- 2007.06 HK PHARMA
Company Name: HONG KONG PHARMACEUTICAL HOLDINGS LIMITEDStock Code: 182Year end: March 31, 2007
Basis for disclaimer of opinion
The evidence available to the auditors was limited due to the following reasons:
i. The auditors were appointed on 16 April 2007 and accordingly they were unable to carry out auditing procedures necessary to obtain adequate assurance regarding the quantities and condition of inventories of HK$5,810,000 stated in the consolidated balance sheet as at 1 April 2006. There were no other satisfactory audit procedures that they could adopt to obtain sufficient evidence regarding the existence of inventories as at 1 April 2006.
ii. The auditors have not been provided with details of the estimated unprovided restructuring expenses as at 31 March 2006. Accordingly, they are unable to satisfy themselves that the provision for restructuring costs as at 1 April 2006 and the restructuring costs recorded for the year ended 31 March 2007 are free from material misstatement.
iii. A convertible bond was issued by the Company to a bank in April 2000 and such convertible bond was subsequently settled and discharged on 6 December 2006. This convertible bond was accounted for as borrowings in the consolidated and Company balance sheets as at 31 March 2006. This accounting treatment was not in accordance with HKAS 32 — Financial Instruments: Disclosure and Presentation and HKAS 39 — Financial Instruments: Recognition and Measurement as the equity and liability elements of the convertible bond were not separated and the liability element was not accounted for at amortised costs as at 31 March 2006. As a result, the interest expenses recorded for the years ended 31 March 2006 and 2007 were misstated. As the auditors have not been provided with the details of the convertible bond, they were not able to quantify the effect of this failure to comply with the relevant accounting standards on the current year’s income statement and accumulated losses as at 1 April 2006.
Since the opening inventories, restructuring expenses and interest expenses of the convertible bond enter into the determination of the results of operations, the auditors were unable to determine whether adjustments to opening balances of assets, liabilities and accumulated losses as at 1 April 2006 and the results of operations for the year ended 31 March 2007 might be necessary. The auditors’ report on the financial statements for the year ended 31 March 2007 was modified accordingly.
Disclaimer of opinion: disclaimer on view given by financial statements
Because of significance of the matters described in the basis for disclaimer of opinion paragraph, the auditors do not express an opinion on the financial statements as to whether they give a true and fair view of the state of affairs of the Company and of the Group as at 31 March 2007 and of the Group’s profit and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards. In all other respects, in their opinion the financial statements have been properly prepared in accordance withdisclosure requirements of the Hong Kong Companies Ordinance.