Supreme Court affirms Philippine Securities and Exchange Commission authority to accredit external auditors of covered entities

The Philippine Securities and Exchange Commission reported that the Supreme Court En Banc has upheld the SEC’s authority to require accreditation of certified public accountants acting as external auditors of covered entities, dismissing claims that the accreditation regime unlawfully restrains the practice of accountancy. In an 18-page resolution promulgated on January 28, the Court reversed and set aside its earlier rulings and declared Rule 68, paragraph 3 of the Implementing Rules and Regulations of the Securities Regulation Code and SEC Memorandum Circular No. 13, Series of 2009 (Revised Guidelines on Accreditation of Auditing Firms and External Auditors) valid and constitutional. The accreditation requirements apply to external auditors engaged to perform statutory audits of the financial statements of covered entities, including publicly listed companies, investment firms, and lending and financing companies, and were characterized as regulation of specific audit activities rather than the accountancy profession itself. The Court held that the SEC’s power to accredit is implied from its express authority to regulate and supervise the activities of persons, that the Board of Accountancy remains the main regulator of the profession, and that SEC accreditation complements Board of Accountancy measures by imposing higher standards aligned with international auditing, ethical, and independence standards; it also cited comparable auditor-accreditation mechanisms under banking and insurance laws.