At the start of every year, most companies in the Philippines need to prepare for a key business requirement – the Audited Financial Statement. In this article, learn all about the Audited Financial Statement, including which businesses are required to do this, the requirements, and the filing process. 

What is an Audited Financial Statement? 

An Audited Financial Statement, otherwise known as AFS, is a legal document that illustrates a company’s financial standing. It is designed to provide a clear and concise snapshot of an operation’s financial and compliance activities to the Bureau of Internal Revenue and the Securities Exchange Commission. 

The SEC and BIR require companies to work with third-party auditors to ensure that the statement remains bias-free. Companies are responsible for putting together the financial statement. Auditors review the statement and certify the information to be true. An independent accounting or auditing firm often does auditing. 

Which Companies Need to Submit an Audited Financial Statement?

Initially, the Tax Reform law required all operations with gross quarterly sales amounting to P150,000 to submit audited financial statements for the year. 

“Section 232. Keeping of Books of Accounts. – (A) Corporations, Companies, Partnerships or Persons Required to Keep Books of Accounts. – All Corporations, Companies, Partnerships or persons required by law to pay internal revenue taxes shall keep a journal and a ledger or their equivalents: Provided, however, That those whose quarterly sales, earnings, receipts, or output do not exceed Fifty thousand pesos (P50,000) shall keep and use simplified set of bookkeeping records duly authorized by the Secretary of Finance wherein all transactions and results of operations are shown and from which all taxes due the Government may readily and accurately be ascertained and determined any time of the years: Provided, further, That corporations, companies, partnerships or persons whose gross quarterly sales, earnings, receipts or output exceed One Hundred Fifty Thousand Pesos (P150,000) shall have their books of accounts audited and examined yearly by an independent Certified Public Accountants x x x.”

However, the TRAIN law has amended the requirement to include only companies that earn P3 million every quarter. 

“Sec. 232. Keeping of Books of Accounts.—

“(A) Corporations, Companies, Partnerships or Persons Required to Keep Books of Accounts.— All corporations, companies, partnerships or persons required by law to pay internal revenue taxes shall keep and use relevant and appropriate set of bookkeeping records duly authorized by the Secretary of Finance wherein all transactions and results of operations are shown and from which all taxes due the Government may readily and accurately be ascertained and determined any time of the year: Provided, That corporations, companies, partnerships or persons whose gross annual sales, earnings, receipts or output exceed Three million pesos (₱3,000,000), shall have their books of accounts audited and examined yearly by independent Certified Public Accountants xxx

It is important to note that companies must submit an Audited Financial Statement if they reach the threshold at any given point in the year. This means that if an operation hits a gross quarterly income of P3 million for one quarter, they have to keep a record of their books and submit the financial statement. The SEC also ha threshold regulation amounting to Php600,000 total assets/Liabilities, even though the corporation did not meet the 3M threshold set by BIR , they are also required to have an AFS for SEC Purposes 

When is the Deadline for Filing the Audited Financial Statement?

In general, there is no set filing deadline for BIR and SEC audit requirements. Each company has a different deadline depending on the registered financial year. Audited Financial Statements, together with the Annual Income Tax Return, or AITR, must be filed on the 15th day of the fourth month following a company’s financial year-end date. 

Since most companies align their financial year with the calendar year, the deadline for filing audit obligations often falls on April 15. 

Audited Financial Statement Filing Process 

The process of filing your company’s Audited Financial Statement depends on how diligent your operation has been in keeping track of all financial and compliance activities. Generally, the more organized your files are, the easier it is for your business to draft the AFS. 

As mentioned earlier, the company is responsible for creating the financial document. An independent auditing contractor reviews this prepared document and certifies that information to be correct, updated, and accurate. 

After the auditors certify the statement, a company should submit the document to the BIR. Filing the AFS can be done manually or online. Manual filing requires a physical visit to your local Regional District Office or RDO. It is important to note that not all RDOs can accept online submissions. It is crucial to check with the office before submitting the AFS through the online portal.

After the BIR submissions, you can now file your AFS with the SEC. As of the time of writing, the SEC no longer accepts AFS hard copies. All financial statements are to be submitted online. The AFS can be filed through the SEC’s Online Submission Tool or OST. This means that companies that intend to file their financial statements must register to the OST. 

Truth be told, the process of filing your company’s Audited Financial Statement is relatively straightforward. The only complication lies in finding third-party accounting contractors that can accurately audit and assess your operation. As with most things, not all accounting professionals are created equal. It is crucial to find professionals that you can trust. 

Thankfully, when it comes to your Audited Financial Statement, you’ve come to the right place. Loft’s accounting services can do the hard work for you. More than auditing, we offer a slew of accounting solutions for businesses of various scales. We have a dedicated team who can help companies like yours with your day-to-day accounting, bookkeeping, and payroll, as well as all tasks related to tax preparation and filing. In addition to that, our consultants can also lend their expertise when it comes to year-end audits and financial statement preparations for your company.

Reach out to us today to learn more about the services that we offer.