Month: April 2010
- 2010.04 KIU HUNG ENERGY
Company Name: Kiu Hung Energy Holdings LimitedStock Code: 381Year end: December 31, 2010
Basis for disclaimer of opinion
(a) The directors of the Company make retrospective restatements (“Restatements”) in relation to the Group’s acquisitions of Inner Mongolia Mingrunfeng Energy Co., Ltd. and Tongliao City Heng Yuan Mining Company Limited in 2007 and 2008 respectively. The details of the Restatements are set out in note 3 to the consolidated financial statements. According to the Restatements, at 1 January 2009, the carrying amount of goodwill was decreased by approximately HK$658,405,000, the carrying amount of exploration and evaluation assets was increased by approximately HK$658,405,000, the carrying amount of deferred tax liabilities was increased by approximately HK$164,601,000, the carrying amount of foreign currency translation reserve was increased by approximately HK$42,859,000 and the carrying amount of accumulated losses was increased by approximately HK$207,460,000. We were not provided with sufficient evidence to satisfy ourselves as to the then fair value of the exploration and evaluation assets as at the dates of acquisitions of Inner Mongolia Mingrunfeng Energy Co., Ltd. and Tongliao City Heng Yuan Mining Company Limited in 2007 and 2008 respectively. Accordingly, we are unable to satisfy ourselves as to the appropriateness of the Restatements.
In view of the above, we are unable to satisfy ourselves as to the carrying amounts of the following figures stated in the consolidated statement of financial position as at 31 December 2009:
– goodwill of HK$Nil;
– exploration and evaluation assets of approximately HK$711,889,000;
– deferred tax liabilities of approximately HK$168,301,000;
– foreign currency translation reserve of approximately HK$53,273,000; and
– accumulated losses of approximately HK$388,228,000.
As a result of the Restatements, the correspondence figures for the year ended 31 December 2008 were restated. We are unable to satisfy ourselves whether the following restated figures stated in the consolidated statement of financial position as at 31 December 2008 were fairly stated:
– goodwill of HK$Nil;
– exploration and evaluation assets of approximately HK$711,889,000;
– deferred tax liabilities of approximately HK$168,521,000;
– foreign currency translation reserve of approximately HK$53,130,000; and
– accumulated losses of approximately HK$323,641,000.
In addition, we are unable to satisfy ourselves whether the following restated figures stated in the consolidated income statement for the year ended 31 December 2008 were fairly stated:
– impairment loss on exploration and evaluation assets of approximately HK$473,383,000;
– impairment loss on goodwill of approximately HK$20,266,000; and
– deferred tax credit of approximately HK$151,012,000.
(b) As set out in notes 16 and 17 to the consolidated financial statements, the directors assessed the carrying amount of exploration and evaluation assets of approximately HK$711,889,000 based on the recoverable amounts of Guerbanhada Coal Mine and Bayanhushuo Coal Field which are estimated as the higher amount of fair value less costs to sell and value in use. We have not been provided with sufficient evidence to satisfy ourselves as to the fair value less costs to sell and value in use of the relevant cash generating units. We are unable to satisfy ourselves whether the carrying amount of exploration and evaluation assets of approximately HK$711,889,000 was fairly stated as at 31 December 2009.
There are no other satisfactory audit procedures that we could adopt to determine whether the above figures were fairly stated in the consolidated financial statements. Any adjustments to the above figures might have significant consequential effect on the results for the year ended 31 December 2008 and 2009 and net assets as at 31 December 2008 and 2009.
Disclaimer of opinion: disclaimer on view given by financial statements
Because of the significance of the matters described in the basis for disclaimer of opinion paragraphs, we do not express an opinion on the consolidated financial statements as to whether they give a true and fair view of the states of the affairs of the Company and the Group as at 31 December 2009 and of the Group’s results and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards. In all other respects, in our opinion the consolidated financial statements have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.
- 2010.04 GLOBAL FLEX
Company Name: Global Flex Holdings LimitedStock Code: 471Year end: December 31, 2009
Basis for qualified opinion
(a) Impairment of property, plant and equipment
Included in the consolidated statement of financial position as at 31 December 2008 was property, plant and equipment with carrying amounts of US$98,919,683. As set out in the consolidated statement of comprehensive income, the Group incurred a loss of US$75,093,827 for the year ended 31 December 2008 and, these factors, together with the fact that the Group’s production activities were suspended during that year, in our opinion, constituted indicators of impairment of the Group’s property, plant and equipment. However, no impairment loss was recognised for the year ended 31 December 2008. We were unable to perform satisfactory audit procedures to satisfy ourselves that the recoverable amounts of the property, plant and equipment exceeded its carrying amounts as at 31 December 2008 and whether any impairment loss should have been recognised during the year ended 31 December 2008 in accordance with Hong Kong Accounting Standard 36 “Impairment of Assets” issued by the HKICPA. This caused us to qualify our audit opinion on the consolidated financial statements in respect of the year ended 31 December 2008. Furthermore, during the year ended 31 December 2009, the Group recognised an impairment loss on property, plant and equipment of US$12,047,166 and disposed of certain property, plant and equipment used for the production of flexible printed circuit boards and flexible printed circuit boards assembly (the “Transaction”) at a loss of US$13,601,822 as detailed in notes 12 and 33 to the consolidated financial statements. However, due to the limitation described above, we were unable to perform satisfactory audit procedures to determine whether the loss arising from the Transaction and the impairment loss on property, plant and equipment recognised during the year ended 31 December 2009 were free from material misstatements. Any adjustments found to be necessary would affect the Group’s net assets as at 31 December 2008 and the Group’s loss for the two years ended 31 December 2009 and 2008.
