- 2007.07 CH CONSERVATION
Company Name: China Conservational Power Holdings LimitedStock Code: 290Year end: March 31, 2007
Basis for qualified opinion
1. As disclosed in note 41, the Group disposed of two subsidiaries during the year and realised a gain on disposal of HK$9,196,000 which was included in other operating income. The Group has not received any updated accounts or financial information on these subsidiaries beyond the unaudited financial information as at 31 December 2005 obtained in previous year. Management represented that the subsidiaries remained inactive during the year and did not have any transactions since 31 December 2005. The gain on disposal was calculated as the difference between the consideration received by the Group and the net liabilities of these subsidiaries as at 31 December 2005 which were incorporated in the consolidated financial statements of the Group prior to their disposal. We are unable to carry out alternative procedures to ascertain the networth of these subsidiaries as at the date of disposal or to satisfy ourselves that the gain on disposal is fairly stated in the consolidated income statement for the year.
2. As disclosed in note 22 to the financial statements, investments held for trading of the Group of approximately HK$66,580,000 as at 31 March 2007, before impairment provision, were valued by the Directors at approximately HK$38,816,000 by reference to a valuation of the fair value of the investments carried out by a professional firm of independent valuers as at 31 March 2006. The valuation assumed, inter alia, that the investee company will be able to continue to carry on business as a going concern. However, we have been unable to carry out the necessary audit procedures to satisfy ourselves that the investee company, which is listed on The Stock Exchange of Hong Kong Limited and has its shares suspended for trading since 29 September 2005, will be able to continue to carry on business as a going concern. As a result of this uncertainty, we are unable to satisfy ourselves as to whether or not the carrying value of investments held for trading of HK$38,816,000 as at 31 March 2007 is fairly stated.
Qualified opinion arising from limitation of audit scope
In our opinion, except for any adjustments that might have been determined to be necessary had we been able to obtain sufficient evidence concerning the gain on disposal of subsidiaries during the year and the carrying value of investments held for trading as at 31 March 2007, the consolidated financial statements give a true and fair view of the state of the Company’s and the Group’s affairs as at 31 March 2007 and of the loss and cash flows of the Group for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.
- 2007.07 MAGICIAN IND
Company Name: Magician Industries (Holdings) LimitedStock Code: 526Year end: March 31, 2007
Basis for disclaimer of opinion
1) We were not able to form a view in the previous year on the appropriateness of the impairment loss of HK$3,515,000 and the reversal of impairment loss of HK$12,196,000 on property, plant and equipment and whether the property, plant and equipment of HK$210,489,000 were fairly stated at 31 March 2006. We had expressed a qualified opinion in our audit report accordingly and details of our qualification were fully explained in the 2006 annual report. Any adjustments to the opening carrying amount of the property, plant and equipment which we have previously qualified would have consequential effects on the results for the year ended 31 March 2007.
As stated in note 13 to the financial statements, in light of the continuing operating loss experienced by the Group, management has carried out an impairment review of its property, plant and equipment. However, we have not been able to obtain adequate supporting information from management in respect of its assessment on the value in use of property, plant and equipment with carrying amount of HK$211,155,000 as of 31 March 2007 and therefore unable to satisfy ourselves whether the recognition of the impairment loss of HK$4,569,000 and the reversal of impairment loss of HK$12,016,000 are appropriate. Consequently, we have been unable to satisfy ourselves whether the property, plant and equipment of HK$211,155,000 were fairly stated at the balance sheet date and whether the loss for the year ended 31 March 2007 was fairly stated.
2) We were not able to form a view in the previous year on the completeness and accuracy of the assets, liabilities, income and expenses, cash flows, commitments, contingent liabilities, related party transactions and other disclosures in the financial statements in connection with the Group’s sales division in the People’s Republic of China (“PRC”). We had expressed a qualified opinion in our audit report accordingly and details of our qualification were fully explained in the 2006 annual report.
The Group’s PRC sales division’s operation has substantially been curtailed since 2006 and therefore its transactions for the year under review were minimal. However, because of the high turnover of members of management and accounting personnel, the present management is unable to give an unqualified representation that all liabilities and contingent liabilities in relation to the PRC sales division as at the balance sheet date has been properly included and disclosed in the Group’s financial statements.
Accordingly, we have been unable to carry out audit procedures that we considered necessary to obtain adequate assurance regarding the completeness and accuracy of the liabilities and contingent liabilities in connection with the PRC sales division.
There were no other satisfactory audit procedures that we could adopt to satisfy ourselves as to the matters set out in paragraphs (1) and (2) above. Any adjustments to the above figures may have a consequential significant effect on the Company’s interests in subsidiaries as recorded in the Company’s balance sheet, the Group’s loss for the year and the Group’s net assets as at 31 March 2007.
Fundamental uncertainty relating to the going concern basis
In forming our opinion, we have considered the adequacy of the disclosures made in note 2 to the financial statements which explains the measures that the directors are currently undertaking and intend to take to generate sufficient liquid funds to finance its operations and, accordingly, that it is appropriate to prepare the financial statements on a going concern basis.
As detailed in note 2 to the financial statements, the Group is dependent upon the continued support of its banks and shareholders. Provided that the measures as detailed in note 2 to the financial statements can accomplish successful outcome, the directors are satisfied that the Group will be able to finance its operations and to meet in full its financial obligations as they fall due in the foreseeable future. The financial statements have been prepared on a going concern basis, the validity of which depends upon the outcome of the measures. The financial statements do not include any adjustments that may result from the failure of these measures to accomplish successful outcome. However, if the outcome turns out to be adverse, it may have significant potential adverse effect on the financial position of the Group and may in turn affect the going concern basis of the preparation of the financial statements.
Qualified opinion: Disclaimer of opinion on view given by financial statements
Because of the significance of the possible effect of:
• the limitation in evidence available to us on the matters as set out in the basis for disclaimer of opinion section; and
• the fundamental uncertainty relating to the going concern basis,
we do not express an opinion on the financial statements as to whether they give a true and fair view of the state of the affairs of the Company and the Group as at 31 March 2007 and of the loss and cash flows of the Group for the year then ended in accordance with Hong Kong Financial Reporting Standards. In all other respects, in our opinion, the financial statements have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.