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When your company needs to terminate its relationship with an external auditor in the Philippines, you must follow specific legal procedures and documentation requirements. An Auditor Termination Letter serves as the formal notification that ends the professional audit engagement while ensuring compliance with Philippine corporate and securities laws.

When do you need this document?

You'll need an Auditor Termination Letter when your company decides to change audit firms for any reason. This commonly occurs when switching to a more specialized auditor, addressing independence concerns, or implementing cost-saving measures. Listed companies must be particularly careful as they face additional SEC disclosure requirements when changing auditors. The letter is also necessary when audit firms merge or when your company undergoes restructuring that affects audit arrangements. Board-driven decisions to terminate auditors for performance issues or strategic realignment also require this formal documentation to protect your company legally.

Key legal considerations

Your termination letter must clearly specify the effective termination date, allowing sufficient time for proper transition and final report completion. You should include appropriate language regarding confidentiality obligations and return of company documents. The letter must address any ongoing audit work and establish procedures for completing current engagements or transferring work to new auditors. Professional courtesy requires reasonable notice periods unless termination is for cause. Consider including language about cooperation during the transition period and maintaining professional relationships. For listed companies, coordinate the termination with required SEC notifications and public disclosures to avoid regulatory violations.

Legal requirements in Philippines

Under the Corporation Code of the Philippines, board resolution approval is typically required before terminating external auditors, especially for corporations with specific governance structures. Listed companies must comply with Securities Regulation Code requirements, including timely SEC notification and public disclosure of auditor changes within prescribed timeframes. The Philippine Institute of Certified Public Accountants' Code of Ethics may impact how termination should be handled professionally. Your letter must reference the original engagement letter or contract to ensure proper contractual termination procedures are followed. Maintain copies for corporate records as required by Philippine corporate law, and ensure any required regulatory filings are completed promptly to maintain good standing with the SEC and other relevant authorities.