(b) Fair value and carrying amounts on convertible loan notes
Included in the consolidated statement of financial position as at 31 December 2008 were the liability component of convertible loan notes with carrying amount of US$2,736,489 and conversion option derivative with carrying amount of US$54,029 respectively. As detailed in note 25 to the consolidated financial statements, the convertible loan notes were fully converted into ordinary shares of the Company during the year ended 31 December 2009. The fair values of these components were determined on initial recognition by the directors of the Company. In addition, the carrying amounts of the conversion option derivative as at 31 December 2008 and the relevant dates of conversion of the convertible loan notes were also determined by the directors of the Company. However, we were unable to obtain sufficient evidence to satisfy ourselves as to whether the valuation methodology and the assumptions adopted by the directors of the Company in these valuations of the liability component of convertible loan notes and conversion option derivative on initial recognition and the valuation of the conversion option derivative as at 31 December 2008 and at the relevant dates of conversion were appropriate. There were no other alternative audit procedures that we could carry out to satisfy ourselves as to whether the liability component of convertible loan notes and the conversion option derivative are fairly stated on initial recognition and as at 31 December 2008 and at the relevant dates of conversion of the convertible loan notes in accordance with the requirements of Hong Kong Accounting Standard 39 “Financial Instruments: Recognition and Measurement” issued by the HKICPA. This caused us to qualify our audit opinion on the consolidated financial statements in respect of the year ended 31 December 2008. Any adjustments found to be necessary may have an effect on the Group’s net assets as at 31 December 2008, the Group’s share premium as at 31 December 2009 and the Group’s loss for the two years ended 31 December 2009 and 2008, and the related disclosures thereof in the consolidated financial statements
Qualified opinion arising from limitation of audit scope
In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Group as at 31 December 2009 and, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to obtain sufficient information concerning the matters as described in the basis of qualified opinion paragraphs, the consolidated financial statements give a true and fair veiw of the Group’s loss and cash flows 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.
Emphasis of matter
Without further qualifying our opinion, we draw attention to note 2 to the consolidated financial statements which indicates that the Group incurred a loss of US$43,630,161 during the year ended 31 December 2009 and as at that date, the Group’s liabilities exceeded its assets by US$8,338,628. As further detailed in note 2 to the consolidated financial statements, the Group has been implementing measures to improve its financial position, certain of which have not yet been completed. The Group’s ability to continue as a going concern is dependent on the successful implementation of these measures. These conditions therefore indicate the existence of a material uncertainty which may cast significant doubt about the Group’s ability to continue as a going concern.
- 2010.04 SMI CORP
Company Name: SMI Corporation LimitedStock Code: 198Year end: December 31, 2009
Basis for qualified opinion
(a) Opening balances and corresponding figures
The auditor’s opinion on the consolidated financial statements of the Group for the year ended 31 March 2009, which form the basis for the corresponding figures presented in the current period’s consolidated financial statements, was qualified by the preceding auditor because of the significance of the possible effect of the limitations on the scope of the audit. Details of the qualified audit opinion are set out in the independent auditor’s report dated 24 July 2009 issued by the preceding auditor and included in the Company’s annual report for the year ended 31 March 2009.
(b) Interests in associates, share of results of associates, impairment loss recognised on interests in associates and loss on disposal of an associate
In respect of the Group’s interests in associates, Applause Holdings Limited (‘‘Applause’’) and 星 美影院發展有限公司 (‘‘星美影院發展’’), no sufficient evidence has been received by us up to the date of this report to verify whether the carrying value of zero as at 31 December 2009 in respect of these investments were fairly stated in the consolidated statement of financial position.
No sufficient evidence has been received by us up to the date of this report in respect of the Group’s share of results of associates from Applause, 星美影院發展 and Polyco Development Limited (‘‘Polyco’’) for the period from 1 April 2009 to 31 December 2009 as included in the share of results of associates of zero in the consolidated statement of comprehensive income.
Included in the consolidated statement of comprehensive income was an impairment loss on interests in associates of approximately HK$18,189,000. No sufficient evidence has been received by us up to the date of this report in respect of the appropriateness of these impairment losses recognised in the consolidated financial statements for the period from 1 April 2009 to 31 December 2009.
