Before this case, prosecutors have rarely held a high-profile auditing firm accountable alongside company insiders.
Auditors are typically treated as neutral third parties, unless there is clear evidence of wrongdoing.
Big picture
Isla Lipana, which turned 100 years old in 2022, is one of the country’s largest and oldest independent accounting firms.
It’s also the Philippine member firm of PwC, one of the global “Big Four” accounting establishments, with 370,000 employees across 149 countries.
The finding forms part of a broader DOJ resolution recommending criminal charges against MFT Group, businesswoman Maria Francesca “Mica” Tan, family members, and company officers for an alleged illegal investment scheme, the resolution dated May 26, 2025 showed.
What the DOJ said
“[A]uditors Geraldine Hammond-Apostol and Ruth F. Blasco of Isla Lipana & Co. aided and colluded with respondent MFT Group and its board of directors in the commission of these fraudulent transactions,” the DOJ said in the resolution.
“These auditors validated the dividend revenue of respondent MFT Group by issuing unqualified opinion for 2020 and 2021 and qualified opinion for 2018 and 2019, on its financial statements, thereby giving the false impression of regularity in the statements submitted by respondent MFT Group,” it added.
This means the auditors signed off on MFT Group’s financial statements despite red flags such as MFT recording hundreds of millions of dividend income even though its subsidiaries did not declare dividends or lacked the earnings to do so.
“This contributed to the significant misrepresentations in the financial statements of respondent MFT Group,” the DOJ said.
Isla Lipana also “liable”
The DOJ added that Isla Lipana, which previously audited MFT, must also answer for the violations.
“Therefore, applying said provision in this case, the acts committed by Blasco and Apostol—though violative of the Revised Corporation Code (RCC) and the Securities Regulation Code (SRC)—were carried out in their official capacity as employees of Isla Lipana,” it said.
“Consequently, Isla Lipana, as the auditing firm of the MFT Group, is likewise liable for violations of the aforementioned laws,” it added.
Dubious financial reports
According to the DOJ resolution, MFT Group declared hundreds of millions of pesos in dividend income from 2018 through 2021, even though several of its subsidiaries either declared no dividends, lacked retained earnings, or showed glaring inconsistencies with the amounts reported.
For example, in 2018, MFT declared P336.78 million in dividend income even when six subsidiaries or affiliates, including Saladstop Spain and medical equipment supplier Meihao Corp., did not declare payouts.
In 2019, MFT Group declared P247.38 million in dividend earnings even though its only dividend-paying subsidiary, Mondial Medical, declared just P117.1 million, of which only P71.7 million went to MFT.
In the following years, MFT also overstated dividend earnings and reported figures without providing any basis or complete financial documents.
“To the minds of the undersigned, these misrepresentations are used by respondent MFT Group, through the Board of Directors, as a device, scheme or artifice in making it appear that the company is profitable, and in luring investors, thereby defrauding them that their investments are legitimate, in violation of Section 26 of the SRC,” the DOJ said.
What the auditors said
Isla Lipana officials did not immediately respond to a request for comment.
In a statement sent to InsiderPH last year, when the SEC charges were first filed, the auditing giant said it was only engaged to review the financial statements of the parent firm, MFT Group of Companies.
“While the name of the company we audit bears ‘Group of Companies,’ we are auditing that company as a standalone entity and we are not the auditors of any other company within the group, or the group in general,” it said in the statement.
Hired to audit parent only
Blasco, Apostol, and Isla Lipana also denied all allegations raised by the SEC, the DOJ resolution showed.
In the filing, Blasco argued that Isla Lipana was “not engaged to audit the consolidated financial statements of respondent MFT Group and that of its subsidiaries and associates,” thus the firm “did not have full access to their books and accounts.”
Isla Lipana argued that its duty was to audit the company’s financial statements in accordance with Philippine accounting standards.
In standard practice, the company or client’s management is responsible for preparing the financial statements, while the auditor’s role is to independently assess whether those statements are presented fairly and in accordance with accounting rules.
Auditors failed to verify claims, DOJ says
The DOJ said that wasn’t enough, adding that auditors should have verified MFT’s claims.
“Even SRC Rule 68 provides that auditors may request for additional supporting documentation in their audit of financial statements. However, respondents Blasco and Apostol merely relied on what is provided to them, thereby failing to verify the revenue declared by respondent MFT Group, causing misrepresentations therein, and thereby aiding in the grand scheme of defrauding the investing public,” the DOJ said.
“If only the respondent auditors verified the declarations of respondent MFT Group, said company would be unable to utilize its financial statements which contain untruthful reported dividend revenues in deceiving its investors,” it added.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
