION
SEC Memorandum Circular No. 26, Series of 2026 strengthens the accreditation framework for external auditors by raising experience and audit-quality expectations, expanding coverage to qualifying government contractors, and providing clearer consequences for audit deficiencies and regulatory violations. For both auditors and covered corporations, the amendments emphasize continuing compliance, independence, reliable financial reporting, and accountability throughout the accreditation period.
This guide provides a general overview of SEC Memorandum Circular No. 26, Series of 2026 at the time of writing and is not intended to constitute comprehensive legal advice or an opinion on the topic. For more details and information, you may coordinate with any GVES Law Partner regarding the matter.
Atty. Beryl Joyce V. Barba is an Associate at GVES Law.