The Group has disposed of Polyco during the period from 1 April 2009 to 31 December 2009. Accordingly, a loss on disposal of an associate amounted to HK$3,612,000 was recognised under continuing operations for the period ended 31 December 2009. As a result of the limitation of audit scope described in paragraph (a) above, we were unable to obtain sufficient evidence to satisfy ourselves as to (i) the accuracy of the financial position as at 1 April 2009 and at the disposal date and of the results for the period then ended of the associate being disposed of; and (ii) whether the amount of loss on disposal of an associate had been accurately recorded in the consolidated statement of comprehensive income. Any adjustments to the figures would have a consequential effect on the classification and presentation of the results and cash flows of the Group for the period from 1 April 2009 to 31 December 2009 and the related disclosures thereof in the consolidated financial statements.
(c) Interests in jointly controlled entities, share of results of jointly controlled entities and impairment loss recognised on interests in jointly controlled entities
In respect of the Group’s interests in jointly controlled entities of Canaria Holding Limited and its subsidiary, Earn Elite Development Limited (collectively referred to as the ‘‘Canaria Group’’), no sufficient evidence has been received by us up to the date of this report to ascertain as to whether the opening balance of the carrying value of approximately HK$23,727,000 were fairly stated in the consolidated statement of financial position as at 31 March 2009.
No sufficient evidence has been received by us up to the date of this report in respect of the Group’s share of results of jointly controlled entities from the Canaria Group of zero for the period from 1 April 2009 to 31 December 2009 as included in the share of results of jointly controlled entities of zero in the consolidated statement of comprehensive income.
Included in the consolidated statement of comprehensive income was an impairment loss on interests in jointly controlled entities in respect of the Canaria Group of approximately HK$6,727,000. As a result of the limitation of audit scope in respect of the opening balance of the Group’s interests in jointly controlled entities and the Group’s share of results for the period ended 31 December 2009 in respect of the Canaria Group as mentioned above, we were unable to ascertain the accuracy of the impairment loss recognised in the consolidated financial statements for the period from 1 April 2009 to 31 December 2009.
(d) Trade and other payables
No sufficient direct confirmation and other sufficient evidence have been received by us up to the date of this report in respect of the trade and other payables of approximately HK$13,045,000 as included in the trade and other payables of approximately HK$87,077,000 in the consolidated statement of financial position as at 31 December 2009. We were unable to carry out other alternative procedures to satisfy ourselves as to the existence, accuracy and completeness of this balance.
(e) Gain on deconsolidation/disposal of subsidiaries
The Group had deconsolidated/disposed of certain subsidiaries during the period from 1 April 2009 to 31 December 2009. Accordingly, gain on deconsolidation/disposal of subsidiaries amounted to HK$10,635,000 and HK$61,132,000 was recognised respectively under continuing and discontinued operations for the period ended 31 December 2009. As a result of the limitation of audit scope described in paragraph (a) above, we were unable to obtain sufficient evidence to satisfy ourselves as to (i) the accuracy of the financial position as at 1 April 2009 and at the respective deconsolidation/disposal date and of the results for the period then ended of the subsidiaries being deconsolidated/disposed of; and (ii) whether the amount of gain on deconsolidation/disposal of subsidiaries had been accurately recorded in the consolidated statement of comprehensive income. Any adjustments to the figures would have a consequential effect on the classification and presentation of the results and cash flows of the Group for the period from 1 April 2009 to 31 December 2009 and the related disclosures thereof in the consolidated financial statements.
Any adjustments to the figures as described in points (a) to (e) above might have a consequential effect on the consolidated financial position of the Group as at 31 March 2009 and 31 December 2009 and on the Group’s result for the year ended 31 March 2009 and for the period from 1 April 2009 to 31 December 2009 and the related disclosures thereof in the consolidated financial statements.
Qualified opinion arising from limitation of audit scope
In our opinion, except for any adjustments to the figures as described in points (a) to (e) above might have been determined to be necessary had we been able to obtain sufficient evidence, the consolidated financial statements give a true and fair view of the state of affairs of the Group as at 31 December 2009 and of the Group’s results and cash flows for the period from 1 April 2009 to 31 December 2009 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.
- 2010.04 GLOBAL GREEN
Company Name: GLOBAL GREEN TECH GROUP LIMITEDStock Code: 274Year end:
Basis for disclaimer opinion
1. Goodwill
They have not been provided with adequate information and explanation to verify the carrying value of goodwill. They have been unable to perform any procedures they considered necessary to satisfy themselves as to whether any impairment loss is required to be made against the carrying value of goodwill as at 31 December 2009. They are therefore unable to determine whether the “Goodwill” of HK$968,024,000 appearing in the consolidated statement of financial position is fairly stated.
2. Property, Plant and Equipment
They have not been provided with adequate information to satisfy themselves as to the Group’s ownership of certain buildings situated in the People’s Republic of China. Furthermore, they have not been provided with adequate information and explanation to satisfy themselves as to whether any impairment loss is required to be made against the carrying value of the property, plant and equipment as at 31 December 2009. They are therefore unable to determine whether the “Property, Plant and Equipment” of HK$1,416,802,000 appearing in the consolidated statement of financial position is fairly stated.
