THE SUPREME COURT (SC) has affirmed the power of the Securities and Exchange Commission (SEC) to accredit external auditors of companies that issue registered securities and own secondary licenses, reversing two decisions it issued earlier.
In a resolution promulgated on Jan. 28 and released on Monday, the full court upheld the validity of the rules that enforce Republic Act No. 8799 or the Securities Regulation Code and the revised SEC guidelines on accreditation of auditing firms and external auditors.
The tribunal reversed the rulings it issued in June 2022 and June 2023.
The rules impose accreditation requirements for external auditors of publicly listed companies, investment firms, as well as lending and financing companies, the SEC said in an e-mailed statement on Monday.
The case stemmed from a lawsuit filed by 1Accountants Party-List, Inc., which argued that the additional accreditation requirements restrained certified public accountants (CPA) from practicing their profession.
1Accountants said the SEC exceeded its mandate by issuing the regulations since the supervision, control and regulation of the accountancy profession has been delegated to the Board of Accountancy.
“The SC’s resolution in favor of the SEC reversed earlier findings of invalidity and unconstitutionality of the subject regulations, as the high court emphasized the far-reaching implications of removing such accreditation,” the SEC said in the statement.
The SC said the corporate regulator’s authority to accredit external auditors is implied from its power to supervise the activities of persons, which include juridical and natural persons such as individual auditors of covered entities.
It added that the accreditation requirement applies only to CPAs who are independent auditors of covered entities.
The SC likewise agreed with the SEC’s view that other laws manifest the state’s policy of allowing various regulators, such as those in the financial sector, to accredit external auditors.
“Hence, the SEC’s accreditation of external auditors… is a logical extension of existing regulatory practices aimed at promoting consistency, efficiency and financial integrity across different sectors,” according to the resolution.
“Centralizing the accreditation process under the auspices of the SEC will enhance regulatory oversight, streamline compliance requirements and reinforce investor protection within the securities market ecosystem,” it added. — Revin Mikhael D. Ochave
