Month: August 2015
- 2015.08 CH FOR YOU GP
Company Name: China For You Group Company LimitedStock Code: 00572Year end: June 30, 2015
BASIS FOR DISCLAIMER OF CONCLUSION
Opening balances and corresponding figures
Our audit opinion on the consolidated financial statements of the Group for the year ended 31 December 2014 dated 31 March 2015 (the “2014 Financial Statements”), which forms the basis for the corresponding figures presented in the current period’s condensed consolidated statement of financial position and related explanatory notes, was disclaimed because of the significance of the possible effect of the limitations on the scope of our audit, details of which are set out in our audit report dated 31 March 2015. Any adjustments found to be necessary to the opening balances as at 1 January 2015 may affect the results and related disclosures in the notes to the condensed consolidated financial statements of the Group for the six months ended 30 June 2015. The comparatives figures for the year ended 31 December 2014 shown in the condensed consolidated statement of financial position and related explanatory notes may not be comparable with the figures for the current period.
Impairment assessment of other receivables
As disclosed in Note 15(iii) to the condensed consolidated financial statements, a writ of summons endorsed with a full statement of claim was issued in the High Court of The Hong Kong Special Administrative Region by Great Rich Trading Limited, a wholly owned subsidiary of the Company dated 25 March 2014 to claim back the receivable amounted to approximately HKD17,616,000. The Directors are of the view that the Group is less likely to recover the outstanding balance due from the debtor, and therefore full impairment had been provided on such balance for the six months period ended 30 June 2015. Had we been able to complete our review of other receivables, matter might have come to our attention indicating that adjustments might be necessary to the condensed consolidated financial statements.
Balance of the amount due to Able Success Asia Limited (“Able Success”)
At 30 June 2015, included in other payable is a balance of approximately HKD15,264,000 represents amount due to the former holding company, Able Success, a company incorporated in the British Virgin Island with limited liability, the entire issued share capital of which is beneficially owned by Mr. He Jianhong (“Mr. He”), who is the former chairman and executive director of the Company. Had we been able to complete our review of other payables, matters might come to our attention indicating that adjustments might be necessary to condensed consolidated financial statements.
DISCLAIMER OF CONCLUSION
Because of the significance of the matters described in the Basis for Disclaimer of Conclusion paragraphs as described above, we do not express any conclusion as to whether the condensed consolidated financial statements for the six months ended 30 June 2015 is prepared, in all material respects, in accordance with HKAS 34.
- 2015.08 HNA INT’L INV
Company Name: HNA International Investment Holdings LimitedStock Code: 00521Year end: June 30, 2015
Basis for Disclaimer of Conclusion
As described in Note 7 to the condensed consolidated financial statements, the directors of the Company are seeking for a potential buyer for the disposal of certain subsidiaries of the Group (collectively referred as the “DTV Disposal Group”) and consider the disposal transaction remains highly probable, however, no formal sales agreement and valuation in relation to the DTV Disposal Group have been concluded as at the date of this report.
In the absence of a formal sales agreement and an appropriate valuation performed as at 30 June 2015, we were unable to obtain sufficient information to assess (i) whether the disposal of the DTV Disposal Group is still highly probable and the classification of the DTV Disposal Group as held-for-sale in the condensed consolidated financial statements remains appropriate; (ii) whether individual assets (other than investment properties and bank balances and cash) included in the DTV Disposal Group are measured in accordance with applicable HKFRSs; and (iii) whether the DTV Disposal Group in its entirety is measured at the lower of its net assets value and fair value less cost of disposal in accordance with HKFRS 5 “Non-current Assets Held for Sale and Discontinued Operations” issued by the HKICPA.
Disclaimer of Conclusion
There were no other satisfactory procedures that we could adopt to satisfy ourselves that the carrying amounts of the assets included in the DTV Disposal Group as at 30 June 2015 was fairly stated. Any adjustment to the carrying amounts may have a consequential significant effect on the loss for the six months ended 30 June 2015 and the net assets as at 30 June 2015.
The above matters caused us to issue a disclaimer audit opinion on the consolidated financial statements in respect of the years ended 31 December 2014 and 2013.
