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Republic of the Philippines

COMMISSION ON AUDIT

Quezon City

INDEPENDENT AUDITORS REPORT


THE BOARD OF DIRECTORS
PEA Tollway Corporation
Aguinaldo Boulevard, Coastal Road
Paranaque City
We have audited the accompanying financial statements of PEA Tollway Corporation (PEATC), a
wholly-owned subsidiary of the Philippine Reclamation Authority (PRA) which comprise the
balance sheet as at December 31, 2008, the statement of joint venture income, the statement of
changes in stockholders equity, changes in due to venturers, and cash flow statements for the
year then ended, and a summary of significant accounting policies and other explanatory notes.
Managements Responsibility for Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements
in accordance with the generally accepted principles in the Philippines. This responsibility
includes: designing, implementing and maintaining internal control relevant to the preparation and
fair presentation of financial statements that are free from material misstatement, whether due to
fraud or error; selecting and applying appropriate accounting policies; and making accounting
estimates that are reasonable in the circumstances.
Auditors Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with Philippine Standards on Auditing. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditors
judgment, including assessment of the risks of material misstatement of the financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal
control relevant to the entitys preparation and fair presentation of the financial statements in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entitys internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the financial
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.

Basis for Adverse Opinion


Toll revenues totaling P1.185 Billion and undetermined amount of expenses were not recorded in
the books of PEATC resulting in the understatement of the Joint Venture income for the year and
the Retained Earnings as of December 31, 2008. Non-recording of revenue and expenses is
contrary to government laws, rules and regulations and the generally accepted accounting
principles and standards.
Distribution of the 91.5% proportionate share in Tollways Revenue in 2007 and 2008 (90% in 2006
and prior years) in the total amount of P3.13 billion to UEM-MARA Philippines Corporation is not in
accordance with Clause 3.2 of the Joint Venture Agreement. Non-submission of the actual
validated capital contribution of UEM-MARA also resulted in non-recording of the joint venture
assets worth P1.06 Billion as of December 31, 2009 which may result in the lack of basis for the
cost of the assets to be turned-over to the Government upon termination of the Toll Operation
Certificate.
Adverse Opinion
In our opinion, because of the significance of the matters discussed in the preceding paragraph,
the financial statements referred to above do not present fairly, in all material respects, the
financial position of the PEA Tollway Corporation as at December 31, 2008, and the results of its
operation and its cash flows for the year then ended not in accordance with the generally accepted
principles in the Philippines.
COMMISSION ON AUDIT

MYRNA D. MONZON
Audit Team Supervisor
June 30, 2009

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