Securities code: Henan Kedi Dairy Co.Ltd(002770) securities abbreviation: Henan Kedi Dairy Co.Ltd(002770) Announcement No.: 2022016 Henan Kedi Dairy Co.Ltd(002770)
Reply announcement on the letter of concern
The company and all members of the board of directors guarantee that the information disclosed is true, accurate and complete without false records, misleading statements or major omissions.
Henan Kedi Dairy Co.Ltd(002770) (hereinafter referred to as the “company” or “Kedi Dairy”) received the letter of concern on Henan Kedi Dairy Co.Ltd(002770) issued by Shenzhen Stock Exchange (hereinafter referred to as the “Shenzhen Stock Exchange”) (company Department attention letter [2022] No. 151, hereinafter referred to as the “attention letter”) on February 22, 2022, requesting the company to make a written explanation on relevant matters. After receiving the letter of concern, the company immediately organized relevant personnel to actively prepare the reply to the letter of concern. Now the reply to the questions in the letter of concern is announced as follows: on February 22, 2022, your company disclosed the announcement on the proposed appointment of an accounting firm, In view of the reasons of the original audit institution Asia Pacific (Group) accounting firm (special general partnership) (hereinafter referred to as “Asia Pacific firm”) and the planning and arrangement of annual audit tasks, your company will not renew the appointment of Asia Pacific firm as the financial and internal control audit institution in 2021. Your company plans to appoint Zhejiang Tianping Certified Public Accountants (special general partnership) (hereinafter referred to as “Tianping certified public accountants”) as the audit institution of your company in 2021. Tianping certified public accountants passed the filing of accounting firms engaged in securities services on December 27, 2020.
On October 30, 2021, your company disclosed the suggestive announcement on the correction and retroactive adjustment of previous accounting errors, which said that according to the decision on administrative punishment ([2021] No. 1) issued by China Securities Regulatory Commission on September 17, 2021, there were false records and major omissions in your annual reports for 2016, 2017 and 2018, Your company will hire an accounting firm to conduct a comprehensive audit of the corrected financial statements and issue a new audit report or special assurance report.
Our ministry is concerned about this. Please verify and explain the following items:
1. According to the No. 9 announcement format of periodic report in the guidelines for self discipline supervision of listed companies of Shenzhen Stock Exchange No. 2 – announcement format, the announcement format of the listed company’s intention to renew / change the accounting firm shall explain the number of audit clients of Listed Companies in 2020, main industries, audit fees, the number of audit clients of Listed Companies in the same industry as your company, as well as project partners Whether the signing certified public accountants and project quality control reviewers have been engaged in the audit of listed companies, and whether they have signed or reviewed the audit reports of Listed Companies in recent three years; In combination with the above situation, explain the verification and review procedures performed by the board of directors, audit committee and independent directors of your company on the replacement of audit institution, and think that the balance firm has the main basis of professional competence.
Company reply:
(I) after verification with Zhejiang Tianping Certified Public Accountants (special general partnership) (hereinafter referred to as “Tianping certified public accountants”), since Tianping certified public accountants was approved to engage in securities business in December 2020, Tianping certified public accountants did not undertake the audit business of Listed Companies in 2020 and undertook the audit business of three listed companies in 2021.
The project partners, signing certified public accountants and project quality control reviewers arranged by Tianping firm to provide audit services for the company have experience in securities services and corresponding professional competence. They have not signed or reviewed the audit report of Listed Companies in recent three years. The basic information is as follows:
1. CPA to be signed (project partner): Qin zhenbi, who has been engaged in securities service business for 11 years. He became a certified public accountant on July 10, 2012. He began to engage in securities business in December 2010 and began to practice in Tianping firm in February 2018. He is now a partner of Tianping firm. During his employment, he has provided securities services such as annual report audit and M & A audit of companies to be listed and listed for many enterprises, has experience in securities services and has corresponding professional competence.
2. Certified public accountant to be signed: Zhang Guozhu, who has been engaged in securities services and related businesses for 10 years, began to engage in securities business in October 2010, became a certified public accountant for the first time on April 14, 2015, and began to practice in Tianping firm in December 2021. During his employment, he has provided many enterprises with securities services such as audit, investment and management of companies to be listed, and has securities service business experience and corresponding professional competence.
3. Proposed quality control reviewer: Yan rushou, engaged in securities service business for 5 years. He became a certified public accountant on February 19, 1998. He began to engage in securities business in July 2008 and began to practice in Tianping firm in August 2013. During his practice, he provided securities services such as declaration audit, annual report audit and M & A audit for many companies to be listed and listed companies.
