Audit report Anhui Zhonghuan Environmental Protection Technology Co.Ltd(300692)
Rong Cheng Shen Zi [2022] No. 230z0373
Rongcheng Certified Public Accountants (special general partnership)
Beijing, China
Audit report
Rong Cheng Shen Zi [2022] No. 230z0373 Anhui Zhonghuan Environmental Protection Technology Co.Ltd(300692) all shareholders:
1、 Audit opinion
We have audited the financial statements of Anhui Zhonghuan Environmental Protection Technology Co.Ltd(300692) (hereinafter referred to as Anhui Zhonghuan Environmental Protection Technology Co.Ltd(300692) ), including the consolidated and parent company's balance sheet as of December 31, 2021, the consolidated and parent company's income statement, consolidated and parent company's cash flow statement, consolidated and parent company's statement of changes in owner's equity and notes to relevant financial statements in 2021.
In our opinion, the attached financial statements are prepared in accordance with the provisions of the accounting standards for business enterprises in all material aspects and fairly reflect the financial position of Anhui Zhonghuan Environmental Protection Technology Co.Ltd(300692) the consolidated and parent company as of December 31, 2021 and the operating results and cash flow of the consolidated and parent company in 2021.
2、 Basis for forming audit opinions
We conducted our audit in accordance with the auditing standards for Chinese certified public accountants. The "responsibilities of certified public accountants for the audit of financial statements" in the audit report further expounds our responsibilities under these standards. In accordance with the code of professional ethics for Chinese certified public accountants, we are independent of Anhui Zhonghuan Environmental Protection Technology Co.Ltd(300692) , and have fulfilled other responsibilities in terms of professional ethics. We believe that the audit evidence we have obtained is sufficient and appropriate, which provides a basis for our audit opinion.
3、 Key audit matters
The key audit matters are the most important matters that we consider to audit the current financial statements according to our professional judgment. The response to these matters is based on the overall audit of the financial statements and the formation of audit opinions. We will not express separate opinions on these matters.
(I) accounting treatment of franchise rights
1. Item description
See notes to financial statements "III. 10. Financial instruments", "III. 19. Intangible assets", "III. 23. Estimated liabilities", "v. 10. Non current assets due within one year", "v. 12. Long term receivables", "v. 18. Intangible assets", "v. 22. Other non current assets" and "v. 35. Estimated liabilities" Anhui Zhonghuan Environmental Protection Technology Co.Ltd(300692) according to the initial construction cost of sewage treatment plant and waste incineration power plant, it is recognized as the amount of franchise right. Franchises with the terms of "guaranteed quantity or guaranteed service quantity" and "basic settlement price or basic price" are recognized as financial assets, and franchises without the terms of "guaranteed quantity or guaranteed service quantity" and "basic settlement price or basic price" are recognized as intangible assets. As of December 31, 2021, the book value of Anhui Zhonghuan Environmental Protection Technology Co.Ltd(300692) franchise rights is 3713212900 yuan, accounting for 68.85% of the total assets of Anhui Zhonghuan Environmental Protection Technology Co.Ltd(300692) franchise rights.
The service price agreed in the franchise contract for confirming financial assets consists of three parts: recovery of project investment principal, interest return of invested funds and operating income. During the operation period agreed in the contract, Anhui Zhonghuan Environmental Protection Technology Co.Ltd(300692) in principle, ensure the recovery of the initial investment principal and interest income, and then recognize the operation income. In the process of operation, the management estimates and reviews the subsequent equipment renewal expenditure of the franchise right at the end of each year, and adjusts the original book amount according to the current best estimate.
The management needs to make significant judgments and estimates when determining the discount rate of franchise rights, subsequent renovation expenses and impairment assessment of franchise rights. Therefore, we recognize franchise rights as key audit matters. 2. Audit response
The procedures we perform include:
(1) Understand, evaluate and test the management's internal control over the daily management of sewage treatment plant and waste incineration power plant and the accounting treatment of franchise rights;
(2) The following procedures are implemented for the amount of franchise rights of sewage treatment plant and waste incineration power plant: ① letter to the supplier for construction projects with significant amount;
② Through sampling test and checking the construction settlement data, the accuracy of the initial entry amount of the franchise right of the new sewage treatment plant and waste incineration power plant is verified;
③ Check whether there are unrecorded assets and liabilities by checking the payment records and invoices received after the period;
(3) Obtain the management's evaluation of the actual interest rate of the franchise project calculated according to the financial assets and the discount rate of subsequent equipment renewal expenses;
(4) Calculate the recovery of the investment principal of the franchise project, the interest return of the invested capital and the operating income, and confirm the accuracy of the subsequent recognition of each project;
(5) Calculate the subsequent renewal and transformation expenses and interest expenses of the franchise project;
(6) Review the contract terms, verify the collection conditions and methods, judge whether there are minimum guarantee terms, and compare them with the accounting treatment of the company;
(7) Examined the management's assessment of the impairment of franchise rights.
