VELASCO, PUNZALAN and COMPANY

(Formerly Velasco Aguirre and Company)

CERTIFIED PUBLIC ACCOUNTANTS
LG 21 Cityland Dela Rosa Condominium, 7648 Dela Rosa St., Pio Del Pilar, Makati City 1230
Tel (632) 819-1427 | Telefax (632) 817-6395 | Email velascoaguirre@outlook.ph; nestor@vmccpa.com Web http://vpccpas.weebly.com
PRC/BOA Cert. of Reg. No. 3390 | SEC Accreditation No. 252-FR-1 | BSP Accredited | CDA Accreditation No. 0019-AF

NOTICE NO. : 2019-004

TO : ALL AUDIT CLIENTS

SUBJECT : REVISED FRAMEWORK ON THE SELECTION OF EXTERNAL

AUDITORS AS INDICATED IN THE BSP CIRCULAR NO. 1040
SERIES OF 2019

NOTICE

On May 20, 2019, the Bangko Sentral ng Pilipinas (BSP) issued BSP Circular 1040 Series of 2019
pertaining to the revised framework on the selection of external auditors for the Bangko Sentral
Supervised Financial Institutions (BSFIs) – which includes banks, savings and loan associations, and
pawnshops, among others. This circular was the result of the Monetary Board Resolution No. 643 dated
April 25, 2019 which was geared toward a cooperative arrangement among Financial Sector
Supervisors, namely: the BSP, the Securities and Exchange Commission (SEC), the Insurance
Commission (IC), and the Philippine Deposit Insurance Corporation (PDIC) under the auspices of the
Financial Sector Forum.

Among the salient points to consider in this circular are as follows:

o Classification of External Auditors in three (3) categories are as follows:

(1) Under Group A

a. Universal/Commercial Banks
b. Foreign banks and branches or subsidiaries of foreign banks
c. Banks, trust departments and trust corporations with additional
derivatives authority, pursuant to Section 613

(2) Under Group B

a. Thrift Banks
b. Non-bank financial institutions with quasi-banking license
c. Trust departments and trust corporations

(3) Under Group C

a. Rural and Cooperative Banks
b. Non-stock Savings and Loan Associations
c. Pawnshops
d. Remittance and Transfer Companies (RCTs)/Money Changers/Foreign
Exchange Dealers (MC/FXDs), including Virtual Currency Exchanges and
Electronic Money Issuers
e. Credit Card Issuers/Acquirers
o External Auditors inclusion in the list of Selected Auditors for BSFIs

Those who will be applying for the first time as well as to those who will be applying for
renewal of inclusion in the list of Selected External Auditors for BSFIs shall submit their
application to the SEC. The inclusion in the List of Selected External Auditors for BSFIs shall
be valid for five (5) years or for a shorter period prescribed by the financial sector supervisors.

o Supervisory Enforcement Action

The BSP reserves the right to deploy its range of supervisory enforcement actions to promote
adherence with the requirements set forth and bring about timely corrective actions. For this
purpose, the BSP may issue directives or impose sanctions on BSFIs and/or its directors/trustees
who approved the appointment of the external auditor, who/which are not in the List of
Selected External Auditors for BSFIs, and/or for non-compliance with the provisions of this
section. The BSP may likewise shorten the period of validity of inclusion of an external auditor
in the Lists of Selected External Auditors for BSFIs, suspend, or delist them based on the results
of the assessment of the quality of the audited financial statements (AFS) as well as non-
compliance with this section.

o Transitory Provisions

The following transitory provisions are hereby stated in this circular:

a) External auditors whose inclusion in the List of Selected External Auditors for BSFIs is
valid to cover the audit of 2018 financial statements are hereby given one (1) year
extension on their inclusion in the List of Selected External Auditors for BSFIs allowing
them to engage in the audit of the 2019 financial statements.
b) All applicants (new and renewal) for inclusion in the List of Selected External Auditors for
BSFIs to cover in the audit of 2020 financial statements and thereafter shall be filed with
the SEC starting June 2019.

Our Firm – Velasco, Punzalan & Co., CPAs (Previously Velasco, Aguirre & Co., CPAs), is
one among the list of the BSP Accredited External Auditors whose accreditation would be
up to 2018 financial statements audit only. Thus, by express provision under the “Transitory
Povisions”, our accreditation is hereby extended for 1 more year – that is, up to 2019 financial
statements audit.

The full text of this article and Attachment 1 could be found here:
http://www.bsp.gov.ph/downloads/regulations/attachments/2019/c1040.pdf

Please be guided accordingly.