Subsections X 164.1 and X 426.2 of the Manual of Regulations for Banks (MORB) and Section 4172Q of the Manual of Regulations for Non-Bank Financial (MORNBFI) require that an annual financial audit of the bank/non-bank with quasi-banking functions [Bank/NBQB Proper (Regular and FCDU) and the Trust Department] be conducted by an external independent auditor not later than thirty (30) calendar days after the close of the calendar year or the fiscal year adopted by the bank.  Reports of such audits shall be made and submitted to the board of directors and the appropriate supervising and examining department of the BSP not later than ninety (90) calendar days after the start of such audit.

In consonance with the aforementioned regulations, banks and NBQBs are to be guided with the checklist of Bangko Sentral requirements in the submission of AFS and Annual Report as shown in Annex A.

Delayed submission of certification of the external auditor, schedules/attachments and amendments in the required reports shall be considered late recording, subject to the penalties under Subsection X 162.2b, MORB and Subsection 4162Q3.b, MORNBFI, as follows:

 

Information/Data required		Deadline for submission
1. Certification on the following:		For submission together with the audited financial statement (AFS) (Not later than ninety (90) calendar days after start of audit)
a. The dates of commencement and termination of audit.
b. The date when the audit report was submitted to the bank's/institution's board of directors/executive officer or country head.
c. That the external auditor, partners, associates, auditor-in-charge of the engagement and the members of their immediate family do not have any direct or indirect financial interest with a bank, quasi-bank, trust entity, NSSLA, its subsidiaries and affiliates where they or any member of their immediate family member have any direct or indirect financial interest and their independence is not considered impaired under the circumstances specified in the Code of Professional Ethics for Certified Public Accountants.
2. Reconciliation for the differences in amounts between the audited financial statements and the submitted Consolidated Statement of Condition (CSOC) and Consolidated Statement of Income and Expenses (CSIE) for bank proper (regular and FCDU) and trust department, including copies of adjusting entries effected by the external auditor.		For submission together with the audited financial statements (AFS). (Not later than ninety (90) calendar days after start of audit)
Note: Please see pro-forma comparative analysis (Annex A-1* )
3. Letter of Comments (LOC) by the external auditor and Certification of the external auditor on the Date when the Letter of Comments was submitted to the bank/ institution's board of directors.		Within thirty (30) banking days after the receipt of the LOC by the Board of Directors/Chief Executive Officer or Country Head.
Note: The Letter of Comments embodies the external auditor's findings and comments on the bank's material weakness on the internal control systems and other aspects of operations
In case no material weakness is noted to warrant the issuance of an LOC, a formal statement issued by the external auditor confirming said fact shall be submitted by the bank/NBQB.
4. Copies of the board resolutions showing the:
1. Action taken on the financial audit report and among other things, the names of the directors present and absent.		Within thirty (30) banking days after the receipt of the audit report (AFS) by the Board of Directors/Chief Executive Officer or Country Head. (AFS to be submitted within Ninety (90) days after start of audit)
2. Action taken on the findings and recommendations in the Letter of Comments (LOC) and among other things, the names of the directors present and absent.		Within thirty (30) banking days after the receipt of the LOC by the Board of Directors/Chief Executive Officer or Country Head.
Note: Foreign banks with branch in the Philippines having no board of directors in the country may submit a certification from the authorized officers that the management had acted on the AFS and LOC in lieu of the board resolution.
5. All the required disclosures in the audited financial statements provided under Subsections X 164.4 to X 164.6 of the MORB, as follows:		(Information is an integral part of the AFS)
i. Basic quantitative indicators of financial performance such as return on average equity, return on average assets and net interest margin;
ii. Risk Based Capital Adequacy Ratio under Sec. 34 of R.A. No. 8791/Sec. 116 of MORB;
iii. Concentration of credit as to industry/ economic sector where concentration is said to exist when total loan exposures to a particular industry/economic sector exceeds thirty percent (30%) of the total loan portfolio;
iv. Breakdown of total loans as to secured and unsecured and breakdown of secured loans as to type of security;
v. Total outstanding loans to DOSRI, percent of DOSRI loans to total loans, percent of unsecured DOSRI loans to total DOSRI loans, percent of past due DOSRI loans to total DOSRI loans and percent of non-performing DOSRI loans to total DOSRI loans;
vi. Nature and amount of contingencies and commitments arising from off-balance sheet items;
vii. Provisions and allowances for losses and how determined;
viii. Aggregate amount of secured liabilities and assets pledged as security;
ix. Accounting policies which shall include, but shall not be limited to, general accounting principles, changes in accounting policies/practices, principles of consolidation, policies and methods for determining when assets are impaired, recognizing income (losses) on impaired assets and losses on non-performing credits (loans or asset), income recognition, valuation policies and accounting policies on securitization, foreign currency translations, loan fees, premiums and discounts, repurchase agreements, premises/ fixed assets, income taxes and derivatives.
6. Annual report of management to stockholders:		Within one hundred eighty (180) calendar days after the close of the calendar year or fiscal year adopted by the bank.
i. For EKBs, KBs and TBs with at least P1 billion resources.
ii. For NBQBs
7. All the required disclosures in the annual report provided under Subsection X 164.5 of MORB(Circular No. 212 dated 20 October 1999), namely:		(Information is an integral part of the Annual Report)
iii. financial performance;
iv. financial position and changes therein;
v. overall risk management philosophy, risk management system and structure;
vi. qualitative and quantitative information on risk exposures; and
vii. basic business management and corporate governance information.
8. Reports required to be submitted by the external auditor under Section 7 of Circular No. 410		Within thirty (30) calendar days after discovery.
a. To enable the BSP to take timely and appropriate remedial action, the external auditor must report to the BSP, the following cases:
1. Any material finding involving fraud or dishonesty (including cases that were resolved during the period of audit); and
2. Any potential losses the aggregate of which amounts to at least one percent (1%) of the capital
b. The external auditor shall report directly to the BSP the following:		Within fifteen (15) calendar day after the occurrence/ discovery
1. Termination or resignation as external auditor and stating the reason therefor;
2. Discovery of a material breach of laws or BSP rules and regulations such as, but not limited to:
a. Capital adequacy ratio; and
b. Loans and other risk assets review and classification.
3. Findings on matters of corporate governance that may require urgent action by the BSP.
Note: In case there are no matters to report (e.g. fraud, dishonesty, breach of laws, etc.), the external auditor shall submit a notarized certification that there is none to report with regard to the items enumerated under Section 7 of Circular No. 410.		For submission together with the audited financial statements (AFS).

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^* Text Available at Office of the National Administrative Register, U.P. Law Complex, Diliman, Quezon City.