FULL PFRS - Unqualified Auditors Report (Capital Deficiency)

INDEPENDENT AUDITOR’S REPORT

The Board of Directors and Stockholders

ELITE BIOCHEMICAL CORPORATION
Alibago, Ilagan, Isabela
Report on the Audit of the Financial Statements

Opinion
We have audited the financial statements of ELITE BIOCHEMICAL CORPORATION (the Company),
which comprise the statements of financial position as at December 31, 2017 and 2016, and the
statements of comprehensive income, statements of changes in stockholders’ equity, and statements
of cash flows for the years then ended, and notes to the financial statements, including a summary of
significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, the
financial position of the Company as at December 31, 2017 and 2016, and its financial performance
and its cash flows for the years then ended in accordance with Philippine Financial Reporting
Standards (PFRSs).
Basis for Opinion
We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Financial Statements section of our report. We are independent of the Company in
accordance with Code of Ethics for Professional Accountants in the Philippines (Code of Ethics)
together with the ethical requirements that are relevant to our audit of the financial statements in the
Philippines, and we have fulfilled our other ethical responsibilities in accordance with these
requirements and the Code of Ethics. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Material Uncertainty Related to Going Concern
As discussed in Note 1 to the financial statements, the Company’s total accumulated loss amounting
to P4,539,959 and P3,992,054 as of December 31, 2017 and 2016, respectively, arising mainly from
pre-operating expenses in previous years that resulted to a capital deficiency of P2,539,959 and
P1,992,054 as of December 31, 2017 and 2016, respectively. These conditions, along with other
matters as set forth in Note 1, indicate the existence of a material uncertainty which may cast
significant doubt of the Company’s ability to continue as a going concern.
The Company’s ability to continue as going concern is mainly supported by its continued support from
its stockholders and management has no intention or necessity to liquidate the Company. We have
performed audit procedures to evaluate management’s plans for future actions as to the likelihood to
improve the situation and as to feasibility under the circumstances. Our opinion is not modified in
respect of this matter.
Responsibilities of Management and Those Charged With Governance for the Financial
Statements
Management is responsible for the preparation and fair presentation of the financial statements in
accordance with PFRSs, and for such internal control as management determines is necessary to
enable the preparation of financial statements that are free from material misstatement, whether due
to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless management either intends to liquidate the Company or
to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting
process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with PSAs will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
As part of an audit in accordance with PSAs, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
 Identify and assess the risks of material misstatement of the financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misinterpretations, or the override of internal control.
 Obtain an understanding of internal control relevant to the audit 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 Company’s internal control.
 Evaluate the appropriateness of accounting policies used and the reasonableness of

accounting estimates and related disclosures made by management.
 Conclude on the appropriateness of management’s use of the going concern basis of

accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Company’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Company to cease to continue as a going concern.
 Evaluate the overall presentation, structure and content of the financial statements, including
the disclosures, and whether the financial statements represent the underlying transactions
and events in a manner that achieves fair presentation
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
Report on Bureau of Internal Revenue Requirements
Our audit was conducted for the purpose of forming an opinion on the basic financial statements
taken as a whole. The supplementary information on taxes and licenses in the notes to the financial
statements is presented for purposes of filing with the Bureau of Internal Revenue and is not a
required part of the basic financial statements. Such information is the responsibility of management
and has been subjected to the auditing procedures applied in our audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial
statements taken as whole.
MANGAY-AYAM, LIM & CO., CPA’S

TIN 228-756-505
BOA CERT. 0672 - valid until December 31, 2018
SEC Accreditation No. 0302-F (Group A) - valid until December 3, 2017
CDA-CEA 0020-AF - valid until March 2, 2020
BIR AN: 08-001698-0-2015 - valid until February 18, 2018
By:
CHERYL LIM-CORDOVA
Partner
CPA Certificate No. 91911
BOA CERT. 0672 - valid until December 31, 2018
SEC Accreditation No. 1455-A (Group B) - valid until December 3, 2017
BIR AN: 08-001698-1-2014 - valid until January 5, 2018
TIN 163-599-264
PTR No. 5927682MD, January 18, 2017, Makati City
Makati City, Philippines

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FULL PFRS - Unqualified Auditors Report (Capital Deficiency)

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INDEPENDENT AUDITOR’S REPORT

The Board of Directors and Stockholders

Report on the Audit of the Financial Statements

Basis for Opinion

Material Uncertainty Related to Going Concern

Auditor’s Responsibilities for the Audit of the Financial Statements

 Evaluate the appropriateness of accounting policies used and the reasonableness of

 Conclude on the appropriateness of management’s use of the going concern basis of

MANGAY-AYAM, LIM & CO., CPA’S

Makati City, Philippines

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