3. Investment Properties
They have not been provided with adequate information and explanations to verify the fair value of investment properties. They are therefore unable to determine whether the “Investment Properties” of HK$25,179,000 appearing in the consolidated statement of financial position is fairly stated.
4. Prepaid Lease Payments for Land under Operating Leases
They have not been provided with adequate information and explanation to satisfy themselves as to whether any impairment loss is required to be made against the carrying value of the prepaid lease payments for land under operating leases as at 31 December 2009. They are therefore unable to determine whether the “Prepaid Lease Payments for Land under Operating Leases” of HK$175,368,000 under Non-current Assets and HK$3,169,000 under Current Assets appearing in the consolidated statement of financial position are fairly stated.
5. Intangible Assets
They have not been provided with adequate information and explanation to satisfy themselves as to whether any impairment loss is required to be made against the carrying value of the intangible assets as at 31 December 2009. They are therefore unable to determine whether the “Intangible Assets” of HK$27,742,000 appearing in the consolidated statement of financial position is fairly stated.
6. Deposits for Acquisition of Property, Plant and Equipment
They have been unable to obtain sufficient information or perform satisfactory audit procedures to satisfy themselves as to the existence of the deposits for acquisition of property, plant and equipment. They are therefore unable to determine whether the “Deposits for Acquisition of Property, Plant and Equipment” of HK$279,123,000 appearing in the consolidated statement of financial position is fairly stated.
7. Inventories
They have not been provided with adequate information to satisfy themselves as to the valuation of inventories. They are therefore unable to determine whether the “Inventories” of HK$56,141,000 appearing in the consolidated statement of financial position is fairly stated.
8. Trade Receivables and Bills Receivables
They have not received adequate response from trade debtors confirming their balances amounting to approximately HK$18,765,000. Furthermore, they have not been able to obtain sufficient reliable evidence to assess the valuation and recoverability of trade and bills receivables amounting to approximately HK$45,091,000. Accordingly, they are unable to determine whether the “Trade Receivables” and “Bills Receivables” of HK$165,085,000 and HK$2,040,000 respectively appearing in Note 25 to the consolidated financial statements are fairly stated.
9. Prepayments, Deposits and Other Receivables
They have not received adequate response from other debtors confirming their balances amounting to approximately HK$30,279,000. Furthermore, they have not been able to obtain sufficient reliable evidence to assess the valuation and recoverability of prepayments, deposits and other receivables amounting to approximately HK$21,652,000. Accordingly, they are unable to determine whether the “Prepayments, Deposits and Other Receivables” of HK$81,188,000 appearing in the consolidated financial statements is fairly stated.
10. Loan Receivables
They have not received adequate response from loan debtors confirming their balances amounting to approximately HK$44,907,000. Furthermore, hey have not been able to obtain sufficient reliable evidence to assess the recoverability of loan receivables amounting to approximately HK$34,907,000. Accordingly, They are unable to determine whether the “Loan Receivables” of HK$44,907,000 appearing in the consolidated financial statements is fairly stated.
11. Trade Payables
They have not received adequate response from trade creditors confirming their balances amounting to approximately HK$8,425,000. Furthermore, they have not been provided with adequate information to verify the completeness and valuation of trade payables. Accordingly, they are unable to determine whether the “Trade Payables” of HK$31,493,000 appearing in the consolidated financial statements is fairly stated.
12. Accrued Liabilities and Other Payables
They have not been provided with sufficient information to verify the completeness and valuation of accrued liabilities and other payables. Accordingly, they are unable to determine whether the “Accrued Liabilities and Other Payables” of HK$44,669,000 appearing in the consolidated financial statements is fairly stated.
13. Tax Payable
They have not been provided with sufficient information and explanation to verify the completeness and valuation of tax payable. Accordingly, they are unable to determine whether the “Tax Payable” of HK$29,827,000 appearing in the consolidated statement of financial position is fairly stated.
14. Finance Costs
They have not been provided with sufficient documents and explanation to satisfy themselves as to the completeness, existence and validity of the transactions. Accordingly, they are unable to determine whether the “Finance Costs” of HK$6,700,000 appearing in the consolidated statement of comprehensive income is fairly stated.
15. Contingent Liabilities
They have not received adequate response from the Group’s solicitors concerning, among other things, the existence of contingent liabilities affecting the Group as at the end of the reporting period. Accordingly, they are unable to determine whether contingent liabilities have been adequately disclosed in the consolidated financial statements.
Any adjustments found to be necessary would affect the net assets as at 31 December 2009 and the results and cash flows for the year then ended.
DISCLAIMER OF OPINION
Because of the significance of the matters described in the basis for disclaimer of opinion paragraph, They do not express an opinion on the consolidated financial statements as to whether they give a true and fair view of the state of affairs of the Company and the Group as at 31 December 2009 and of the Group’s results and cash flows for the year then ended in accordance with HKFRSs and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.
