In 2017, KPMG RG Manabat & Co. and SGV & Co.

, two of the most

notable auditing firms in the country, were involved in the accounting issue
surrounding the logistics giant 2GO Group Incorporated. This emerged as the new
management of 2Go employed SGV & Co. to conduct a special audit of the firm’s
records to warrant fair representation of financial statements and establish
accountabilities. The audit revealed that the 2015 and 2016 statements understated
debts and inflated noncash assets and profits. This caused the investigation and
involvement of the Securities and Exchange Commission (SEC). With this, the
reputation of KPMG RG Manabat & Company was put on the line as they were the
former external auditor of the 2GO Group. Here it was discovered that the
statements condensed 90% of the firm’s net income in 2015 to P109.131 million
and 74% of its 2016 net income to P344.035 million. Thus, there should have been
a net loss of P264.86 million in the first quarter of 2017; however, the statements
reported a net income of P267.562 million. Despite the investigation, KPMG RG
Manabat & Co. stood on its claim that their audit was based on the judgment and
estimates made by 2GO management and in compliance with the Philippine
Standard on Accounting which requires compliance with ethical requirements and
was performed to obtain reasonable assurance about whether the statements are
free from material misstatements.
This case reflects Section 310 of Part C of the IESBA Code of Ethics for
Professional Accountants. The particular section deals with conflicts of interest
that professional accountants face in business. In this case, the restated items in
question, specifically the treatment of non-cash receivables on the books of 2GO,
were treated differently by the two different external auditors, KPMG liberally and
SGV conservatively, due to the different roles they played in examining the
financial statements. There was a conflict of interest as SGV & Co. was 2GO’s
external auditor for four decades (since 1977); however, they were dismissed and
replaced by KPMG-RG Manabat Co. in 2014 under the precedence of 2GO former
CEO Sulficio Tagud Jr. He claimed that this scandal was a battle between external
auditors, pointing that the auditing industry in the country has become so
competitive to the extent of bringing firms down when given the opportunity. Such
conflicts of interest compromised the judgment of the parties. To address this, the
role of the auditors should be properly established and legal counsel (such as from
the SEC) must be sought.
Sources claimed that the case was misinterpreted as a fraud due to the
varying accounting interpretations made by the involved parties, which is why, if I
were in KMPG RG Manabat’s place I would have not done the same. As Rule 68
of the Securities Regulation Code requires publicly-held entities to report
according to internationally accepted principles of accounting, I would report
according to the said principles, instead of complying with Philippine Standard on
Accounting to avoid false impression. Scandals such as this do not only question
the reputation of the parties involved, for it also questions the credibility of the
accounting profession as a whole, because the profession is grounded on integrity
and public confidence. This is why the profession must be regulated. All audits
and reports performed by professional accountants must follow a unified standard
to maintain objectivity and consistency of information. Through this, professional
ethics play a vital role in promoting the common good by equipping professionals
with the right values and principles that guide them in making appropriate
decisions. The code serves as a manual instructing the virtues that professionals
must have. All accountants are taught to have the required technical competence
and professional skills; however, these are nothing without the principles of good
conduct as it leads one to professional behavior.
References
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