The auditor issued an adverse opinion on the financial statements of PEA Tollway Corporation. The auditor found that toll revenues of 1.185 billion pesos and unknown expenses were not recorded, understating income and retained earnings. Distribution of tollway revenues to the joint venture partner was not in accordance with the agreement. Failure to record the joint venture partner's capital contribution also resulted in joint venture assets of 1.06 billion pesos not being recorded. Due to the significance of these issues, the financial statements did not fairly present the financial position and results of operations in accordance with generally accepted accounting principles.
The auditor issued an adverse opinion on the financial statements of PEA Tollway Corporation. The auditor found that toll revenues of 1.185 billion pesos and unknown expenses were not recorded, understating income and retained earnings. Distribution of tollway revenues to the joint venture partner was not in accordance with the agreement. Failure to record the joint venture partner's capital contribution also resulted in joint venture assets of 1.06 billion pesos not being recorded. Due to the significance of these issues, the financial statements did not fairly present the financial position and results of operations in accordance with generally accepted accounting principles.
The auditor issued an adverse opinion on the financial statements of PEA Tollway Corporation. The auditor found that toll revenues of 1.185 billion pesos and unknown expenses were not recorded, understating income and retained earnings. Distribution of tollway revenues to the joint venture partner was not in accordance with the agreement. Failure to record the joint venture partner's capital contribution also resulted in joint venture assets of 1.06 billion pesos not being recorded. Due to the significance of these issues, the financial statements did not fairly present the financial position and results of operations in accordance with generally accepted accounting principles.
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