They also draw attention to Note 2(b) of the consolidated financial statements which indicates that the Group incurred a loss for the year attributable to equity shareholders of the Company of approximately HK$269,748,000 and its current liabilities exceeded its current assets by HK$44,716,000 as at 31 December 2009. These conditions, along with other matters set forth in Note 2(b) to the consolidated financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the Group’s ability to continue as a going concern.
- 2010.04 EVER FORTUNE
Company Name: Ever Fortune International Holdings LimitedStock Code: 875Year end: December 31, 2009
BASIS FOR DISCLAIMER OF OPINION
Material uncertainties relating to the going concern basis
As disclosed in note 1(b), the Group incurred a consolidated loss attributable to owners of the Company of approximately HK$7,117,000 for the year ended 31 December 2009 and had consolidated net current liabilities and net liabilities of approximately HK$62,143,000 and HK$61,938,000 respectively as at 31 December 2009 and the consolidated financial statements have been prepared on a going concern basis, the validity of which depends upon the continuing financial support from the Company’s substantial shareholder and the successful outcome of the measures to be undertaken as described in note 1(b) to ensure that adequate cash resources are available to meet in full its financial obligations as they fall due in the foreseeable future.
In view of the extent of the material uncertainties relating to the measures mentioned above that might cast a significant doubt on the Group’s ability to continue as a going concern, the auditors have disclaimed their opinion. The financial statements do not include any adjustments that would be necessary if the various measures as described in note 1(b) were unsuccessful or fail to take place. Any adjustment to the financial statements may have a consequential significant effect on the Group’s loss for the year and net liabilities as at 31 December 2009. However, the auditors consider that appropriate disclosures have been made.
Disclaimer of opinion: Disclaimer on view given by financial statements
Because of the significance of the matter described in the basis for disclaimer of opinion paragraph, the auditors do not express an opinion on the consolidated 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 December 2009 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 the opinion of the auditors, the consolidated financial statements have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.
- 2010.04 KARCE INTL HOLD
Company Name: Karce International Holdings Company LimitedStock Code: 1159Year end: December 31, 2009
Basis for disclaimer of opinion
Limitation of scope – 聯合光電（蘇州）有限公司(transliterated as “United OptoElectronics (Suzhou) Co., Ltd.) (the “PRC Subsidiary”)
The Group has been unable to obtain the books and records and related supporting documents of the PRC Subsidiary for the period from 15 January 2009 (date of acquisition) to 30 November 2009 (date of deconsolidation). We were therefore unable to carry out audit procedures to obtain sufficient appropriate audit evidence to satisfy ourselves as to the nature, completeness, accuracy, existence, valuation, classification and disclosures in respect of all of the transactions undertaken by the PRC Subsidiary during the year ended 31 December 2009. We were also unable to carry out audit procedures that we consider necessary to satisfy ourselves as to the completeness and existence of any significant contingent liabilities, commitments and events after the reporting period relating to the PRC Subsidiary. Any adjustments that might have been found to be necessary in respect of the above financial information would have a significant effect on the consolidated statement of comprehensive income of the Group for the year ended 31 December 2009. The financial information of the PRC Subsidiary which has been included in the consolidated statement of comprehensive income of the Group for the year ended 31 December 2009 is summarised as below:
Income and expenses of the PRC Subsidiary for the period from 15 January 2009 to 30 November 2009 as included in the consolidated statement of comprehensive income of the Group for the year ended 31 December 2009
HK$’000
Administrative expenses (1,810)
Loss for the period (1,810)
Net loss arising from deconsolidation of subsidiaries on 30 November 2009 as included in the consolidated statement of comprehensive income of the Group for the year ended 31 December 2009
HK$’000
Goodwill 77,685
Intangible asset 668,000
Property, plant and equipment 854
Inventories 2,730
Prepayments, deposits and other receivables 620
Bank balances and cash 4
Accruals and other payables (3,487)
Deferred tax liabilities (143,600)
Net loss on deconsolidation of subsidiaries 602,806
Included in “Net loss on deconsolidation of subsidiaries” as shown in the consolidated statement of comprehensive income for the year ended 31 December 2009, was loss of approximately HK$602,806,000 arising from the deconsolidation of Pacific Choice Holdings Limited and its subsidiaries (collectively referred to as the “Pacific Choice Group”) on 1 December 2009. Due to the effect of the limitation described as above, the Group was unable to ascertain the valuation, existence and completeness of the assets and liabilities of the Pacific Choice Group as at the date of deconsolidation. The Group was also unable to reliably and accurately assess the valuation of the goodwill and intangible assets in accordance with HKFRS 3 and HKAS 38 respectively on the date of deconsolidation. We were therefore unable to carry out audit procedures to obtain sufficient appropriate audit evidence to satisfy ourselves as to whether the loss on the deconsolidation of the Pacific Choice Group and the loss included in the consolidated financial statements up until the date of deconsolidation of the Pacific Choice Group, as well as the related disclosures set out in the notes to the consolidated financial statements are free from material misstatement. Any adjustments that might have been found to be necessary in respect of the above would have a consequential significant effect on the consolidated statement of comprehensive income of the Group for the year ended 31 December 2009 and its cash flows for the year then ended.
