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SUMMARYUnder the new management, led by businessman Dennis Uy and the Syfamily’s SM Investments Corp., the board engaged the audit firm, SyCip, Gorres,Velayo & Company (SGV & Co.), to perform an opening balance sheet audit of thecompany and subsidiary as of quarter ended March 31, 2017. The purpose was toestablish a firm opening balance sheet for the new shareholders which is customaryafter an acquisition. The audit was conducted to ensure fair presentation of financialstatements and establish accountabilities.The audit showed that there is alleged inflation of financial statement since2015. The audit revealed certain accounts in the previously audited financial
required restatements. The management, with the support of and approval of thenewly elected members of the audit committee and the board of directors, agreedto restate financial statements covering the period 2015 and 2016 as well as theunaudited financial statements for the three months period ending March 31, 2017,to reflect fairly the state of the business.The consolidated financial statements of 2GO & its subsidiary for the yearfrom 2015 to 2016 were audited by KPMG R.G Manabat & Company. KPMG audit inthose year issued unqualified opinion stating that the financial statements werefairly presented in accordance with PFRS. SGV & Co. had been 2GO's independent public accountant for almost decades(from 1977 until 2013). It was replaced by KPMG in 2014 due to “majordisagreement” between management and the auditing firm over how to treat adeferred tax asset during the 2013 audit. According to Tagud that in 2014, thecompany turned around and because there were losses in the previous two years,there was net loss carryover. It is in deferred tax assets. “A deferred tax asset is anaccounting item on a company's balance sheet that may be used to reduce taxableincome.” Tagud added that the deferred tax asset, which is more than P300 million,would have been used the following year, 2015, but SGV said that the companyhave to write it off to make money. And then the board decided to fire SGV becausethey insisted it to write off.In June 2017, 2GO filed its complete restated financial documents for the year2015 & 2016, as well as the first quarter of 2017. The result showed that therestated item are non-cash and non-recurring. Uy state that the restatement reflectsthe commitment of the new management and the board to raise corporategovernance standards in the company.
ANALYSISOn July, the Security and Exchange Commission starts investigating thealleged discrepancy in bookkeeping of logistic 2GO Group Inc. unearth by the newinvestor group now running the company after the company filed its restatedfinancial statement.The restated revealed certain accounts that are reclassified and overstated.