Most Philippine corporations are required to prepare the Audited Financial Statement at the start of each year. This is a legal document that displays a company’s financial standing. It is also known as an AFS. The Audited Financial Statements (AFS) provide both the Securities and Exchange Commission (SEC) and the Bureau of Internal Revenue (BIR) with a summary of the company’s compliance and financial activity.
Both the BIR and the SEC require businesses to collaborate with third-party auditors to guarantee that their financial statements are free of prejudice and errors. However, it is vital to highlight that third-party auditors merely clarify and validate the information’s accuracy. Companies are still primarily responsible for compiling financial statements by regularly applying proper accounting processes.
Who and what companies then are required to submit an Audited Financial Statement?
1. BIR – P3M threshold
Section 232 of the NIRC requires that all companies with operations grossing a quarterly amount of at least P 150,000 to submit an audited financial statement. This includes Corporations, Companies, Partnerships, Sole Proprietorships, and Individual persons (self-employed), and those fitting the aforementioned criteria must submit to a yearly audit by a Certified Public Accountant.
However, the new TRAIN Law has included amendments that state only companies whose gross annual sales, earnings, receipts, or output reach or exceed a sum of P3,000,000 are required to be subject to a yearly audit by a Certified Public Accountant. Companies or individuals must submit an Audited Financial Statement if they reach or surpass this threshold at any given time in the year.
2. SEC – P600K/P1M threshold
Under the Securities and Exchange Commission (SEC) and by the Revised SRC Rule 68, the following are the companies that are required to submit an AFS to the SEC:
- Stock corporations with total assets or liabilities of P600,000 or more
- Non-stock corporations with total assets or total liabilities of P600,000 or more
- Branch offices/representative offices of either stock or non-stock foreign corporations with total assets equivalent to P1,000,000 or more
- Regional operating headquarters (ROHQ) of foreign corporations with total revenue equivalent to P1,000,000 or more
Interestingly, even if companies do not reach the P 3,000,000 threshold by the BIR, but meet the P600,000.00 threshold of the SEC for assets or liabilities, they are still required to submit an AFS to the SEC.
When is the filing deadline for Audited Financial Statements?
Meeting SEC and BIR audit standards does not have a predetermined schedule. This is because the deadline will vary depending on when each company’s fiscal year begins. The Audited Financial Statements, along with the Annual Income Tax Return, must, however, be submitted by the 15th day of the fourth month after the company’s year-end date.
If you are like most businesses that conclude their fiscal year in December, following that calendar year, your deadline will be the 15th of April the following year. Companies who miss the December 31 deadline have 120 calendar days from the end of the fiscal year to comply. Meanwhile, publicly traded firms and other share issuers have only 105 calendar days.
Where do I file audited financial statements?
Online submission of annual reports is compulsory for both stock and non-stock corporations through the SEC Electronic Filing and Submission Tool (eFAST), previously called the Online Submission Tool, at SEC eFAST.
The SEC and its Extension Offices shall not accept submissions over the counter and through courier, as the Commission continues to implement a zero face-to-face transaction policy, in line with the zero-contact policy and automation of business-related transactions mandated by Republic Act No. 11032, or the Ease of Doing Business and Efficient Government Service Delivery Act of 2018.
Process on How to File Audited Financial Statements
1. Prepare your Audited Financial Statements
2. Audit Procedures
The auditor performs audit procedures in accordance with the Philippine Standards on Auditing(PSAs). These procedures may include analytical review, confirmation with third parties, inspection of document, physical observation and sample testing.
3. Audit Adjustment
If the auditor identifies errors and misstatements during the audit, they propose adjustments to the company’s management. The management reviews and approves the adjustments before they are incorporated into the financial statements.
4. Regulatory Filings
The audited financial statements, approved by the board, are filed with the Securities and Exchange Commissions (SEC) within the prescribed period. The SEC required specific forms and supporting documents to be submitted along with the financial statements.
“As of now, the SEC will no longer be accepting AFS hard copies. It should be submitted online. You can file your AFS through eFAST.”
Companies should consult with legal and accounting professionals to ensure compliance with the specific filing requirements and timelines set by the regulatory authorities in the Philippines, such as Securities and Exchange Commissions (SEC) and Bureau of Internal Revenue (BIR).
If you keep up with your bookkeeping and accounting, it will be simple to file your audited financial statements. The most significant aspect of this phase is to choose a trustworthy team of CPAs to handle the audit process and do the submission to the BIR and SEC. If you require assistance with this, our experts can assist you. You may set up a free consultation with us today to get started.
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