Audit Report
Qin Xin Audit Document [2005] No. 085
To all shareholders of Shenyang Feifei Aojia Modern Agriculture Co., Ltd.:
We have audited the accompanying balance sheets of Shenyang Feifei Aojia Modern Agriculture Co., Ltd. (hereinafter referred to as "your company") as of December 31, 2004, and the consolidated balance sheets, the profit and profit distribution statements for the year 2004, and the consolidated profit and profit distribution statements, as well as the cash flow statements and consolidated cash flow statements for the year 2004. The preparation of these financial statements is the responsibility of your company's management. Our responsibility is to express an opinion on these financial statements based on our audit work.
As described in Note 11 (4) of the financial statements, your company has made a substantial impairment provision of 303,528,810.62 yuan for its assets based on a decision made by the management office. We were unable to obtain sufficient and appropriate audit evidence to assess the reasonableness of this impairment provision. Furthermore, due to the company's inability to pay for confirmation letters, the bank deposit accounts, loan accounts, and receivables and payables could not be confirmed.
As stated in Note 12, as of December 31, 2004, your company was unable to repay its due debts; it has incurred losses for three consecutive years, and the business operations of the company and its subsidiaries have completely ceased; working capital has turned negative; the net cash flow from operating activities is negative; and the major shareholder, Shenyang Feifei Group, has incurred substantial debts due to penalties from the China Securities Regulatory Commission for failing to complete relevant property rights procedures related to three pieces of land transferred to your company during an asset restructuring.
As of the date of the audit report, your company stated that it is actively taking multiple improvement measures, including asset swaps. However, since these improvement measures are still in the early stages of implementation, we were unable to obtain sufficient and appropriate audit evidence to determine whether they can improve your company's ability to continue as a going concern. Therefore, we cannot evaluate the reasonableness of your company's preparation of financial statements based on the going concern assumption.
Due to the significant and widespread impact of the limitations on the audit scope mentioned above, we are unable to express an opinion on the aforementioned financial statements.
Zhongqin Wanxin Certified Public Accountants Co., Ltd. Certified Public Accountants Beijing, China Report Date: April 27, 2005