2GO management, auditors may face over P1-M fine
MANILA, Philippines – If a probe uncovers irregularities in the financial statements of 2GO Group Incorporated, the publicly-listed company's management and auditors may face a fine of more than P1 million, among others, according to the chief of the Securities and Exchange Commission (SEC).
"It will not be less than P1 million. And then there is probably a daily fine of P10,000 at least since the time it was discovered and your attention has been called that there has been really wrong accounting. So the penalties will run from that time," SEC Chairperson Teresita Herbosa said on the sidelines of an event in Makati City on Tuesday, July 11.
2GO last week restated its 2015 and 2016 financial statements, after a special audit requested by the firm's new management – a development that is turning out to be a major accounting scandal.
The restated financials pruned a whopping 90% off 2GO's net income in 2015 to P109.131 million. It also turned out that its 2016 net income should have been 74% lower than what was reported.
The special audit conducted by SGV and Company also showed that in the 1st quarter of 2017, there was a net loss of P264.86 million, instead of the earlier reported net income of P267.562 million.
Herbosa said she has never encountered such a big discrepancy. "We are going to prioritize this because of the reports regarding the overinflated figures. If proven that the reported misrepresentation is really that big, that calls for a really big investigation."
Following the accounting fiasco is the resignation of 2GO chief financial officer Jeremias Cruzabra, who was replaced by William Charles Howell.
The restated financial statements came after SM Investments Corporation acquired a 34.5% stake in 2GO's parent company for $124.50 million. It was also last March when Chelsea Logistics Corporation acquired a significant interest in 2GO. (READ: How SM Investments acquired stake in 2GO)
Chelsea Logistics still optimistic
Despite the fiasco, Chelsea maintains its optimism over the 2GO Group's prospects, anchored on strong fundamentals and potential synergies between Udenna Corporation and the SM Group.
Chelsea chairman Dennis Uy – who concurrently serves as the president and chief executive officer of 2GO Group – had approved the restatement of the financial statements of 2GO for the prior periods.
"The restated financials were subsequently disclosed for fairness and transparency to the shareholders and the investing public. The restatement also reflects the commitment of the new management and board to raise corporate governance standards in the company," Uy said.
He added that the restated items are non-cash and non-recurring. "Thus, the prospective profitability of 2GO remains strong."
The new management of 2GO took over only in the 2nd quarter of 2017.
KPMG was the former auditor of the 2GO Group. RG Manabat and Company, the local partner of accounting firm KPMG, said in a statement that it is confident its audit was "in compliance with the Philippine Standards on Auditing."
"Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements," RG Manabat and Company said.
"The firm has requested, but has yet to receive, from 2GO Group the details on the restatement of its 2015 and 2016 financial statements," the accounting firm added.
If proven that there was misrepresentation in the audit, Herbosa said the SEC may impose penalties and/or revoke the license of KPMG.
"Following our authority to accredit auditors when they do audit for publicly listed companies, we will have to look at whether we have to revoke and impose penalties on them," she said. – Rappler.com