Sample Script:

Good afternoon everyone. I am Toby. I am primarily responsible for the identification of 3 rd

party documents to prove underdeclaration of HMM Phil’s earnings.

To begin with, we understand that our ultimate objective is to pressure Citadel into declaring
dividends in our favor. Under the law, the declaration of dividends is a management
prerogative, in this case HMM Phil’s prerogative, unless __cite the 3 instances where a
corporation is obliged to de declare dividends____.

So the question now is, does HMM Phil fall under any of the three instances mentioned? And
the answer is: YES/NO [Insert explanation why it does not fall under #1, #2, or #3]

Hence, our plan now is to restructure the financial statements of HMM Philippines to
determine any underdeclaration of retained earnings (URE).

Since we will be alleging that HMM is understating their retained earnings, we need to know
the exact amount of HMM Phil’s URE. [insert explanation on why the determination of
underdeclared retained earnings is the primary step and why the amount of underdeclaration
cannot be determined at a later stage after exhaustion of documents]

Just to set things straight, URE is the accumulation of the net income or net loss of the company
from its creation.

Now, what are the documents that we need to determine the proper RE? We need
invoices/receipts of HMM Philippines from the time of its creation to present because we need
to review whether HMM Phil properly recorded their income and expenses from the moment it
was created. I’d like to familiarize you on how we’ll go about with the examination of individual
receipts/invoices.

Basically, the process will be similar to an official independent audit. In an audit, the company
will provide their books or records of the income and expenses and the corresponding proof,
which can be an invoice, official receipt or acknowledgement receipt or any other document
issued by the company or the company’s supplier.

Let’s take the 2019 AFS of HMM Phil as an example.

For 2019, the revenue from customers amount to 48.9 million. In reviewing HMM’s proper
retained earnings, we will be individually looking at all the invoices issued in 2019 and confirm
whether the amount of those invoices total 49.798 million.

At this point, I would just like to express my concern on the volume of the receipts/invoices as
we will be working from year 2014, the year when HMM Phil was created. Let us say that for
every week the company issues 50 invoices so in a year that would total 2600 invoices and
multiply that by 5 years since the company started in 2014. Only for the revenue from
customers, we will be checking 13,000 invoices. So, with these 13,000 invoices, we will need at
the very least one minute, which means just for revenue on customers alone, we will need
13000 minutes or 216.667 hours and this is based on the fact that everything is proper. If there
are issues on the document, then it will entail a little bit more time.

I would also like to note that when we will check the invoices, we need to check also its
authenticity - whether it is a genuine document and will check all the details such as the price,
the description, the control number, the quantity, the total amount we will compare these
details to the books of HMM.

I have tried going over the other items stated in the AFS and my conservative estimate of hours
worked is: _____________________________. [why]

[Just mention the highlighted portion below if necessary/client needs further explanation.
Temper the language to make client understand without getting offended]

So let’s continue for revenue. next, we will check forex gain, interest income. Gain on disposal
of property and other income.

These are miscellaneous items only but this will still require time for checking. So for forex gain,
interest income and other income, we will check the investment portfolios of the company or
whatever proof they may be able to show as basis for these income.

For gains on disposal of PPE, we will compare the book value of the PPE and its selling price and
also the deed of sale, if any.

So for these miscellaneous items, let’s put an estimate of just 40 hours. Despite the documents
having less volume, they are different types of documents for each transaction.

For expenses, there are 20 expense accounts. We will do the same thing with these expenses.

For personnel costs, we will have to check the payroll and whether the employees really do
exist.

Travel and transportation, the invoices or receipts for this will definitely be voluminous
considering this pertains to small figures. So for 2019, 4.190 million was recorded. Let’s put an
estimate that the travel expenses have another 2000 receipts for the year. So from its creation
it will be another 10,000 receipts and 10,000 minutes. Another 166.67 hours

For depreciation we will have to check the acquisition cost then the depreciation will be
recomputed.

For commission, the receipts will also be recomputed. Let’s put another 40 hours for this.

Then for the next 16 accounts, let’s say on average that will require 30 hours for each account
considering the documents to be reviewed will still be for the entire life of the company.

That’s 480 hours.

The total estimated hours that will be spent by our team will be 943.34 hours multiplied by
4,000 = 3.773 million worth of professional fees
I would also like to stress that we cannot guarantee that after exhaustion of all the
invoices/receipts, we will find an underdeclaration [WHY?]

Further, if ever we find any misstatements, then we need it to be substantial enough to claim
that the AFS is wrong because auditors provide for a margin of error. [please expound on
margin of error and its importance]

I would also like to note that independent audit reports need a certified CPA qualified to
perform an audit. For a CPA to be certified, the law requires years of experience. As of the
moment, there are no certified CPA lawyers in the firm to perform an audit because all of us
have not yet reached the supervisor level in the field of audit. Hence, the need for you to
engage an external auditor [is my term correct?] to perform this audit.

If you decide to continue with the individual examination of invoices/receipts, we need to

confirm the availability of these documents to HMM Phil. Based on experience, other
companies have already lost their receipts for the previous years. [Pls confirm] Hence, our plan
is really contingent on the availability of these invoices and the willingness of HMM Phil to
provide the same. [Pls discuss also WON HMM may legally deny us access to these receipts and
if denying us access is illegal, what is our recourse]

[Toby, as discussed, pls be ready with an explanation on why we documents readily available to
client may not be utilized to determine underdeclaration/why are receipts/invoices are only
option. We can cite credibility of these documents to restructure AFS]

[Pls prepare an explanation for Alphalist, its process, timeline, as Sir Jayr might bring this up.
You may use your previous email to us as a working draft]