The new rules are intended to strengthen the enforcement capacity of the commission as a regulatory body and increase reliance on the opinion of external auditors.
In a memorandum circular issued yesterday, the SEC said: "High standards and strict reporting obligations for external auditors of listed companies and secondary licensees of the commission shall be maintained and monitored through a system that will encourage quality control and disciplined financial environment."
To get accredited, an external auditor must have at least five years experience in external audits, of which no less than two years should have been spent in auditing the type of entity for which accreditation is applied for.
An external auditor for public companies and all types of secondary licensees shall have at least five clients with total assets of at least P50 million each. To be able to audit pre-need companies, an external auditor must have at least three clients with assets of at least P30 million each.
The SEC said the accredited auditing firm is prohibited from engaging in the following non-audit services unless the safeguards under the Code of Ethics for CPA’s are undertaken by the firm or auditor to reduce the threat to independence:
• bookkeeping or other services related to the accounting records or financial statements of the audit client;
• appraisal or valuation services, fairness opinions;
• internal audit outsourcing services;
• management functions or human resources;
• broker or dealer, investment adviser or investment banking services, and;legal services and expert services unrelated to the audit.
The firm and its external auditor are also required to comply with the terms of the generally-accepted auditing standards in the Code of Professional Ethics which include independence rules.
The accreditation of an external auditor and/or auditing firm shall expire or shall be automatically delisted after a period of three years from date of approval of his accreditation unless renewed before said date.
Entities with secondary licenses are issuers of registered securities, financing companies, investment houses, brokers and dealers of securities, investment companies, government securities eligible dealers, universal banks registered as underwriters of securities, transfer agents, issuers of registered time shares, and stock exchanges.