On February 7, 2026, I had the privilege of speaking at the QAR Bootcamp, a seminar dedicated to public practitioners. I was tasked with discussing the final topic of the day: Effective and Efficient Working Paper Preparation.
Having worked in both a large firm and a local practice, I’ve seen firsthand how differently audits are performed—and more importantly, how their purpose is perceived. Audits for MSMEs are largely driven by regulatory requirements from the BIR and SEC. If you ask a local practitioner how many of their clients undergo a financial statement audit voluntarily to gain reliable insights for decision-making, the answer would likely be close to none.
Although we are taught in undergrad that "accounting is the language of business," many small business owners view financial statements and the auditor’s report as mere compliance documents, not tools for growth.
The Real Value of Working Papers
One major challenge in working paper preparation is the constraint of time. Since clients are often small businesses, fees are usually low—dictated more by the "going market rate" than by the actual time and expertise required by the audit team. I recall one attendee asking:
"If we prepare detailed working papers for small clients, what’s in it for them?"
My answer? For the client, perhaps not much immediately, as they rarely see the working papers. But for the practitioner? It ensures the continuity of your practice.
When QAR (Quality Assurance Review) inspectors review your firm, your working papers are your defense. Without them, how can you prove an audit was actually performed? In theory, we should budget our time and set fees based on the effort required. In practice, however, we are often forced to match the fees of competitors. This begs the question: How can a proper audit be performed at such low rates?
Core Principle: Documentation is the Work
It is difficult to sell the importance of financial statements—let alone audits—to small businesses if practitioners themselves aren't sold on the value. Some practitioners view documentation as "additional work," but it is not. Documentation is the work.
The Low-Fee Vicious Cycle & Unscoped Work
The mindset that "documentation is extra" combined with low fees creates a vicious cycle where business owners think, "If you charge too much, I’ll just find someone to do it for Php 5,000."
Ironically, the actual "additional work" usually consists of things outside the audit scope: preparing the financial statements, filing ITRs, and submitting documents to regulators (BIR, SEC). If you read a standard audit engagement letter, those items are rarely in the scope, yet we often do them anyway.
With the SEC’s move to increase the threshold for mandatory audits (from Php 600,000 to Php 3,000,000 in assets/liabilities), smaller firms will struggle to keep their practice afloat. If they charge a rate that allows for full QAR compliance, they risk losing clients. If they match low market prices, they risk unprofitable engagements.
For this to work, there must be a collective shift in the practitioners' mindset. We must acknowledge that an audit takes time, even for small businesses. We don’t just "convert" a trial balance into an FS; we verify, we document, and we preserve the integrity of the assurance provided.
The 5-Stage MSME Financial Maturity Model
Perhaps we can approach this by viewing the maturity levels of MSMEs and aligning our professional services to their developmental stage:
Level 1: No Record Keeping
Owners who operate by estimating cash flow solely to keep daily operations running, with no structured ledger.
Level 2: Tax-Driven Record Keeping
Owners who record revenues and expenses solely for the bookkeeper to compute minimum statutory tax obligations.
Level 3: Internal Reporting
Owners who use financial data for management decisions, but not in a standardized format (no trial balance, just cash inflow/outflow sheets).
Level 4: Assisted Reporting
Owners who use financial statements for decisions and can produce a trial balance, but rely on consultants to align them with GAAP / PFRS frameworks.
Level 5: Self-Sufficient Reporting
Owners who prepare their own rigorous financial statements for strategic decision-making, driving a genuine need for an independent audit to verify those figures.
The Practitioner's Opportunity
Since many small clients are still in the earlier stages, we can treat this as an opportunity. As CPAs, we can create a roadmap to help them move to the next level. By doing so, we demonstrate that we are adding actual value to the business, rather than just filing papers for compliance.