Included in notes 21 and 41 was the goodwill with the carrying amount of approximately HK$77,685,000 arising from the acquisition of the Pacific Choice Group (the “Acquisition”). The assets and liabilities of the PRC Subsidiary are significant to the Pacific Choice Group on the date of acquisition. For reasons as explained above, we were unable to carry out audit procedures to obtain sufficient appropriate audit evidence to satisfy ourselves as to nature, completeness, accuracy, existence, valuation, classification and disclosures in respect of the assets and liabilities acquired from the Acquisition on 15 January 2009. Any adjustments that might have been found to be necessary in respect of the above would have a significant effect on the carrying amount of the goodwill arising from the Acquisition on 15 January 2009. The financial position of the PRC Subsidiary as at 15 January 2009 which has been included in note 42 to the consolidated financial statements of the Group for the year ended 31 December 2009 is summarised as below:
Assets and liabilities of the PRC Subsidiary as at 15 January 2009
HK$’000
Property, plant & equipment 1,268
Inventories 2,730
Deposits and prepayments 1,965
Bank balances and cash 45
Accruals and other payables (3,487)
2,521
Disclaimer of opinion: Disclaimer on view given by financial statements
Because of the significance of the matters described in the basis for disclaimer of opinion paragraphs, we do not express an opinion on the consolidated financial statements as to whether they give a true and fair view of the state of affairs of the Group as at 31 December 2009 and of the Group’s loss and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and as to whether the financial statements have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.
- 2010.04 JACKIN INT’L
Company Name: Jackin International Holdings LimitedStock Code: 630Year end:
Basis for disclaimer of opinion
(a) Limitation of scope affecting opening balances
The former auditor of the Company issued an auditor’s report dated 22 May 2009 with a “disclaimer opinion” on the consolidated financial statements of the Group for the year ended 31 December 2008 (the “2008 Auditor’s Report”) with scope limitations based on reasons summarised in the basis for disclaimer of opinion paragraphs therein.
We were not able to obtain sufficient reliable evidence to enable us to assess the scope limitations for the year ended 31 December 2008. Any adjustments found to be necessary to the opening balances as at 1 January 2009 may affect the results and related disclosures in the notes to the consolidated financial statements of the Group for the year ended 31 December 2009. The comparative figures for the year ended 31 December 2008 shown in these consolidated financial statements may not be comparable with the figures for the current year.
(b) Turnover and cost of sales
As mentioned in the Company’s 2008 Auditor’s Report, the completeness, existence and accuracy of the sales and purchases of approximately HK$105.1 million and HK$100.8 million respectively asserted to have been undertaken by Sky City Macao Commercial Offshore Limited (“Sky City”), a wholly-owned subsidiary of the Group and the corresponding trade debtor and trade creditor balances of HK$110.0 million and HK$1.7 million as at 31 December 2008 were qualified by the former auditor of the Company.
The Group’s turnover and cost of sales for the year ended 31 December 2009 included sales and purchases of approximately HK$27.8 million and HK$26.9 million respectively reported by Sky City, in addition, Sky City also reported sales return of approximately HK$28.6 million during the year in relation to sales recorded in 2008. In respect of these transactions, we were unable to rely on the Sky City’s internal control system which was the same as in 2008 nor to obtain other sufficient audit evidence to satisfy ourselves as to the completeness and accuracy of the sales and purchases asserted to have been undertaken by Sky City and the sales return reported by Sky City during the year ended 31 December 2009. Sky City was disposed of during the year.
(c) Loss on disposal of subsidiaries
The Group has disposed of its entire equity interest in one of its wholly-owned subsidiaries, Jackin Accessories Industrial Limited, together with and its subsidiaries including Sky City to an independent third party during the year ended 31 December 2009. Accordingly, the Group has recorded a loss on disposal of subsidiaries of approximately HK$17,674,000 for the year ended 31 December 2009. Due to the scope limitations as described in (b) above in respect of Sky City, being one of the subsidiaries disposed of, we were unable to satisfy ourselves as to the accuracy of the carrying value of the net assets of Sky City as at the date of the disposal included in the calculation of the loss on disposal of subsidiaries during the year ended 31 December 2009 and as to whether the amount of loss on disposal of subsidiaries has been accurately recorded in the consolidated statement of comprehensive income due to the impact on scope limitations in Sky City. Any adjustments to the figure would have a consequential effect on the loss of the Group for the year ended 31 December 2009.
