Henan Liliang Diamond Co.Ltd(301071)
audit report
Dhsz [2022] No. Hunan Tv & Broadcast Intermediary Co.Ltd(000917)
Dahua Certified Public Accountants (special general partnership)
DaHuaCertifiedPublicAccountants（SpecialGeneralPartnership）
Henan Liliang Diamond Co.Ltd(301071)
Audit report and financial statements
(from January 1, 2021 to December 31, 2021)
Contents page 1. Audit report 1-6 II. Audited financial statements
Consolidated balance sheet 1-2 consolidated income statement 3 consolidated cash flow statement 4 consolidated statement of changes in shareholders’ equity 5-6 parent company balance sheet 7-8 parent company income statement 9 cash flow statement of parent company 10 statement of changes in shareholders’ equity of parent company 11-12 notes to financial statements 1-87
Audit report
Dahuashen Zi [2022] No. Hunan Tv & Broadcast Intermediary Co.Ltd(000917) Henan Liliang Diamond Co.Ltd(301071) all shareholders:
1、 Audit opinion
We have audited the financial statements of Henan Liliang Diamond Co.Ltd(301071) (hereinafter referred to as power shares), 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 shareholders’ equity and notes to relevant financial statements in 2021.
In our opinion, the attached financial statements are prepared in accordance with the accounting standards for business enterprises in all material aspects, and fairly reflect the consolidated and parent company’s financial position as of December 31, 2021 and the consolidated and parent 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 power shares 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.
We confirm that the following matters are the key audit matters that need to be communicated in the audit report. 1. Revenue recognition
2. Provision for inventory falling price reserves
（1） Revenue recognition
1. Event description
For the accounting policies and carrying amount information related to revenue recognition of power shares, please refer to note 4 to the consolidated financial statements, important accounting policies, accounting estimates (32) and note 35 to note 6 to the consolidated financial statements.
The consolidated main business income of power shares in 2021 was 490220700 yuan, including domestic sales and overseas sales. The main business income is an important component of the consolidated income statement, which has a significant impact on the operating results of power shares, so there is an inherent risk that the management manipulates the time point of revenue recognition in order to achieve specific goals or expectations.
2. Audit response
In the audit of financial statements in 2021, our important audit procedures for revenue recognition include:
(1) Understand and evaluate the accounting policies for the recognition of sales revenue of power shares through interviews and tests;
(2) Understand and evaluate the design and operation effectiveness of key internal controls related to revenue recognition;
(3) Select samples to check the sales contract, identify the individual performance obligations contained in the contract and the contract terms for the customer to obtain the transfer of control over relevant commodities, and evaluate whether the revenue recognition time point of the company meets the requirements of the accounting standards for business enterprises;
(4) Select a sample of revenue transactions recorded in the reporting period, check the sales contract, sales order, invoice, delivery order and delivery receipt confirmation, and evaluate whether the relevant revenue recognition complies with the accounting policies of the company for revenue recognition;
(5) Implement on-site visits and confirmation procedures to important customers, inquire about the sales amount and current account balance in the reporting period, and confirm the authenticity of income;
(6) Conduct a cut-off test on the operating revenue, select samples, check the sales contract, delivery order and delivery receipt confirmation form, query the express receipt records, and evaluate whether the revenue is recorded in the appropriate accounting period.
Based on the audit work performed, we believe that the revenue recognition is in line with the accounting policies of Power Co., Ltd.
（2） Provision for inventory falling price reserves
1. Event description
Please refer to note 4, important accounting policies and accounting estimates (XV) of the consolidated financial statements and note 7 of note 6 of the consolidated financial statements for the accounting policies and carrying amount information related to the withdrawal of inventory falling price reserves of power shares.
In 2021, the book value of consolidated inventory of Power Co., Ltd. was 129812 million yuan respectively, and the provision for inventory falling price was 6.5103 million yuan. The inventory was measured by the method of the lower of cost and net realizable value. Whether the provision for inventory falling price was sufficient had a great impact on the financial statements. Therefore, we identified the provision for inventory falling price as a key audit event.
2. Audit response
In the audit of financial statements in 2021, our important audit procedures for the provision of inventory falling price reserves include:
(1) Through interviews and tests, understand and evaluate the calculation and withdrawal methods of inventory falling price reserves of power shares;
(2) Understand and evaluate the design and operation effectiveness of key internal controls related to inventory falling price reserves;
(3) Obtain the calculation table of inventory falling price reserves of power shares, review the net realizable value of inventory and the amount of inventory impairment, and check the estimated selling price and selling expenses when the management determines the net realizable value with the actual amount, so as to evaluate whether the judgment made by the management in determining the net realizable value of inventory is reasonable;
(4) Check the quantity and status of inventories in combination with the inventory supervision procedures, focus on the long-term inventory, and analyze the adequacy of the provision for depreciation of inventories with signs of impairment;
(5) Check the changes of inventory falling price reserves accrued in previous years in the current period, and analyze the rationality of the changes of inventory falling price reserves.
Based on the audit work performed, we believe that the assumptions and methods adopted by the management in the provision for inventory falling price reserves are acceptable and the relevant judgments and estimates on the provision for inventory falling price reserves are reasonable.
4、 Responsibilities of management and governance for financial statements
The management of power shares 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 of powershare is responsible for evaluating the sustainable operation ability of powershare, disclosing matters related to sustainable operation (if applicable), and applying the assumption of sustainable operation, unless the management plans to liquidate powershare, terminate operation or has no other realistic choice. The management is responsible for supervising the financial reporting process of power shares.
5、 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 to design appropriate audit procedures.
3. Evaluate the appropriateness of accounting policies selected by the management and the rationality of accounting estimates and related disclosures.
4. Draw a conclusion on the appropriateness of the going concern assumption used by the management. 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 the sustainable operation ability of power shares. If we conclude that there are significant uncertainties, the auditing standards require us to draw the attention of report 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 lead to the inability of power shares to continue to operate.
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 power shares to express an opinion on the financial statements. We are responsible for guiding, supervising and executing the group audit. We are fully responsible for the audit opinion.
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. Dahua Certified Public Accountants (special general partnership) Chinese certified public accountant:
(project partner) Wu Shaohua, Beijing, China Certified Public Accountant:
Sang Dongxue February 23, 2002
Henan Liliang Diamond Co.Ltd(301071)
Notes to financial statements of 2021
1、 Basic information of the company
（1） Place of registration, organizational form and headquarters address of the company
Henan Liliang Diamond Co.Ltd(301071) (hereinafter referred to as “the company” or “the company”), formerly known as Henan Power New Material Co., Ltd. (hereinafter referred to as “Power Co., Ltd”), was jointly initiated and established by Shao Zengming and Li Aizhen with the approval of Henan provincial (municipal) people’s Government in November 2010.
On November 16, 2015, Power Co., Ltd. held a shareholders’ meeting and agreed to the resolution to change the company into a joint stock limited company. With its audited net assets of 3568434101 yuan as of January 10, 2016, it was converted into shares at the ratio of 1189478031, equivalent to 30 million shares, and renamed Henan Liliang Diamond Co.Ltd(301071) .
On August 10, 2021, the company was approved to publicly issue 15092995 ordinary shares (with a par value of 1 yuan per share) to the public in accordance with the approval of zjxk [2021] No. 2624 document of the China Securities Regulatory Commission, and the raised funds were in place on September 15, 2021, It has been verified by Dahua Certified Public Accountants (special general partnership) and issued the capital verification report “Dahua Yan Zi [2021] No. Yang Guang Co.Ltd(000608) “. Now the unified social credit code is 91411400
