The Securities and Exchange Commission (SEC) has issued new regulations requiring publicly listed companies and other public interest entities to disclose fees paid to external auditors. The move aims to enhance transparency and accountability in corporate financial reporting.
Outlined in SEC Memorandum Circular No. 18, Series of 2024, the guidelines mandate that companies provide detailed information on fees paid to auditors in their annual financial statements, starting with the period ending 31 December 2024. The disclosure must include fees for auditing financial statements, as well as related services provided by audit firms or their networks, presented in a two-year comparative format.
The rules apply to a range of entities, including public companies, those with assets over P50 million and 200 or more equity security holders, and other firms deemed of public interest by the SEC.
Key highlights of the disclosure requirements include:
- Detailed fees paid or payable to external auditors for financial audits.
- Fees for related entities controlled by the company.
- Any fees constituting over 15% of total auditor income over two consecutive years (a sign of fee dependency).
The SEC has emphasized that failure to comply with these new disclosure rules could result in penalties, reinforcing the agency’s commitment to ensuring corporate transparency and accountability.
By requiring firms to clearly communicate auditor fees, the SEC aims to foster greater trust in financial reporting and audit processes.