- 2015.08 WISON ENGRG
Company Name: Wison Engineering Services Co. Ltd.Stock Code: 02236Year end: June 30, 2015
Basis for Disclaimer of Conclusion
Impairment of trade receivables and amounts due from contract customers
The Group had outstanding trade and bills receivables of RMB850,780,000and RMB1,015,257,000 as of 30 June 2015 and 31 December 2014, respectively and amounts due from contract customers of RMB3,846,752,000and RMB3,242,274,000as of 30 June 2015 and 31 December2014,respectively,of which trade receivables of RMB60,433,000 and RMB455,057,000 as of 30 June 2015 and 31 December 2014, respectively, and amounts due from contract customers of RMB1,035,265,00and RMB1,038,005,000as of 30 June 2015 and 31 December 2014, respectively, have been identified as overdue in accordance with the contract terms or have been substantially behind the contract schedule with slow progress payment. The Group has recorded an impairment provision of RMB765,000as of 30 June 2015 and 31 December2014 against the balance of trade receivables and amounts due from contract customers. We were unable to obtain sufficient evidence on the recoverability of the balance of trade receivables and amounts due from contract customers as of 30 June 2015 and 31 December 2014. Accordingly, we were unable to satisfy ourselves regarding the adequacy of the impairment provision against the balance of trade receivables and amounts due from contract customers as at 30 June 2015 and 31 December2014.Any under-provision for the recoverability of these balances would reduce the net assets of the Group as at 30 June 2015 and 31 December 2014 and decrease the Group’s net profit for the six months ended 30 June 2015 and year ended 31 December 2014, respectively.
Impairment of property, plant and equipment and other long-term assets
Included in the consolidated statement of financial position of the Group as at 30 June 2015 and 31 December2014are property, plant and equipment of approximatelyRMB1,168,858,000and RMB1,210,881,000(net of depreciation and impairment),prepaid land lease payments of approximatelyRMB176,052,000and RMB178,279,000,goodwillof approximately RMB15,752,000 and RMB15,752,000, other intangible assets of approximately RMB10,468,000 and RMB13,134,000 and long-term prepayments relating to the purchase of property, plant and equipment of approximatelyRMB1,302,000and RMB1,603,000,respectively. The management has performed impairment assessment on these assets based on discounted cash flows. As a result of the assessment, the management is of the view that there was no impairment provision required as at 30 June 2015 and 31 December 2014.
Due to the uncertainty as to whether the Group will remain as a viable going concern, as set out in further detail in the paragraph headed “Going concern basis” below, we were unable to obtain sufficient evidence to assess the appropriateness of the management’s estimation of the recoverable amounts of the property, plant and equipment, prepaid land lease payments, long-term prepayments relating to the purchase of property, plant and equipment, goodwill and other intangible assets and whether these assets as at 30 June 2015 and 31 December2014 were impaired. Any under-provision for impairment of these assets will reduce the net assets of the Group as at 30 June 2015 and 31 December2014 and decrease the net profit of the Group for the six months ended30 June 2015and year ended31 December2014, respectively.
Going concern basis
As mentioned in the foregoing section headed “Impairment of trade receivables and amounts due from contract customers”, the Group had outstanding trade receivables of RMB60,433,000as of 30 June 2015, and amounts due from contract customers of RMB1,035,265,000 as of 30 June 2015 which have been identified as overdue in accordance with contract terms or have been substantially behind the contract schedule with slow progress payment. The recoverability of these overdue amounts may significantly impact the financial position and cash flows of the Group.
As further disclosed in note 15 to the interim financial information, the Group remained in default of the outstanding loan of RMB110 million due to China Development Bank (“CDB”) and have triggered cross-default provisions in other loan agreements entered into between the Group and certain banks with a total principal amount of RMB429 million as of 30 June 2015. As a possible consequence of the breaches, the banks may demand immediate repayment of loans advanced to the Group with an aggregate outstanding principal amount of RMB429 million at 30 June 2015.
As at the date of approval of the interim financial information, notwithstanding the implementation of the measures as disclosed in note 2.1 to the interim financial information, the foregoing events still indicate the existence of material uncertainties which may cast significant doubt on the Group’s ability to continue as a going concern. The validity of the going concern assumption on which the interim financial information is prepared is dependent on the successful and favourable outcomes of the steps being taken by the directors of the Company as set out in note 2.1 to the interim financial information. The interim financial information has been prepared on the assumption that the Group will continue as a going concern and, therefore, does not include any adjustments relating to the realisation and classification of non-current assets and non-current liabilities 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 at amounts other than those currently recorded in the statement of financial position. In addition, the Group may have to provide for further liabilities that might arise, and to reclassify non-current assets and non-current liabilities as current assets and current liabilities.
