Auditor's Report Adverse E

Villafuerte, Echano
& Co.
6777 Ayala Avenue
1226 Makati City
Philippines
& Co.
Tel: (632) 225

5565
Fax: (632) 041
8540
www.veco.com.
ph
BOA/PRC Reg. No. 0018,

October 28, 2012, valid until October
31, 2015
SEC Accreditation No. 0012-FR-3
(Group C),
INDEPENDENT AUDITORS REPORT

The Board of Directors
Philippine Postal Corporation
Liwasang Bonifacio, Manila
Report on the Financial Statements
We have audited the accompanying financial statements of the Philippine Postal Corporation
(PPC), which comprise the balance sheet as at December 31, 2011, and the income statement,
statement of changes in equity and cash flow statement for the year then ended, and a
summary of significant accounting policies and other explanatory information.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial
statements in accordance with generally accepted state accounting principles in the Philippines,
and for such internal control as management determines is necessary to enable the preparation
and fair presentation of financial statements that are free from material misstatement, whether
due to fraud or error.
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 the 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 adverse audit opinion.
Basis for Adverse Opinion
The audit disclosed the following weaknesses or breakdown in the accounting system which
greatly impaired the fairness of presentation of major significant accounts in the financial
statements, as discussed in detail in the Comments and Observations portion of this Report:
1. The Cash in Banks account balance in the books of the Corporation registered a
discrepancy of P210 million with those outstanding in the books of its depository banks
as of December 31, 2011. In the absence of the usual bank reconciliation
statements/schedules and plausible explanation on the reasons for the discrepancy, the
Cash in Banks account stated at P828 million, is of doubtful accuracy. (Comments and
Observations No. 1)
2. Reciprocal accounts, Due from Regional Offices and Due to Central Office, which should
normally be equal or zero during consolidation of the accounts at yearend, as they are
& Co.
We make things
better. . .
intended merely as clearing accounts for intra-agency receivables and payables, have
unreconciled balances that accumulated to P4,479 million. Both accounts showed
outstanding debit balances and abnormal debit balances of P2,421 million and P2,058
million, respectively. The abnormal debit balance of the Due to Central Office account of
P2,058 million should have been of great concern as it indicates overcharging of the
account beyond its normal credit balance being an intra-agency liability account, more
so in the light of its reciprocal account at the Central Office reflecting a still huge
receivable from the Regional Offices at P2,421 million. Since these reciprocal accounts
affect a group of real and nominal accounts which are either charged or settled, the
distortions in the balances of the related accounts affected reached quite an
unmanageable level in the face of the discrepancy being unreconciled over the years
which now stood at P4,479 million. (Comments and Observations No. 3)
3. The balances of the bad accounts included in the total assets at P1,241 million and in
the total liabilities and capital at P760 million that were unreconciled and unsubstantiated
put in question the validity, accuracy, existence, legitimacy and relevance of the amounts
recorded and their corresponding implications in the financial position of the Corporation.
(Comments and Observations No. 4)
4. Payable, Others-Domestic Money Orders, a liability account for Money Orders which by
design should be equal to and backed up by the Money Order Fund, a trust fund
maintained with banks for encashment of issued Money Orders, showed a difference in
bank balance of P2,903 million representing or at least indicating unfunded payables of
the same amount which have not been reconciled for several years. The said
unreconciled variance was too huge to have not been reconciled for several years and
implies lapses in the recording of the transactions with significant impact on the balances
of other accounts affected. (Comments and Observations No. 6)
5. The huge unreconciled balances between the general ledgers and subsidiary ledgers of
the Accounts Receivable-International Accounts and the Accounts Payable-International
Accounts which stood at P609 million and P722 million, respectively, greatly affect the
reliability of the recorded amounts. The failure to reconcile and support the substantial
discrepancy in these accounts with the details supposedly available from the subsidiary
ledgers rendered the amounts as reported significantly unreliable. (Comments and
Observations No. 7)
Adverse Opinion
In our opinion, because of the effects of the matters discussed in the Basis for Adverse Opinion
paragraphs, the financial statements do not present fairly, in all material respects, the financial
position of the Philippine Postal Corporation as of December 31, 2011, and of its financial
performances and its cash flows for the year then ended in accordance with generally accepted
state accounting principles in the Philippines.
Report on the Supplementary Information Required Under Revenue Regulations
No. 15-2010
Management of the PPC has not presented the supplementary information on taxes, duties and
license fees required for purposes of filing with the BIR. Such information is not required as part
of the basic financial statements. Our opinion on the basic financial statements is not affected
by the non-presentation of the information.
VILLAFUERTE, ECHANO & CO.

We make things
better. . .
& Co.
Gerome I. Echano
Partner
CPA Certificate No. 82426
SEC Accreditation No. 0664-AR-1 (Group C),
March 11, 2011, valid until March 10, 2014
Tax Identification No. 160-302-865
BIR Accreditation No. 08-001998-73-2012,
April 11, 2012, valid until April 10, 2015
PTR No. 3670019, January 2, 2013, Makati City
March 25, 2013

Auditor's Report Adverse E

Uploaded by

Copyright:

Available Formats

Auditor's Report Adverse E

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Auditor's Report Adverse E

Uploaded by

Copyright:

Available Formats

Villafuerte, Echano

Tel: (632) 225

BOA/PRC Reg. No. 0018,

INDEPENDENT AUDITORS REPORT

VILLAFUERTE, ECHANO & CO.

You might also like