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Republic of the PhilippinesCOMMISSION ON AUDIT

Quezon City 

INDEPENDENT AUDITOR’S REPORT

THE BOARD OF DIRECTORS

PEA Tollway Corporation Aguinaldo Boulevard, Coastal RoadParanaque City

We have audited the accompanying financial statements of PEA Tollway Corporation PEATC!, awholly"owned su#sidiary of the Philippine Reclamation Authority PRA! which comprise the#alance sheet as at $ecem#er %&, '((), the statement of *oint venture income, the statement of changes in stoc+holders equity, changes in due to venturers, and cash flow statements for the

year then ended, and a summary of significant accounting policies and other e-planatory notes.

Management’s Responsibility for Financial Statements

/anagement is responsi#le for the preparation and fair presentation of these financial statementsin accordance with the generally accepted principles in the Philippines. This responsi#ilityincludes0 designing, implementing and maintaining internal control relevant to the preparation andfair presentation of financial statements that are free from material misstatement, whether due tofraud or error1 selecting and applying appropriate accounting policies1 and ma+ing accountingestimates that are reasona#le in the circumstances.

 Auditor’s Responsibility 

2ur responsi#ility is to e-press an opinion on these financial statements #ased on our audit. Weconducted our audit in accordance with Philippine 3tandards on Auditing. Those standards requirethat we comply with ethical requirements and plan and perform the audit to o#tain reasona#leassurance whether the financial statements are free from material misstatement.

 An audit involves performing procedures to o#tain audit evidence a#out the amounts anddisclosures in the financial statements. The procedures selected depend on the auditors

 *udgment, including assessment of the ris+s of material misstatement of the financial statements,whether due to fraud or error. 4n ma+ing those ris+ assessments, the auditor considers internalcontrol relevant to the entitys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, #ut not for the purpose of e-pressing an opinion on the effectiveness of the entitys internal control. An audit also includesevaluating the appropriateness of accounting policies used and the reasona#leness of accountingestimates made #y management, as well as evaluating the overall presentation of the financialstatements.

We #elieve that the audit evidence we have o#tained is sufficient and appropriate to provide a#asis for our audit opinion.

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Basis for Adverse Opinion

Toll revenues totaling P&.&)5 Billion and undetermined amount of e-penses were not recorded inthe #oo+s of PEATC resulting in the understatement of the 6oint 7enture income for the year andthe Retained Earnings as of $ecem#er %&, '((). 8on"recording of revenue and e-penses iscontrary to government laws, rules and regulations and the generally accepted accounting

principles and standards.

$istri#ution of the 9&.5: proportionate share in Tollways Revenue in '((; and '(() 9(: in '((<and prior years! in the total amount of P%.&% #illion to =E/"/ARA Philippines Corporation is not inaccordance with Clause %.' of the 6oint 7enture Agreement. 8on"su#mission of the actualvalidated capital contri#ution of =E/"/ARA also resulted in non"recording of the *oint ventureassets worth P&.(< Billion as of $ecem#er %&, '((9 which may result in the lac+ of #asis for thecost of the assets to #e turned"over to the >overnment upon termination of the Toll 2perationCertificate.

 Adverse Opinion

4n our opinion, #ecause of the significance of the matters discussed in the preceding paragraph,

the financial statements referred to a#ove do not present fairly, in all material respects, thefinancial position of the PEA Tollway Corporation as at $ecem#er %&, '((), and the results of itsoperation and its cash flows for the year then ended not in accordance with the generally acceptedprinciples in the Philippines.

COMMISSION ON AUDIT

MYRNA D. MONZON

 Audit Team 3upervisor 

6une %(, '((9