Disclaimer of Conclusion
Because of the significance of the matters described in the Basis for Disclaimer of Conclusion paragraphs, we were unable to obtain sufficient appropriate evidence to form a conclusion on the interim financial information. Accordingly, we do not express a conclusion on the interim financial information.
- 2015.08 HAN TANG INTL
Company Name: Han Tang International Holdings LimitedStock Code: 01187Year end: June 30, 2015
Basis for qualified conclusion
Corresponding figures and gain on disposal of subsidiaries
Our audit opinion on the consolidated financial statements of the Group for the year ended 31 December 2014 was qualified because of the possible effects of the limitations on the scope of our audit, details of which are set out in the report dated 9 March 2015. Accordingly, we were then unable to satisfy ourselves as to the gain on disposal of subsidiaries of approximately HK$1,075,000 included in the consolidated profit or loss for the year ended 31 December 2014.
Any adjustment to this figure as described above might have a consequential effect on the Group’s results for the period ended 30 June 2014.
Qualified Conclusion
Based on our review, except for the possible effect of the matter on the 2014 corresponding figures as described in the basis for qualified opinion paragraphs, nothing has come to our attention that causes us to believe that the interim financial information is not prepared, in all material respects, in accordance with HKAS 34.
- 2015.08 C BILLION RES
Company Name: China Billion Resources LimitedStock Code: 00274Year end: December 31, 2014
Basis for disclaimer of opinion
1) Opening balances and corresponding figures
Our audit opinion on the consolidated financial statements of the Group for the year ended 31 December 2013 (“2013 Financial Statements”), which forms the basis for the corresponding figures presented in the current year’s consolidated financial statements, was disclaimed because of the significance of the possible effect of the limitations on the scope of our audit and the material uncertainty in relation to going concern, details of which are set out in our audit report dated 9 February 2015. Accordingly, we were then unable to form an opinion as to whether the 2013 Financial Statements gave a true and fair view of the state of affairs of the Group as at 31 December 2013 and of the Group’s results and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards.
2) Movement of mining right
Because of the matters as detailed in the paragraph headed “Opening balances and corresponding figures”, we are unable to obtain sufficient evidence on the opening balance of the mining right. Thus, no sufficient evidence has been received by us up to the date of this report in respect of whether the amortisation and impairment loss on mining right of approximately HK$23,813,000 and HK$844,216,000 respectively charged to profit or loss were properly accounted for in the consolidated financial statements for the year ended 31 December 2014. However, we are satisfied that the mining right is fairly stated as at 31 December 2014.
3) Loss on disposal of subsidiaries
Because of the matters as detailed in the paragraph headed “Opening balances and corresponding figures”, we are unable to obtain sufficient evidence on the opening balances of contingent liabilities and related party balances of certain subsidiaries being disposed of during the year ended 31 December 2014, as disclosed in note 26 to the consolidated financial statements. No sufficient evidence has been provided to satisfy ourselves as to the loss on disposal of subsidiaries of approximately HK$26,732,000 for the year ended 31 December 2014.
4) Deferred tax credit
Because of the matters as detailed in the paragraph headed “Opening balances and corresponding figures”, we are unable to obtain sufficient evidence on the opening balance of the deferred tax liabilities. Thus, no sufficient evidence has been provided to satisfy ourselves as to the deferred tax credit of approximately HK$214,935,000 credited to profit or loss for the year ended 31 December 2014. However, we are satisfied that the deferred tax liabilities are fairly stated as at 31 December 2014.
Any adjustments to the figures as described from points 1 to 4 above might have a significant consequential effect on the Group’s results and cash flows for the two years ended 31 December 2014 and 2013 and the financial position of the Group as at 31 December 2013, 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 that:
(a) the directors believe the convertible bonds of which has been reclassified as current liabilities since year ended 31 December 2011 will be converted into shares of the Company and the directors have also been advised that a major shareholder of the Company has indicated his intention to provide financial support to the Group.
(b) the directors believe the Group will be able to renew the mining permit with Department of Land and Resources of Hunan Province, China continuously at insignificant cost.
