Audit Report
Zhongxingyu Audit No. (2005) 5081
To all shareholders of Heilongjiang Longdi Co., Ltd.:
We have audited the accompanying balance sheets of Heilongjiang Longdi Co., Ltd. (hereinafter referred to as Longdi Co.) as of June 30, 2005, and the consolidated balance sheets, the profit and profit distribution statements for the period from January to June 2005, and the consolidated profit and profit distribution statements, as well as the cash flow statements and consolidated cash flow statements for the same period. The preparation of these financial statements is the responsibility of Longdi Co.'s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the Independent Auditing Standards for Chinese Certified Public Accountants, planning and performing the audit to obtain reasonable assurance about whether the financial statements are free of 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.
In our opinion, the aforementioned financial statements comply with the national enterprise accounting standards and the provisions of the "Enterprise Accounting System," and fairly present, in all material respects, the financial position of Longdi Co. as of June 30, 2005, as well as the operating results and cash flows for the period from January to June 2005.
Furthermore, we draw the attention of users of the financial statements to the following:
- As stated in Note (5, 33) to the financial statements, Longdi Co. received a subsidy income of 56 million yuan from the Heilongjiang Provincial Finance Department in the first half of 2005, resulting in a profit.
- As stated in Note (11, 1) to the financial statements, as of June 30, 2005, Longdi Co. had shareholders' equity of -416.03 million yuan and a bank loan balance of 1.44729 billion yuan, of which 1.01045 billion yuan was overdue. In light of its financial situation, Longdi Co. disclosed the improvement measures it plans to take and has already taken. If these improvement measures are not effectively implemented and ultimately realized, there will be significant uncertainty regarding Longdi Co.'s ability to continue as a going concern. This paragraph does not affect the audit opinion expressed.