Annual report for 2021
financial reports
February 2022
1、 Audit report
Unqualified opinion of audit opinion type standard
Signing date of audit report: February 25, 2022
Name of audit institution: Zhitong Certified Public Accountants (special general partnership)
Audit Report No.: ztsz (2022) No. 110a Haima Automobile Co.Ltd(000572)
Dong Xu, Nie Shengyong
Body of audit report
Sino Biological Inc(301047) all shareholders:
1、 Audit opinion
We have audited the financial statements of Sino Biological Inc(301047) (hereinafter referred to as ” Sino Biological Inc(301047) “), including the consolidated and company’s balance sheet as of December 31, 2021, the consolidated and company’s income statement, consolidated and company’s cash flow statement, consolidated and company’s statement of changes in shareholders’ 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 consolidated and company’s financial position as of December 31, 2021 and the consolidated and company’s operating results and cash flow 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 Sino Biological Inc(301047) , 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) revenue recognition
For relevant information disclosure, see “28. Operating revenue and operating cost” in “VII. Notes to items of consolidated financial statements” in “section x financial report”.
1. Item description
Sino Biological Inc(301047) is mainly engaged in the production, sales and technical services of biological reagents. In 2021, the operating revenue of Sino Biological Inc(301047) was 965272500 yuan, and the operating revenue is one of the key performance indicators of Sino Biological Inc(301047) so there is an inherent risk that the management manipulated the revenue recognition in order to achieve specific goals or expectations. Therefore, we identified the revenue recognition as a key audit matter.
2. Audit response
We have mainly implemented the following procedures for revenue recognition:
(1) Understand and evaluate the rationality of internal control design related to revenue recognition, and test the effectiveness of key internal control implementation;
(2) Obtain the standing book of sales contracts, select the sales contracts of major customers by sampling, identify the contract terms and conditions related to the transfer of main risks and rewards of commodity ownership and the transfer of commodity control, analyze and evaluate whether the accounting policies related to revenue recognition comply with the provisions of enterprise accounting standards, and analyze the identification of performance obligations, the allocation of transaction prices Whether the determination of the time point of control transfer of relevant goods or services is in line with industry practices and Sino Biological Inc(301047) ‘s business model, and review whether relevant accounting policies have been consistently applied;
(3) Implement analytical procedures for operating income and gross profit margin, identify whether there are significant or abnormal fluctuations, and find out the reasons for fluctuations;
(4) For sales revenue, sample and check sales contracts or orders, product delivery orders, sales invoices, bank collection vouchers, express delivery orders, customer signing documents, product declaration forms and other supporting documents;
(5) Combined with the accounts receivable correspondence, the sales volume in the reporting period is confirmed to the main customers by sampling, and the registered address of the customers is checked through the industrial and commercial information network and checked with the sending address to check whether the correspondence information is accurate;
(6) According to the recognition basis of operating revenue before and after the balance sheet date, check the recognition records of operating revenue with supporting documents such as sales contract or order, product delivery order, sales invoice, bank collection voucher, express delivery order, customer signing document and product declaration form, so as to evaluate whether the revenue before and after the balance sheet date is recorded in the correct accounting period;
(7) Obtain the sales return records after the balance sheet date and check whether there is any situation that does not meet the conditions for revenue recognition on the balance sheet date.
(II) measurement and impairment of inventories
For relevant information disclosure, see “7. Inventory” in “VII. Notes to items of consolidated financial statements” in “section x financial report”.
1. Item description
Sino Biological Inc(301047) finished products include recombinant protein, antibody, gene and culture medium. Combined with current research hotspots, application fields and other factors, recombinant protein products are divided into general-purpose recombinant protein and non general-purpose recombinant protein according to their wide application.
Due to the production process factors of recombinant protein, antibody and gene products, the production quantity of products usually exceeds the sales demand, and the unit cost and marginal cost of products are low. It is difficult to predict the future sales of non universal protein, antibody and gene products, and the future sales of universal protein products are predictable. Therefore, the closing valuation principles of the above products are divided into: the closing inventory valuation of general recombinant protein is carried out by multiplying the unit cost by the closing balance quantity; For non general recombinant proteins, antibodies and gene products, the current production cost is directly carried forward to profit and loss without inventory balance.
On the balance sheet date, if the inventory cost is higher than its net realizable value, the inventory falling price reserves shall be accrued. The future sales of general protein products shall be predicted according to its historical sales data, current market dynamics, technological progress and other factors. For the part exceeding the expected sales volume, the inventory falling price reserves shall be accrued in full. As the prediction of future sales of inventories involves the management’s judgment on market dynamics, technological progress and other factors, there is uncertainty in accounting estimation, so we determine the measurement and impairment of inventories as key audit matters.
2. Audit response
We have mainly implemented the following procedures for the measurement and impairment of inventories:
(1) Understand the internal controls related to inventory measurement and impairment provision, evaluate the rationality of these control designs, and test the effectiveness of the implementation of key internal controls;
(2) Review the management’s forecast of inventory sales quantity and actual operating results in previous years, and evaluate the accuracy of the management’s forecast of inventory sales in previous years; (3) Review the management’s forecast of the estimated selling price of inventory by sampling, and compare the estimated selling price with historical data, future situation, market information, etc; (4) Implement the inventory supervision procedure, and check the storage status, storage environment and whether there is damage, expiration, deterioration and other conditions of the inventory;
(5) Test whether the management’s calculation of the net realizable value of inventory is accurate;
(6) Analyze and evaluate whether the information related to inventory accounting complies with the provisions of accounting standards, and check whether the information related to inventory has been properly presented in the financial statements.
4、 Other information
Sino Biological Inc(301047) Management (hereinafter referred to as management) is responsible for other information. Other information includes the information covered in Sino Biological Inc(301047) 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
Sino Biological Inc(301047) the management is responsible for preparing the financial statements in accordance with 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 due to fraud or error.
When preparing the financial statements, the management is responsible for assessing the going concern ability of Sino Biological Inc(301047) , disclosing matters related to going concern (if applicable), and applying the going concern assumption, unless the management plans to liquidate Sino Biological Inc(301047) , terminate the operation or has no other realistic choice.
The management is responsible for supervising the financial reporting process of Sino Biological Inc(301047) .
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 Sino Biological Inc(301047) ‘s ability to continue as a going concern. 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 Sino Biological Inc(301047) 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 Sino Biological Inc(301047) to express an 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 (if applicable).
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.
Zhitong certified public accountants, Chinese Certified Public Accountants:
(special general partnership) Dong Xu (project partner)
Chinese certified public accountant
Nie Shengyong, Beijing, China (project partner)
February 25, 2022
2、 The unit of the statement in the notes to the financial statements is: yuan 1. Preparation unit of the consolidated balance sheet: Sino Biological Inc(301047)
December 31, 2021
Unit: Yuan
December 31, 2021 December 31, 2020
Current assets:
