The Securities and Exchange Commission (SEC) is investigating the alleged discrepancy in book-keeping of leading logistics provider 2Go Group Inc. unearthed by the new investor group now running the company.

The restatement of financial reports from 2015 to 2016 has worried investors and cast the spotlight on the independent auditing industry that thrives behind the scenes.

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The logistics firm—now jointly owned by Davao-based businessman Dennis Uy and the SM group—disclosed last Friday a substantial downward restatement of its profit for 2015 and 2016 of approximately P1 billion for each fiscal year.

This was revealed after they hired SGV & Co. to conduct a special audit on the periods previously handled by KPMG. Uy said in a previous statement that SGV was hired to “establish accountabilities.”

“Our (Office of the General Accountant) looks into the financial reports of all PLCs (publicly listed companies) on a regular and special basis; in the latter case when our attention is called on possible deficiencies under SRC (Securities Regulation Code) Rule 68 and related rules and standard,” SEC Chair Teresita Herbosa said in a text message.

SRC Rule 68 states the requirements applicable to the form and content of financial statements required to be filed by corporations.

The Philippine Stock Exchange, which ordered the suspension of 2GO’s trading today, has kept mum on the issue.

The local partner of international accounting firm KPMG yesterday said it was seeking more information about the alleged infirmities in the financial records of logistics firm 2Go, which it audited for the 2015-2016 fiscal years.

In a statement yesterday, R.G. Manabat & Co. said it was “confident that it has performed the audits of 2GO Group Inc. in compliance with the Philippine Standards on Auditing.”

“The firm has requested, but has yet to receive, from 2GO Group the details on the restatement of its 2015 and 2016 financial statements,” said the audit firm whose senior partners were former members of SGV, the firm tasked by 2Go’s new owners to conduct the so-called “due diligence” audit.

SGV had been 2GO’s independent public accountant for almost four decades, or from 1977 until 2013. It was replaced by KPMG in 2014.

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Third-party accounting experts opined that the restated items in question, in particular, the treatment of non-cash receivables on the books of the logistics firm may have been treated liberally by KPMG and conservatively by SGV because of the different roles they played in examining the firm’s books.

“There is judgment involved,” an auditing expert, not associated with either SGV and KPMG, said in an interview.

“For example, if you think you are not going to be able to collect on a receivable, you should not have recognized it in the first place,” the auditor said.

While these judgment calls take place on a regular basis, the auditing expert said the 2GO case stood apart because of the size of the amounts involved.

“These adjustments happen, but rarely are they retroactive,” he added. “I’m bothered, as a professional, that such a large amount was not spotted.”

Based on the findings of SGV, 2GO had overstated its equity by 60 percent in 2016 to P6.3 billion and 40 percent in 2015. Receivables in 2016 were higher by P1.2 billion in 2016 alone. Its total assets for 2016 were overstated by P2.2 billion, according to SGV.

2GO said Friday it appointed William Charles Howell as chief financial officer, replacing long-time CFO Jeremias E. Cruzabra, who resigned.

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