Through the implementation of the above procedures, we found no abnormality in the accounting treatment and recognition of Anhui Zhonghuan Environmental Protection Technology Co.Ltd(300692) franchise rights.
(II) revenue recognition according to the performance progress
1. Item description
See "III. 24. Revenue recognition principles and measurement methods" and "v. 41. Operating revenue and operating costs" in the notes to the financial statements. In 2021, Anhui Zhonghuan Environmental Protection Technology Co.Ltd(300692) recognized environmental engineering revenue of 6711196 million yuan, accounting for 57.58% of the total operating revenue of the year Anhui Zhonghuan Environmental Protection Technology Co.Ltd(300692) the revenue from environmental engineering business shall be recognized according to the performance progress, and the performance progress shall be determined by the proportion of the performance cost incurred in the estimated total contract cost. Calculating the estimated total cost of the contract involves significant accounting estimates and judgments, including unforeseen expenses that exist or may occur before completion. Relevant accounting involves significant accounting estimates and judgments. Therefore, we recognize the performance progress income of environmental engineering as a key audit event.
2. Audit response
The relevant procedures we implement include:
(1) Understand and evaluate the management's internal control design related to the total budget cost, revenue and actual cost of environmental engineering business, and test the effectiveness of the implementation of key controls, including the internal control related to the actual project cost and the estimated total contract cost;
(2) Compare and analyze the actual total cost of completed projects with the estimated total cost by sampling, and evaluate the management's experience and ability to make this accounting estimate;
(3) Obtain the income calculation table of environmental engineering business, and check the accuracy of income calculation;
(4) For the actual project cost, the following procedures are implemented by sampling:
① Check the contract, invoice, equipment receipt, project progress confirmation and other supporting documents of the actual project cost;
② Select large projects to investigate the project site, verify the actual project progress, and confirm the project progress and settlement to the customer;
③ Check the actual project cost recognized before and after the balance sheet date to the equipment receipt, project progress confirmation and other supporting documents to assess whether the actual cost is recognized in an appropriate period;
④ In addition, we have implemented the following procedures for the estimated total cost of the project by sampling:
A. Check the composition of the estimated total cost to the purchase contract and other supporting documents;
B. Evaluate the rationality of the preparation of the estimated total cost by discussing with relevant departments and reviewing relevant supporting documents.
Through the implementation of the above procedures, we have not found any abnormality in the recognition of environmental engineering business income. 4、 Other information
Anhui Zhonghuan Environmental Protection Technology Co.Ltd(300692) Management (hereinafter referred to as management) is responsible for other information. Other information includes the information covered in Anhui Zhonghuan Environmental Protection Technology Co.Ltd(300692) 2021 annual report, but does not include the financial statements and our audit report.
Our audit opinion on the financial statements does not cover other information, and we will not issue any form of assurance conclusion on other information.
In combination with our audit of the financial statements, our responsibility is to read other information and consider whether other information is materially inconsistent with the financial statements or the information we have learned in the audit process, or there seems to be material misstatement.
Based on the work we have performed, if we determine that there is a material misstatement in other information, we should report that fact. In this regard, we have nothing to report.
5、 Responsibilities of management and governance for financial statements
The management is responsible for preparing the financial statements in accordance with the provisions of the accounting standards for business enterprises to achieve a fair reflection, and designing, implementing and maintaining necessary internal control so that the financial statements are free from material misstatement caused by fraud or error.
When preparing the financial statements, the management is responsible for evaluating the going concern ability of Anhui Zhonghuan Environmental Protection Technology Co.Ltd(300692) and disclosing the matters related to going concern (if applicable), and applying the going concern assumption, unless the management plans to liquidate Anhui Zhonghuan Environmental Protection Technology Co.Ltd(300692) , terminate the operation or has no other realistic choice.
