Audit Opinion
Audit Report No. Shenpengso Guo Shenzi [2005] 053
To all shareholders of Dalian Changxing Industrial Co., Ltd.:
We have audited the attached financial statements of Dalian Changxing Industrial Co., Ltd. (hereinafter referred to as "Changxing Company") as of December 31, 2004, including the balance sheet, consolidated balance sheet, income statement, consolidated income statement, cash flow statement, and consolidated cash flow statement 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.
As of December 31, 2004, the balance of other receivables for Changxing Company was RMB 258.26 million, accounting for 66.20% of total assets. A provision for bad debts of RMB 41.91 million was made. Due to limitations in the scope of the audit, we were unable to perform any audit procedures other than confirmation letters to obtain sufficient appropriate audit evidence to determine whether the amount of bad debt provision made by Changxing Company was appropriate.
Due to the company's substantial accumulated losses, the long-term occupation of large amounts of funds by related companies and other units, overdue external loans and guarantees, and the inability to repay due debts, as well as the suspension of operations by significant subsidiaries such as Dalian Haifang Multilayer Circuit Board Co., Ltd. and the external contracting operations of Dalian Changxing Cement Co., Ltd., we are unable to determine whether the going concern assumption used in preparing the financial statements is reasonable. Given the potential significant and widespread impact of the above circumstances, we are unable to express an opinion on the aforementioned financial statements.
Shenzhen Pengcheng Accounting Firm Certified Public Accountants of China Shenzhen, April 13, 2005 Zhang Keli Certified Public Accountant Hao Shiming
Financial Statements
Balance Sheet
Prepared by: Dalian Changxing Industrial Co., Ltd. Unit: RMB