The consolidated financial statements have been prepared on a going concern basis, the validity of which is dependent on (i) the successful outcome that the convertible bonds will be converted into shares of the Company, (ii) the availability of funding from the major shareholder of the Company to the Group to meet its financial obligations as they fall due and to finance its future working capital and financial requirements and (iii) the successful renewal of the mining permit.
The consolidated financial statements do not include any adjustments that would be necessary if the Company fails to convert the convertible bonds, the Group fails to obtain financial support from the major shareholder of the Company and the Group fails to renew the mining permit. We consider that adequate disclosures have been made. However, the uncertainties surrounding (i) the successful conversion of the Company’s convertible bonds, (ii) the availability of funding from the major shareholder of the Company and (iii) the successful renewal of mining permit raise significant doubt about the Company’s ability to continue as a going concern. We therefore 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 described in the basis for disclaimer of opinion paragraphs and the material uncertainty relating to the going concern basis as described above, 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 2014 and of the Group’s results and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and whether the consolidated financial statements have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.
- 2015.08 SIHUAN PHARM
Company Name: Sihuan Pharmaceutical Holdings Group Ltd.Stock Code: 00460Year end: December 31, 2014
Basis for Disclaimer of Opinion
As disclosed in note 2.2 to the consolidated financial statements, during 2014 the Company received an external enquiry (the “Enquiry”) as to how the Group has been conducting its sales and marketing activities, which may have an impact on the accounting treatment that the Group adopted in the past for certain sales revenue and distribution expenses, as well as other financial reporting matters.
In response to the Enquiry, the audit committee of the Company (the “Audit Committee”) conducted an independent investigation (the “Investigation”) involving, among others, assistant from a third party consultant in relation to the matters raised in the Enquiry.
As detailed in note 2.2 to the consolidated financial statements, based on the findings of the Investigation, the directors of the Company considered it appropriate to make adjustments to the Group’s consolidated financial statements for the year ended 31December 2013 and before, and consequently prior year adjustments were recorded by the Group in respect of the following matters:
(1) Sales model adopted since 2011 and reimbursement to distributors
(a) Certain marketing research agents (“Consolidated MRAs”), whose sole activities are the provision of marketing related services to the Group, were previously considered as third parties but now, based on the substance of the transactions, were considered to be controlled by the Group. Prior year adjustments were raised to consolidate these Consolidated MRAs in the consolidated financial statements of the Group.
As a result of these prior year adjustments, total income/gains and expenses of RMB78,521,000 and RMB78,521,000, respectively; cash and cash equivalents and trade and other payables of RMB64,833,000 andRMB64,833,000, respectively were adjusted and included in the Group’s consolidated financial statements as at and for the year ended 31 December2013. In addition, cash and cash equivalents and trade and other payables ofRMB10,361,000 and RMB10,361,000 were adjusted and included in the Group’s consolidated financial statements as at 1 January 2013. Total income/gains and expenses of RMB30,114,000 and RMB30,114,000, respectively; and cash and cash equivalents and trade and other payables ofRMB2,320,000 and RMB2,320,000, respectively relating to the Consolidated MRAs were consolidated in the Group’s consolidated financial statements as at and for the year ended 31 December 2014.
(b) The marketing and promotion expenses paid by the Group to its marketing research agents (including those paid to the Consolidated MRAs) under a revised sales model adopted by the Group since 2011 were eventually reimbursed, directly or indirectly, to the Group’s distributors (“Reimbursement Activities”). The Directors of the Company considered that the relevant marketing and promotional expenses should be adjusted and accounted for as a reduction of revenue earned from the distributors since 2011.
As a result, a prior year adjustment was recorded to offset the related revenue and distribution costs of RMB2,146,298,000 for the year ended 31 December 2013. The corresponding amounts for year 2012 and before amounted to RMB1,714,514,000. For the year ended 31 December 2014, total distribution costs that have been offset against revenue amounted to RMB810,935,000.