(d) Cost of sales and impairment loss on inventories
As mentioned in the Company’s 2008 Auditor’s Report, the accuracy and valuation of the inventories of approximately HK$204.7 million of the remanufacture and sale of computer printing and imaging products segment as at 31 December 2008 were qualified by the former auditor of the Company. Since the carrying amounts of the inventories at 1 January 2009 of this segment has direct impact on the cost of sales figure for the current year, and we could not place reliance on the remanufacture and sale of computer printing and imaging products segment’s inventory system nor was it practical for us to perform other audit procedures to verify the carrying value of the Group’s inventories as at 1 January 2009, we were therefore unable to obtain sufficient information to assess whether the cost of sales of this segment of approximately HK$242.4 million including impairment loss of inventories of HK$82.1 million, recognised for the year ended 31 December 2009 were free from material misstatement.
Disclaimer of opinion: disclaimer on view given by the consolidated financial statements
Because of the significance of the matters described in the basis for disclaimer of opinion paragraphs, we do not express an opinion on the consolidated financial statements as to whether they give a true and fair view of the state of affairs of the Group as at 31 December 2009 and of the Group’s loss and cash flow for the year then ended in accordance with Hong Kong Financial Reporting Standards. In all other respects, in our opinion the consolidated financial statements have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.
Emphasis of matter
Without qualifying our opinion, we draw attention to note 1(a) to the consolidated financial statements which indicates capital deficiency attributable to owners of the Company of approximately HK$14,904,000 as at 31 December 2009. The Group had incurred loss attributable to owners of the Company for the year ended 31 December 2009 amounted to approximately HK$278,003,000. These conditions indicate the existence of a material uncertainty which may cast doubt about the Group’s ability to continue as going concern.
- 2010.04 PARADISE ENT
Company Name: Paradise Entertainment LimitedStock Code: 1180Year end: December 31, 2009
Basis for disclaimer of opinion
1. Limitation of scope – Prior year’s audit scope limitation affecting opening balances of intangible assets, payments for investments, property, plant and equipment and deferred tax liabilities in connection with the Group’s biopharmaceutical business.
The consolidated financial statements for the year ended 31 December 2008 contained a disclaimer audit opinion on whether the Group had made adequate provision for impairment in value in respect of the Group’s intangible assets, payments for investments and property, plant and equipment (“These Assets”) and the related deferred tax liabilities on the intangible assets relating to the beneficial rights to drugs under development not yet available for use.
As stated in note 3 to the consolidated financial statements, prior period adjustments for impairment loss of approximately HK$10,688,000, HK$18,524,000 and HK$5,336,000 was made for These Assets for 31 December 2007 and HK$1,246,000, HK$6,143,000 and HK$529,000 was made for These Assets for 31 December 2008. The related deferred tax liabilities has been reversed by approximately HK$1,603,000 and HK$1,184,000 for 31 December 2007 and 2008 respectively.
We have not been able to ascertain the accuracy and adequacy of the prior period adjustments made for the impairment loss of approximately HK$10,688,000, HK$18,524,000, HK$5,336,000 and HK$1,246,000, HK$6,143,000, HK$529,000 in respect of These Assets and the reversal of the related deferred tax liabilities of approximately HK$1,603,000 and HK$1,184,000 for the years ended 31 December 2007 and 2008 respectively as we were unable to substantiate the appropriateness of the assumptions and basis made by the management in the forecast which was used to determine the fair value of These Assets for the years ended 31 December 2007 and 2008.
Any adjustments found to be necessary in respect thereof would have a consequential effect on the net assets of the Group as at 31 December 2009, the results of the Group for the years ended 31 December 2009 and 2008 and the related disclosures thereof in the consolidated financial statements.
2. Limitation of scope – Current year’s audit scope limitation regarding the impairment loss recognised for intangible assets, payments for investments, property, plant and equipment and deferred tax liabilities in connection with the Group’s biopharmaceutical business.
The management has made an assessment on the fair value of These Assets individually as at 31 December 2009. As stated in note 8 to the consolidated financial statements, further impairment loss of approximately HK$66,837,000, HK$40,074,000 and HK$10,270,000 was made for These Assets for 31 December 2009 and the related deferred tax liabilities has been fully reversed by approximately HK$13,976,000 for 31 December 2009.
Included in the above impairment losses were amounts of approximately HK$30,119,000 and HK$2,606,000 made for drugs of which application had been made to State Food and Drug Administration of the People’s Republic of China, which were included in payments for investments and property, plant and equipment respectively. We were unable to obtain sufficient evidence to substantiate the appropriateness of the assumptions and basis made by the management to justify that full provision for impairment loss was required for the drugs as at 31 December 2009.
Any adjustments found to be necessary in respect thereof would have a consequential effect on the net assets of the Group as at 31 December 2009, the results of the Group for the years ended 31 December 2009 and 2008 and the related disclosures thereof in the consolidated financial statements.
Disclaimer of opinion: disclaimer on view given by consolidated financial statements
Because of the significance of the matters described in the basis of opinion paragraph points 1 and 2 only, we do not express an opinion on the consolidated financial statements as to whether they give a true and fair view of the state of the Group’s affairs as at 31 December 2009 and of its loss and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards. In all other respects, in our opinion the consolidated financial statements have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.