The management is responsible for supervising the financial reporting process of Anhui Zhonghuan Environmental Protection Technology Co.Ltd(300692) .
6、 Responsibilities of certified public accountants for the audit of financial statements
Our goal is to obtain reasonable assurance on whether the financial statements as a whole are free from material misstatement due to fraud or error, and issue an audit report containing audit opinions. Reasonable assurance is a high-level assurance, but it does not guarantee that the audit performed in accordance with the audit standards will always be found when a major misstatement exists. Misstatement may be caused by fraud or error. If it is reasonably expected that the misstatement alone or in summary may affect the economic decisions made by the users of the financial statements based on the financial statements, the misstatement is generally considered to be significant.
In the process of carrying out the audit work in accordance with the audit standards, we use professional judgment and maintain professional doubt. At the same time, we also carry out the following work:
(1) Identify and assess the risks of material misstatement of financial statements due to fraud or error, design and implement audit procedures to deal with these risks, and obtain sufficient and appropriate audit evidence as the basis for issuing audit opinions. Since fraud may involve collusion, forgery, intentional omission, misrepresentation or override of internal control, the risk of failing to find major misstatement caused by fraud is higher than that caused by error.
(2) Understand the internal control related to audit in order to design appropriate audit procedures, but the purpose is not to express an opinion on the effectiveness of internal control.
(3) Evaluate the appropriateness of accounting policies selected by the management and the rationality of accounting estimates and related disclosures.
(4) Draw conclusions on the appropriateness of management's use of going concern assumptions. At the same time, according to the audit evidence obtained, draw a conclusion on whether there are major uncertainties in the matters or circumstances that may lead to major doubts about Anhui Zhonghuan Environmental Protection Technology Co.Ltd(300692) going concern ability. If we conclude that there is significant uncertainty, the auditing standards require us to draw the attention of statement users to the relevant disclosures in the financial statements in the audit report; If the disclosure is insufficient, we should express a non unqualified opinion. Our conclusions are based on the information available as of the date of the audit report. However, future events or circumstances may cause Anhui Zhonghuan Environmental Protection Technology Co.Ltd(300692) unable to continue its business.
(5) Evaluate the overall presentation, structure and content of the financial statements, and evaluate whether the financial statements fairly reflect relevant transactions and events.
(6) Obtain sufficient and appropriate audit evidence on the financial information of entities or business activities in Anhui Zhonghuan Environmental Protection Technology Co.Ltd(300692) to express an audit opinion on the financial statements. We are responsible for guiding, supervising and implementing the group audit, and take full responsibility for the audit opinions.
We communicated with the management on the planned audit scope, schedule and major audit findings, including the internal control defects that we identified in the audit.
We also provide a statement to the management that we have complied with the professional ethics requirements related to independence, and communicate with the management all relationships and other matters that may reasonably be considered to affect our independence, as well as relevant preventive measures.
From the matters communicated with the management, we determine which matters are the most important for the audit of the current financial statements, thus constituting key audit matters. We describe these matters in the audit report, unless laws and regulations prohibit the public disclosure of these matters, or in rare cases, if the negative consequences of communicating a matter in the audit report are reasonably expected to exceed the benefits in the public interest, we determine that we should not communicate the matter in the audit report.
(there is no text on this page, which is the signature and seal page of Anhui Zhonghuan Environmental Protection Technology Co.Ltd(300692) rongchengshen Zi [2022] No. 230z0373 report.)
Rongcheng certified public accountants China Certified Public Accountants:
(special general partnership) Guo Kai (project partner) Chinese certified public accountant:
Huo Jinfeng
Beijing, China Certified Public Accountant:
Wang mingcan
February 28, 2022
Anhui Zhonghuan Environmental Protection Technology Co.Ltd(300692)
Notes to financial statements
As of December 31, 2021
(unless otherwise specified, the monetary unit is RMB)
1、 Basic information of the company
1. Company profile
Anhui Zhonghuan Environmental Protection Technology Co.Ltd(300692) (hereinafter referred to as "the company" or "the company") was registered in Hefei Administration for Industry and Commerce in December 2011 and obtained the business license of enterprise legal person No. 3401 Shenzhen Fountain Corporation(000005) 97706. The company was established by Anhui Zhongchen Investment Holding Co., Ltd. (hereinafter referred to as "Zhongchen investment") with a monetary capital of 12 million yuan and Zhang Bozhong with a registered capital of 8 million yuan