(II) relevant evaluation procedures adopted by the board of directors, audit committee and independent directors in the process of selecting firms include:
1. Access the basic information and integrity information (including disciplinary and punishment information) of Tianping firm and the filing information of securities service business through the websites of China Institute of certified public accountants, financial accounting management network, China Securities Regulatory Commission and the official website of Shenzhen Stock Exchange;
2. Through the website search of cninfo.com and other websites, learn about the audit related businesses of listed companies and listed enterprises of Tianping firm;
3. Check the business license of the accounting firm provided by Tianping firm and the license of the certified public accountant to be signed; Review the basic information provided by Tianping office;
4. The independent directors and members of the audit committee communicated with the partners of Tianping firm and the certified public accountants to be signed on the basic information, professional experience, independence and integrity of the firm, major matters that the certified public accountants think should be concerned about, and the communication between the previous and subsequent audit institutions.
Through the above sufficient evaluation procedures, it is verified that the balance firm has filed the securities service business, and it is not found that the project partner, the signing certified public accountant and the project quality control reviewer violate the requirements of the code of professional ethics for Chinese Certified Public Accountants on independence and integrity; No criminal punishment, administrative punishment, supervision and management measures, self-discipline supervision measures and disciplinary sanctions have been found in Tianping firm, project partners, signed certified public accountants and project quality control reviewers in the past three years.
The project partner of Tianping firm, the signing certified public accountant and the project quality control reviewer all have rich experience in securities service business; The cumulative compensation limit of the occupational insurance purchased by him is 20 million yuan, which can bear the civil compensation liability caused by audit failure, has the ability to protect investors, can meet the needs of the company’s annual audit and provide fair audit services for the company.
(III) verification and deliberation procedures performed by the board of directors, audit committee and independent directors on the replacement of audit institutions:
1. The audit committee of the board of directors of the company has fully understood and reviewed the professional competence, investor protection ability, independence and integrity of Tianping firm, and believes that it has the qualification to engage in securities business, can meet the annual audit needs of the company and has the ability to protect investors.
The audit committee of the board of directors of the company unanimously agreed to propose to appoint Tianping firm as the financial and internal control audit institution of the company in 2021 and submit it to the board of directors and the general meeting of shareholders for deliberation.
2. The independent directors of the company issued their prior approval opinions and independent opinions:
Prior approval opinion: before convening the board of directors to consider the relevant proposal on the appointment of audit institutions, we carefully reviewed the relevant qualifications, institutions, personnel, business, practice, integrity records and other information of Tianping firm, and inquired and discussed with the board of directors and management of the company on relevant matters. We believe that Tianping firm has the qualification to engage in securities business, the ability to provide audit services for listed companies, the ability to protect investors and the ability to provide fair audit services for the company. Therefore, we agree to submit the proposal to the 15th meeting of the Fourth Board of directors for deliberation.
Independent opinion: the balance firm to be employed by the company has the qualification to engage in securities business, the ability to provide audit services for listed companies, the ability to protect investors, and the ability to provide fair audit services for the company. The deliberation procedures of the board of directors comply with the relevant provisions of relevant laws and regulations. Agree to appoint Tianping firm as the financial and internal control audit institution of the company in 2021, and agree to submit the proposal to the general meeting of shareholders of the company for deliberation.
3. The company held the 15th meeting of the 4th board of directors on February 21, 2022. The board of directors agreed to appoint Tianping firm as the company’s financial and internal control audit institution in 2021, with a cost of RMB 1.8 million (including annual financial audit cost and annual internal control assurance cost), The term of employment is one year (see the announcement on the resolution of the 15th meeting of the Fourth Board of directors disclosed by the company on February 21, 2022, Announcement No.: 2022012). The company’s proposal to appoint Tianping firm as the company’s financial and internal control audit institution in 2021 still needs to be considered by the general meeting of shareholders.
2. Combined with the fact that your company’s 2020 annual report was issued by the Asia Pacific firm with an audit report that cannot express an opinion, etc
Describe the communication progress and content between your company and the former accounting firm Asia Pacific firm, balance firm and Asia Pacific firm; On this basis, explain whether there are differences between your company and Asia Pacific firm on matters related to the annual audit, whether Tianping firm and Asia Pacific firm have made necessary communication on matters that have a significant impact on the audit, whether you have fully understood the risks faced by your company, and provide the above-mentioned relevant communication documents.