- 2010.04 INCUTECH INVEST
Company Name: Incutech Investments LimitedStock Code: 356Year end: December 31, 2009
Basis for disclaimer of opinion
(1) Prior year audit scope limitation affecting opening balance of available-for-sale investmentsAs detailed in the auditor’s report dated 29 April 2009 issued by the other auditor (“Predecessor Auditor”) on the consolidated financial statements of the Group for the year ended 31 December 2008, the Predecessor Auditor were unable to obtain sufficient audit evidence to satisfy themselves as to whether the carrying value in the consolidated balance sheet as at 31 December 2008 and the notes thereon relating to the available-for-sale investments are fairly stated. Accordingly, the Predecessor Auditor, among others, expressed a disclaimer opinion on the consolidated financial statements of the Group for the year ended 31 December 2008. Any adjustments found to be necessary to the opening balance of available-for-sale investments as at 1 January 2009 would have a consequential effect on the net liabilities of the Group as at 31 December 2009 and the loss and the related disclosures in the notes to the consolidated financial statements of the Group for the year ended 31 December 2009.
(2) Existence and ownership of available-for-sale investments
As at 31 December 2009, included in the available-for-sale investments were the investments in unlisted equity securities, Super Plus Investments Limited and Good Spirit Group Limited (collectively the “Investee Companies”) with an aggregate carrying amount of HK$2. As detailed in the consolidated financial statements, the Group was unable to contact the management of the Investee Companies and obtain sufficient information and documentations to verify the existence and its ownership of the equity interest in Investee Companies. In the absence of sufficient reliable evidence, we were unable to carry out adequate audit procedures to ascertain the existence and ownership of the available-for-sale investments and accordingly, we were unable to satisfy ourselves as to whether the carrying amount of the available-for-sale investments included in the consolidated financial statements and the related disclosures set out in the notes to the consolidated financial statements are free from material misstatement. Any adjustments found to be necessary in respect of the above would have a consequential effect on the net liabilities of the Group as at 31 December 2009 and on the loss and the related disclosures in the notes to the consolidated financial statements of the Group for the year ended 31 December 2009.
(3) Going concern
As set out in the consolidated financial statements, the Group incurred a loss of HK$2,072,639 for the year ended 31 December 2009 and the Group’s net current liabilities and net liabilities as at 31 December 2009 amounted to HK$8,568,479 and HK$8,564,487 respectively. The directors of the Company have been taking steps to improve the liquidity of the Group. These steps included (i) extending the Group’s short term loans upon maturity; (ii) securing the financial support from the substantial shareholder; (iii) negotiating with the suppliers to reschedule the payments of the Group’s expenditures; and (iv) exploring the possibility to conduct fund raising activities.The validity of the going concern assumption on which the consolidated financial statements are prepared is dependent on the favourable outcomes of the steps being taken by the directors of the Company as described above. The consolidated financial statements have been prepared on the assumption that the Group will continue as a going concern and therefore do not include any adjustments relating to the realisation and classification of non-current assets that may be necessary if the Group is unable to continue as a going concern.
Should the going concern assumption be inappropriate, adjustments may have to be made to reflect the situation that assets may need to be realised other than at the amounts at which they are currently recorded in the consolidated statement of financial position. In addition, the Group may have to provide for further liabilities that might arise, and to reclassify non-current assets as current assets.
These matters therefore indicate the existence of material uncertainties which may cast significant doubt about the Group’s ability to continue as a going concern.
DISCLAIMER OF OPINION
Because of the significance of the matters described in the basis for disclaimer of opinion paragraphs, we do not express an opinion on the consolidated financial statements as to whether they give a true and fair view of the state of affairs of the Group as at 31 December 2009 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 consolidated financial statements have
been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance. - 2010.04 TIME INFRA HOLD
Company Name: Time Infrastructure Holdings LimitedStock Code: 686Year end: December 31, 2009
Basis for Qualified Opinion
As further explained in notes 11 and 13 to the financial statements, included in the consolidated statement of financial position as at 31 December 2009 is a secured loan receivable of HK$28,200,000 relating to a refundable deposit due by the vendor of certain toll road entities (“the
Loan Receivable”) which is secured by the share of the vendor’s subsidiary. Up to the date of this report, the Loan Receivable is overdue and one of the toll road entity’s development and operation contract has been terminated by the PRC government, which might have an impact of the underlying
value of the securities held by the Group. We have been unable to obtain reliable sufficient information, or to carry out alternative audit procedures to satisfy ourselves that the carrying amount of the Loan Receivable is fairly stated and is not subject to impairment as at 31 December 2009.Any adjustment that might have been found to be necessary in respect of the Loan Receivable would have had a consequential effect on the financial position of the Group as at 31 December 2009 and of its loss for the year then ended.
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 satisfy ourselves that the Loan Receivable is fairly stated and is not subject to impairment as at 31 December 2009, 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 December 2009 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.