- 2011.12 SMI PUBLISHING
Company Name: SMI Publishing Group LimitedStock Code: 08010Year end: March 31, 2011
Basis for disclaimer of opinion
(A) Scope limitation – borrowings under dispute
Included in the borrowings of the Group and of the Company as at 31 March 2011 are borrowings of approximately HK$23,367,000 and HK$13,910,000; and as at 31 March 2010 were borrowings of approximately HK$23,090,000 and HK$13,691,000, respectively due to several parties. Included in the finance costs in the statements of comprehensive income of the Group and the Company for the year ended 31 March 2011 are accrued interest expenses of approximately HK$277,000 and HK$219,000; and for the year ended 31 March 2010 were accrued interest expenses of approximately HK$277,000 and HK$219,000, respectively based on the amounts due and the applicable interest rates. As discussed in Note 24(b) to the consolidated financial statements, the Group and the Company are in dispute with these parties over these balances. Management makes no representation on the accuracy of these borrowings as there was either no formal agreement entered or there was no evidence of such arrangement in the past. We were unable either to obtain direct confirmations from these parties or other supporting evidence to satisfy ourselves as to whether the borrowings and interest expenses are free from material misstatement because these lenders were either no longer in contact with the Group or did not reply to our confirmation requests. There was no other satisfactory audit procedure that we could adopt to satisfy ourselves as to whether the borrowings and interest expenses were fairly stated, which would have a consequential effect on net current liabilities and net liabilities of the Group and the Company as at 31 March 2011 and their losses for the year then ended. We qualified our opinion in respect of a similar limitation of scope in the auditor’s report dated 21 June 2010 for the year ended 31 March 2010. Therefore, the comparative amounts may not be comparable and any adjustment to these amounts may also have a consequential effect on the opening balance of the accumulated losses of the Group and the Company at 1 April 2010 and their results for the year ended 31 March 2011.
(B) Appropriateness of using the going concern basis in preparing the consolidated financial statements
The Group sustained consolidated loss for the year of approximately HK$50,316,000 for the year ended 31 March 2011. At 31 March 2011, the Group had consolidated net current liabilities and net liabilities of approximately HK$97,680,000 and HK$427,884,000, respectively. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Group’s ability to continue as a going concern.
As explained in Note 2 to the consolidated financial statements, the Directors have adopted or plan to adopt certain measures (the “Measures”) in order to improve the Group’s financial and cash flow positions and to maintain the Group as a going concern. The Directors have prepared a cash flow forecast for the next twelve months (the “Forecast”) based on certain underlying assumptions including obtaining adequate funding from a loan facility granted by a company owned by an executive director (the “Lender”). The Directors are of the opinion that the Measures will be successfully implemented.
These financial statements have been prepared on a going concern basis, the validity of which depends upon the successful outcome of the Measures to be undertaken in order to satisfy the Group’s working capital needs and improve its cash flow position. However, the Directors are unable to obtain sufficient information from the Lender to satisfy us that the Lender is able to provide the loan facility. Accordingly, we are unable to determine whether the underlying assumptions of the Forecast are valid and therefore whether it is appropriate to use the going concern basis in preparing the consolidated financial statements. There were no other satisfactory audit procedures that we could adopt in this regard.
Should use of the going concern basis in preparing the financial statements be determined to be inappropriate, adjustments might have to be made to reduce the value of assets to their recoverable amounts, to provide for any further liabilities which might arise and to reclassify non-current assets and liabilities as current assets and liabilities, respectively.
Disclaimer of opinion
Because of the significance of the matters described in the “Basis for Disclaimer of Opinion” paragraphs, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the consolidated financial statements. 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.