Today is July 14, 2020

002 – Emphasis of Matter paragraph for companies with capital deficiency – Part I, 3.B(iv)

Bulletin No.


Subject Matter



Feb. 16, 2012

SRC Rule 68,  as amended (2011)

Emphasis of Matter paragraph for companies with capital deficiency - Part I, 3.B(iv)

Request for Additional Ground for Exemption


If, other than those specific exemptions provided under subpar. (viii) items (a) to (c) of Part I, par. 3.B(iv), the auditor believes that the audit report on a company with capital deficiency does not warrant an emphasis matter paragraph, a confirmation must be obtained from the Commission through the submission of a position paper.


A determination will be made by the Commission whether the circumstance/s described in the position paper will qualify under item (d) of the exemption list [i.e., such other cases which the Commission may consider as valid ground for considering the company as a going concern].


For those availing of the exemption based on items (a) to (c) or pursuant to an additional exemption granted by the Commission, the notes to the financial statements should include a disclosure of the basis for the exemption.


Wordings of the Emphasis of Matter paragraph


The external auditor of a company  which has incurred a capital deficiency, shall provide in the audit report an emphasis paragraph indicating the following information:


(a)     The fact that the company has incurred a capital deficiency that  raises an issue on its going concern status;

(b)     A brief discussion of a concrete plan of the company to address the capital deficiency and reference to the note to financial statements that provides a complete disclosure of the said plan;

(c)    A statement that the auditor conducted sufficient audit procedures to verify the validity of the aforementioned plan.


Under PSA 570, external auditors are required to perform additional procedures when materiality uncertainty exists as to the ability of the company to continue as a going concern. Thus, in lieu of the statement under item (c) above, the following provisions consistent with PSA 570 provisions, may be indicated: that the auditor performed audit procedures to evaluate management’s plans for such future actions as to likelihood to improve the situation and as to feasibility under the circumstances.


We collect only the valid email addresses of individuals or organizations interested to subscribe in the SEC Bulletin.
IP Addresses
SEC Bulletin sign up form does not collect information about your computer (or mobile device), including IP addresses, operating system and browser type.
For this project, SEC collects and uses email addresses through an online subscription/sign-up form located at the upper left portion of the website. This email addresses are to be incorporated in the mailing list created for the SEC Bulletin.
The collected email addresses will be utilized solely for the mailing list. The email addresses will serve as a means to send out the SEC Bulletin to its subscribers. The email addresses will not be shared with outside parties of the SEC.
Only authorized SEC personnel are granted access to the email addresses collected by SEC through SEC Bulletin sign up from. This information collected are stored in a secure database. We use reasonable security safeguards to protect the information from loss, unauthorized access, use or disclosure.
Under the Data Privacy Act of 2012, a data subject refers to an individual whose personal information is collected and processed. We are duly bound to observe and respect your privacy rights, including your right to information, right to access, right to correct, right to remove, right to damages and right to data portability.

In accordance with the Data Privacy Act of 2012, the SEC is committed to protect and respect the personal data gathered from our clients.If you voluntarily agree to subscribe to our newsletter and receive a monthly issue of the SEC Bulletin as well as other advisories, please provide a valid email address so we can include you in our subscription list.

Rest assured that the information collected will only be used for SEC Strategic Communication purposes and will not be publicized for the privacy and safety of our subscribers.

If you agree with these terms and conditions, please sign up now! Thank you

For more information, suggestion and feedback on this Privacy Notice, please send your email to our Data Protection Officer at