- 2015.01 CHAODA MODERN
Company Name: Chaoda Modern Agriculture (Holdings) LimitedStock Code: 00682Year end: June 30, 2014
BASIS OF QUALIFIED OPINION
The auditors’ report on the consolidated financial statements of the Group for the year ended 30 June 2013 contained a qualification on the possible effect of the limitation of scope in relation to the physical counting and inspection of the Group’s property, plant and equipment, construction-in-progress, biological assets and inventories. Any adjustments found to be necessary in respect of the prior year’s qualification would have an effect on the opening balances and consequential effect on the consolidated financial position of the Group as at 30 June 2014 and the results and cash flows for the year ended 30 June 2014.
QUALIFIED OPINION ARISING FROM LIMITATION OF SCOPE
In our opinion, except for the possible effects of the matters described in the paragraph headed “Basis of Qualified Opinion” above, the consolidated financial statements give a true and fair view of the state of affairs of the Company and the Group as at 30 June 2014, and 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 compliance with the disclosure requirements of the Hong Kong Companies Ordinance.
- 2015.01 JIMEI INT ENT
Company Name: Jimei International Entertainment Group LimitedStock Code: 01159Year end: December 31, 2014
BASIS FOR QUALIFIED OPINION
In the year ended 31 December 2009, the Group completed the acquisition of Pacific Choice Holdings Limited and its directly wholly owned subsidiary, Precise Media Limited (“Precise Media”) and its indirectly wholly owned subsidiary United Opto-Electronics (Suzhou) Co., Ltd (the “PRC Subsidiary”). Collectively these entities are referred to as the “Pacific Choice Group”. As part of the acquisition consideration, convertible bonds and promissory notes were issued. In the year of acquisition, the Group determined that it lost control of the PRC Subsidiary after November 2009 and the PRC Subsidiary was deconsolidated and recognised as an available-for-sale investment from 1 December 2009 onwards. In the acquisition of the Pacific Choice Group, the Group acquired an intangible asset of HK$668,000,000. Also in the year of acquisition, the Group fully impaired the carrying amount of the intangible asset.
In prior years, there were limitations in the scope of our audit work on the loss of control of these subsidiaries and their deconsolidation, the impairment of the intangible assets, the valuation of the convertible bonds and promissory notes on initial recognition and the amounts allocated to liability component and equity component. The liability component of the convertible bonds and the promissory notes were measured at amortised cost. Due to the limitations in our work on the initial value of these liabilities, we were unable to satisfy ourselves as to whether the carrying amounts of the liabilities in subsequent years and the interest expense charged to profit or loss were free from material misstatements.
During the year ended 31 December 2013, the Group disposed of its equity interests in Precise Media. As part of the disposal arrangement, the convertible bonds and the promissory notes were cancelled. Due to the scope limitations encountered in prior years remained unresolved as of the date of disposal, we were unable to satisfy ourselves as to whether (i) any results of operation relating to the PRC Subsidiary for year ended 31 December 2013 would have been recognised had there been no deconsolidation in 2009, (ii) the effects on consolidated statement of comprehensive income for the year ended 31 December 2013 arising from the disposal were free from material misstatements, (iii) the gain on derecognition of the convertible bonds of HK$276,544,000 and the promissory notes of HK$87,500,000 recognised in the profit or loss for the year ended 31 December 2013 were free from material misstatements, and (iv) interest expense on the liability component of the convertible bonds of HK$10,184,000 charged to the profit or loss for the year ended 31 December 2013 was free from material misstatement.
Due to the above limitations, we disclaimed our opinion on the Group’s performance and cash flows for the year ended 31 December 2013. Our opinion on the current year’s financial statements is modified because of the possible effect of the above matters on the comparability of the current year’s figures and the corresponding figures.
In our opinion, except for the possible effects on the corresponding figures of the matter described in the Basis for Qualified Opinion paragraph, the consolidated financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2014, and of its 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.