Company reply:
(I) settlement progress of relevant matters:
On March 26, 2021, the company issued the announcement on the repayment of part of the company’s debts by a third party on behalf of major shareholders and related party transactions (Announcement No.: 202019). The controlling shareholder of the company Kedi Food Group Co., Ltd. (hereinafter referred to as the “controlling shareholder”) returned the company’s funds of 61 million yuan by means of debt commitment On April 7, 2021, the announcement on the repayment of part of the company’s arrears and related party transactions by a third party on behalf of major shareholders in the form of debt undertaking (Announcement No.: 202025) the controlling shareholders of the company returned the company’s funds of 65 million yuan in the form of debt undertaking and cash On November 9, 2021, the company’s controlling shareholders returned the company’s capital of 07 million yuan in cash, According to the punishment decision of Henan securities regulatory bureau of China Securities Regulatory Commission (No. 2021), the amount owed by the controlling shareholder to the company was reduced by 299 million yuan (see the suggestive announcement on early accounting error correction and retroactive adjustment issued by the company on October 30, 2021) and the announcement on signing creditor’s rights and debt compensation agreement and related party transactions disclosed on December 30, 2021, Shangqiu development and investment company acquired the company’s non-performing debt and settled the debt of 926 million yuan by means of debt repayment. The remaining debt of 505 million yuan has been fully accrued for credit impairment losses, and the remaining companies will continue to accelerate repayment by means of debt repayment and other means.
The company’s guarantee balance is 235 million, and the estimated liabilities have been fully accrued in 2021. The board of directors of the company will fully urge the controlling shareholders and the guaranteed party to formulate practical plans to repay the loans and eliminate the company’s guarantee liability through effective ways as soon as possible.
The CSRC filed a case for investigation and issued a final conclusion on September 16, 2021. The investigation results clarified the impact on the financial statements of Kedi dairy company. The company has fulfilled the obligation of information disclosure and paid fines and other procedures in accordance with the requirements of the decision on administrative punishment ([2021] No. 1).
In 2021, the company’s production and operation have entered normal. Compared with 2020, the performance has increased significantly, and there is no problem with the ability of sustainable operation. In view of the normal production and operation of the company, the continuous enhancement of sustainable operation ability and the continuous improvement of the company’s future development situation, there is no problem in the recognition of deferred income tax assets.
The elimination of the impact of the matters involved in which opinions cannot be expressed has yet to be reviewed by the accountant of Tianping firm.
(II) the company has communicated with the former audit institution Asia Pacific firm on the appointment of the accounting firm, and the Asia Pacific firm has made it clear that it is aware of the matter and confirmed that it has no objection. Whether the balance firm and Asia Pacific firm have different opinions on the integrity of the company’s management, major accounting, audit and other issues. The matters on which the board of supervisors and the audit committee cannot express their opinions on the issuance of 2020 financial statements are communicated as follows:
1. Other receivables
As stated in the notes to the financial statements “XIII. (IV) bankruptcy reorganization of the controlling shareholder”, Kedi dairy company received the civil ruling of Shangqiu intermediate people’s court forwarded by the controlling shareholder Kedi Food Group Co., Ltd. (hereinafter referred to as “Kedi group”) on December 21, 2020, Creditors submitted an application for bankruptcy reorganization on the grounds that Kedi group “still has reorganization value”. Shangqiu intermediate people’s court accepted the creditor’s application and made the civil ruling (2020) Yu 14 Po Shen No. 20. As of December 31, 2020, Kedi dairy company and its subsidiaries had receivable from Kedi group of 1858333600 yuan; The provision for credit impairment loss was 929166800 yuan. The above-mentioned credit impairment loss of Kedi dairy company is lack of appropriate evidence. We are unable to obtain sufficient audit evidence for the estimation of the balance of 1858333600 yuan receivable from Kedi group and the future recoverability of Kedi dairy company, so as to reasonably judge the accuracy of the above fund balance and the amount of credit impairment loss withdrawn by Kedi dairy company.
2. Recognition of estimated liabilities
As stated in “X. Contingencies” in the notes to the financial statements, Kedi dairy company and its subsidiaries, as guarantors, provided external guarantees, resulting in a contingent amount of 235019700 yuan. As of December 31, 2020, Kedi dairy company had accrued an estimated liability of 1927736 million yuan for the above guarantees. Cody dairy’s prediction of the above guarantee loss is lack of appropriate evidence. We are unable to obtain sufficient audit evidence for Kedi dairy company’s estimation of the possible guarantee loss caused by the external guarantee, so as to reasonably judge the accuracy of the estimated liability amount accrued by Kedi dairy company for the above external guarantee.
3. Investigation items filed by CSRC
As stated in “XII. (III) filing investigation” in the notes to the financial statements, Kedi dairy company received it on August 16, 2019《
