Audit Report
To all shareholders of Bit Technology Holdings Co., Ltd.:
We have audited the attached financial statements of Bit Technology Holdings Co., Ltd. (hereinafter referred to as "the Company") as of June 30, 2004, including the balance sheet, profit and profit distribution statement for the period from January to June 2004, and the cash flow statement for the same period. The preparation of these financial statements is the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
Except for the matters described in the following paragraph, we conducted our audit in accordance with the Independent Auditing Standards for Certified Public Accountants of China, planning and performing the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. The audit included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting policies used and the reasonableness of significant accounting estimates made by management, and evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
During the period, the Company recognized 9 million RMB in revenue from consulting fees related to the online game "Horse Racing Club," all of which has been received. However, we were unable to obtain sufficient and appropriate audit evidence to confirm the fairness of the transaction price and the corresponding cost matching for this revenue. As of June 30, 2004, the Company's "Other Receivables" had a book balance of 388.93 million RMB, for which the Company has made a provision for bad debts of 356.47 million RMB. However, we could not obtain sufficient and appropriate audit evidence to confirm the authenticity of this receivable.
We believe that, except for the potential effects of the above-mentioned matters, the financial statements comply with the national accounting standards and the provisions of the "Enterprise Accounting System," and fairly present, in all material respects, the financial position of the Company as of June 30, 2004, as well as the operating results and cash flows for the period from January to June 2004.