2017.10 NEPTUNE GROUP

Company Name: Neptune Group Limited
Stock Code: 00070
Year end: June 30, 2017

Basis for Qualified Opinion

1. Investment in an associate and loss on disposal of an associate

We were unable to obtain sufficient appropriate audit evidence to satisfy ourselves as to the assumptions made by the directors in the valuation of the associate’s intangible assets as well as the recoverable amount of the associate’s trade receivables as at 30 June 2016. There are no other satisfactory audit procedures that we could adopt to satisfy ourselves as to the valuation of the interest in an associate as included in the consolidated statement of financial position as at 30 June 2016 and the Group’s share of profit of an associate as included in the consolidated statement of profit or loss and other comprehensive income for the year ended 30 June 2016.

We were unable to obtain sufficient appropriate audit evidence to satisfy ourselves as to the carrying amount of the above associate on disposal for the year ended 30 June 2017. There are no other satisfactory audit procedures that we could adopt to determine whether the loss on disposal of an associate charged to the consolidated statement of profit or loss and other comprehensive income for the year ended 30 June 2017 is appropriate. However, we are satisfied that the investment in an associate is fairly stated as at 30 June 2017.

2. Intangible assets

We were unable to obtain sufficient appropriate audit evidence to satisfy ourselves as to the useful life determination of the intangible assets related to gaming and entertainment business of HK$65,338,000 and HK$571,285,000 as at 30 June 2017 and 2016 respectively. There are no other satisfactory audit procedures that we could adopt to determine whether the carrying amounts of these intangible assets of HK$65,338,000 and HK$571,285,000 as at 30 June 2017 and 2016 respectively are fairly stated, and the accuracy of the impairment loss and amortisation of the intangible assets of HK$450,870,000 and HK$205,416,000 charged for the year ended 30 June 2016 respectively and the accuracy of the impairment loss and amortisation of the intangible assets of HK$397,311,000 and HK$108,636,000 charged for the year ended 30 June 2017 respectively.

Any adjustments to the figures as described above might have a consequential effect on the Group’s financial performance and cash flows for the year ended 30 June 2017 and 2016 and the financial position of the Group as at 30 June 2017 and 2016, and the related disclosures thereof in the consolidated financial statements.

We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the HKICPA. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the HKICPA’s Code of Ethics for Professional Accountants (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.

Qualified Opinion

In our opinion, except for the possible effects of the matters described in the Basis for Qualified Opinion section of our report, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 30 June 2017, and of the Group’s consolidated financial performance and consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) and have been properly prepared in compliance with the Hong Kong Companies Ordinance.