Question & AnswerQ&A (IC CIRCULAR NO. 29-2009)
The purpose is to strengthen the regulatory framework of the IC and ensure the integrity of audited financial statements by adopting revised rules and regulations on the accreditation and delisting of external auditors and auditing firms, emphasizing high ethical standards, qualifications, and strict reporting obligations.
Group A covers insurance companies, reinsurance companies, and mutual benefit associations. Group B covers insurance and reinsurance brokers, general agents, and trusts for charitable uses.
An external auditor means a single practitioner or a signing partner in an auditing firm responsible for auditing covered entities.
Grounds include failure to submit required reports, loss of independence, willful misrepresentation, violations found by the Board of Accountancy, criminal convictions involving moral turpitude or fraud, refusal to submit documents for investigations, gross negligence, non-compliance with auditing standards, dissolution of the firm, and involvement in major accounting or auditing scandals.
They must be primarily accredited by the Board of Accountancy (BOA), have at least five years of external audit experience (with two years related to the type of entities covered), hold adequate quality assurance procedures, comply with independence requirements through notarized certification, and have attended at least 40 hours of relevant seminars.
Accreditation is valid for three years from the date of approval, and renewal applications must be filed not later than 60 days before expiration to maintain accreditation.
They must report within 30 calendar days after discovery of material findings involving fraud or error, under-reserving issues causing capital deficiency, inadequate consolidated assets, material internal control weaknesses, resignation or termination, breaches of law or IC regulations, and corporate governance matters requiring urgent action. If no issues are found, a notarized certification stating so must be submitted within 15 calendar days after audit completion.
Prohibited services include bookkeeping, information systems design, appraisal or valuation services, actuarial services, internal audit outsourcing, management functions, insurance underwriting, investment advisory, legal services unrelated to audit, and any services declared non-permissible by the IC.
Submission of a completed and notarized application form, a valid BOA Certificate of Accreditation with a list of qualified partners, a copy of the firm's Quality Assurance Manual, audited financial statements of the firm's two largest clients, and the firm's audited financial statements for the preceding two years, accompanied by a fee of Five Thousand Pesos (P5,000).
The external auditor and/or auditing firm must be changed, or the signing partner rotated, every five years or less. Entities that have had the same auditor or firm for five or more consecutive years as of the Circular’s effectivity date have a one-year grace period to comply.