(2) Off-book transactions conducted through employees’ personal bank accounts
The Group had certain off-book transactions that were conducted through certain personal bank accounts (referred to as “off-book transactions ”) opened in the names of certain employees of the Group. These off-book transactions and balances were not previously accounted for and recorded in the Group’s consolidated financial statements. The Directors of the Company considered that the prior year consolidated financial statements should be adjusted. As a result of these prior year adjustments, total income/gains and expenses of RMB10,589,000 and RMB28,719,000, respectively; and total assets and liabilities of RMB20,594,000 and RMB81,440,000, respectively were adjusted and included in the Group’s consolidated financial statements as at and for the year ended 31 December 2013. In addition, total assets and liabilities of RMB12,780,000 and RMB55,496,000 were adjusted and included in the Group’s consolidated financial statements as at 1 January 2013. Total income/gains and expenses amounting to RMB10,217,000 and RMB4,151,000, respectively; and total assets and liabilities amounting to RMB64,531,000 and RMB119,311,000, respectively relating to the off-book transactions were included in the Group’s consolidated financial statements as at and for the year ended 31 December 2014.
The details of these prior year adjustments together with their impacts are described in note 2.2 to the consolidated financial statements.
In our prior years’ audits, we were not aware of nor were we informed by management or the Directors of the Company of the fact that the Consolidated MRAs are controlled by the Group, the existence of the Reimbursement Activities with the distributors and marketing research agents, as well as the off-book transactions. In response to these matters, we have performed extended procedures in the current year’s audit, including a review of the findings of the Investigation. However, there were limitations encountered in our audit as outlined below.
We were not able to obtain sufficient documentary evidence to assess whether the Consolidated MRAs are controlled by the Group and whether other marketing research agents (“MRAs”) not currently consolidated in the Group’s financial statements are in fact also controlled by the Group such that consolidation of these other MRAs are necessary. In addition, the Group did not maintain a complete set of books and records of the aforesaid Consolidated MRAs to enable us to determine whether the balances and transactions of these Consolidated MRAs were free from material misstatements. In addition, the Consolidated MRAs have been taxed in the local province for corporate income tax purposes on a deemed taxation basis irrespective of the expenses recorded by these Consolidated MRAs. The Directors of the Company are of the opinion that there are no additional tax liabilities for these Consolidated MRAs even though these expenses represented reimbursements to the distributors of the Group. However, management was not able to provide us with sufficient documentary evidence to support the deemed taxation basis adopted by the Consolidated MRAs for tax reporting purpose.
We were not able to obtain sufficient and adequate documentary evidence to validate the Reimbursement Activities mentioned above as the reimbursement transactions were not all supported by complete or properly authorised reimbursement payment requests and authorisation letters from distributors, among others. We have also not received satisfactory confirmation replies from the Group’s distributors and other relevant parties to confirm the Reimbursement Activities and the related transactions.
Management was not able to provide us with satisfactory supporting documents to support the personal bank accounts are held by those individuals on behalf of the Group. In addition, management did not maintain adequate accounting records and supporting documents for the off book transactions conducted through these employees’ personal bank accounts. We were also not able to obtain sufficient evidence to assess whether there are other off-book transactions not recorded by the Group.
Because of the above scope limitations, there were no alternative audit procedures that we could perform to satisfy ourselves as to:
(1) whether the Consolidated MRAs are in fact controlled by the Group and thus whether they should be consolidated in the Group’s consolidated financial statements; as well as whether all MRAs controlled by the Group have been consolidated;
(2) the occurrence, accuracy, valuation, rights and obligation, existence and completeness of the transactions and balances related to the Consolidated MRAs and their related tax impacts; and whether or not the prior year adjustment identified, together with the relevant amounts recorded in 2014, are complete and accurate in all material respects;
3) the occurrence, accuracy and completeness of the reimbursement transactions including the Reimbursement Activities with the distributors and the offsetting of the Group’s distribution costs against its revenue; and whether or not the prior year adjustment identified, together with the relevant amounts recorded in 2014, are complete and accurate in all material respects; and
(4) the occurrence, accuracy, valuation, rights and obligation and existence and completeness of the off-book transactions and balances and the related tax impacts; and whether or not the prior year adjustment identified, together with the relevant amounts recorded in 2014, are complete and accurate in all material respects.
Accordingly, we were not able to obtain sufficient appropriate audit evidence to determine whether any adjustments to the consolidated financial statements were necessary.
Disclaimer of Opinion
Because of the significance of the matters described in the Basis of 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.
Other Matters
This report, including the opinion, has been prepared for and only for you, as a body, in accordance with Section 90 of the Companies Act 1981 of Bermuda and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.