- 2015.01 KITH HOLDINGS
Company Name: Kith Holdings LimitedStock Code: 01201Year end: December 31, 2013
BASIS FOR DISCLAIMER OF OPINION
1. Opening inventories
We were initially appointed as auditor subsequent to the end of the reporting period of 31 December 2013. In consequence we were unable to attend the physical count of the Group’s inventories as at 31 December 2013 and 2012. Due to the insufficiency of certain aged manual stock quantity movement record for two subsidiaries of the Company, there were no other satisfactory alternative audit procedures that we could adopt to satisfy ourselves as to the existence, quantities and conditions of those related inventories of approximately HK$4,680,000 for those two subsidiaries included in the Group’s consolidated statement of financial position as at 31 December 2012.
2. Limited accounting books and records of discontinued operations
The consolidated financial statements have been prepared based on the accounting books and records maintained by the Group. However, due to the cessation of the Group’s distribution of television business-related products and distribution of other electronic and related products during the year and the changes of management and directors subsequent to the end of the reporting period, the new Directors were unable to locate the complete set of accounting books and records in respect of certain of the Company’s wholly-owned subsidiaries in relation to the Group’s discontinued operations (collectively “these Subsidiaries”) for the year ended 31 December 2013 and 2012.
Due to the insufficiency of supporting documentation and explanations, we were unable to carry out audit procedures to satisfy ourselves as to whether the following income and expenses for the year ended 31 December 2013 and 2012 and the assets and liabilities as at that dates, and the related disclosure notes in relation to these Subsidiaries, as included in the consolidated financial statements of the Group, have been accurately recorded and properly accounted for in the consolidated financial statements:
Year ended 31 December 2013 2012 HK$’000 HK$’000 Income and expenses Revenue 244,565 1,266,214 Cost of goods sold (239,471) (1,216,904) Gross profit 5,094 49,310 Other income 2,184 10,844 Distribution and selling costs (3,046) (3,678) Administrative expenses (16,183) (21,249) Impairment loss on trade receivables (592,449) (17,255) Finance costs (10,230) (14,989) Gain recognised on deemed disposal of interest in a subsidiary – 37,169 (Loss)/profit before tax (614,630) 40,152 Income tax (12) (2,933) (614,642) 37,219 As at 31 December 2013 2012 HK$’000 HK$’000 Assets and liabilities Deferred tax assets – 130 Inventories – 8,928 Trade and other receivables, deposits and prepayments 7 560,358 Cash balances 323 323 Trade and other payables (83,022) (61,800) Tax payables (1,575) (1,577) (84,267) 506,362
We were also unable to obtain sufficient reliable evidence to satisfy ourselves as to whether the Group has any significant contingent liabilities and commitments as at 31 December 2013 and 2012 in respect of these Subsidiaries that need to be adjusted for or disclosed in the consolidated financial statements.
Any adjustments that are found necessary in relation to matters as described in points 1 and 2 above might have a significant consequential effect on the Group’s results and cash flows for the two years ended 31 December 2013 and 2012 and the financial positions of the Group as at 31 December 2013 and 2012, and the related disclosures thereof in the consolidated financial statements.
MATERIAL 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 consolidated financial statements which explains that the Investor has decided to pursue a restructuring of the Company.
The consolidated financial statements have been prepared on a going concern basis on the assumption that the proposed restructuring of the Company will be successfully completed and that, following the restructuring, the Group will continue to meet in full its financial obligations as they fall due in the foreseeable future. The consolidated financial statements do not include any adjustments that would result from a failure to complete the restructuring. We consider that the disclosures are adequate. However, in view of the extent of the material uncertainty relating to the completion of the restructuring, we disclaim our opinion in respect of the material uncertainty relating to the going concern basis.
DISCLAIMER OF OPINION
Because of the significance of the matters as 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 Hong Kong Companies Ordinance.