As a statutory requirement imposed under Philippine law, non-exempt businesses are required to prepare and submit audited financial statements (AFS) and other related disclosures with the BIR and SEC every year as part of their annual compliance.
While not every entity is obligated to do so, Section 232 of the National Internal Revenue Code (NIRC), as further amended by the TRAIN Law, provides that individuals and corporate taxpayers with gross annual sales, earnings, receipts, or output exceeding three million pesos (Php 3,000,000) are mandated to have their books of accounts examined and audited yearly by independent certified public accountants (CPA), with the exception of individuals who availed of the Optional Standard Deduction (OSD).
However, for corporate taxpayers, they are still required by the SEC to file audited financial statements regardless of the OSD rule as this is a mandatory reportorial requirement, and SEC will not accept filing unless the same is stamped by the BIR.
Why audit your financial statements?
Financial statements are audited to ensure that a company has presented a true and fair view of their financial performance and position, and that these reports are prepared in accordance with the generally accepted accounting principles (GAAP). Apart from this, undertaking an audit helps ascertain respective stakeholders and regulatory bodies of the proper valuation of the accounts and the accuracy of these disclosures, giving them a reasonable assurance that the financial statements, in all material respects, are free from misrepresentation or misstatement.
Who is qualified to carry out the audit?
To be qualified, CPAs must be duly accredited by the Board of Accountancy-Philippine Regulatory Commission (BOA), and by the BIR as a tax agent. If audited financial statements were signed by a non-accredited CPA, the taxpayer will be penalized while the signatory CPA will be reprimanded, or worse, may get his license revoked.
What if financial statements are not audited?
The BIR may refuse to accept unaudited financial statements as an attachment to the income tax returns (ITR), and may impose penalties upon failure to file or late filing.
To avoid these inconveniences, it’s always a good practice to start preparing for your audit several months prior to the deadline. But now that the tax season is here, you might need the services of a qualified audit firm like MP Camaso and Associates to take care of the volume of work needed in filing your audited financial statements and income tax returns on time.
Let us take care of your audit today by sending us an email at mpcamaso@mpca.com.ph!
