Shenzhen Huakong Seg Co.Ltd(000068)
audit report
Dhsz [2022] No. 001510
Dahua Certified Public Accountants (special general partnership)
DaHuaCertifiedPublicAccountants（SpecialGeneralPartnership）
Shenzhen Huakong Seg Co.Ltd(000068)
Audit report and financial statements
(from January 1, 2021 to December 31, 2021)
Contents page I. audit report 1-7 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 1-96
Dahua Certified Public Accountants (special general partnership)
12 / F, building 7, yard 16, Middle West Fourth Ring Road, Haidian District, Beijing [100039]
Tel: 86 (10) 58350011 Fax: 86 (10) 58350006
www.dahua-cpa. com.
Audit report
Dahuashen Zi [2022] No. 001510 Shenzhen Huakong Seg Co.Ltd(000068) all shareholders:
1、 Audit opinion
We have audited the financial statements of Shenzhen Huakong Seg Co.Ltd(000068) (hereinafter referred to as Shenzhen Huakong Seg Co.Ltd(000068) company), 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 provisions of the accounting standards for business enterprises in all material aspects and fairly reflect the consolidated and parent company’s financial position of Shenzhen Huakong Seg Co.Ltd(000068) company 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 Shenzhen Huakong Seg Co.Ltd(000068) company 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、 Highlight matters
We remind users of financial statements that, as stated in note Xi (III) of this financial report, Shenzhen Huakong Seg Co.Ltd(000068) company’s dispute over financial management agreement with Tongfang Investment Co., Ltd. involves a significant amount. At present, the case is under trial, and the future results are uncertain.
The contents of this paragraph shall not affect the issued audit opinion.
4、 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. Confirmation of book value of PPP project in sponge City
(I) revenue recognition
1. Event description
Please refer to note VI to the financial statements and notes to the items of the consolidated financial statements (note 38) Shenzhen Huakong Seg Co.Ltd(000068) company comprehensively evaluates relevant contracts and business arrangements, identifies various performance obligations in the contract, and judges whether the relevant performance obligations are performed within a certain period of time or at a certain point in time. Revenue is one of the key performance indicators of Shenzhen Huakong Seg Co.Ltd(000068) company. According to the contract terms and business arrangements, the identification of performance obligations and the determination of whether to complete the performance obligations within a certain period of time or at a certain point of time involve the judgment of the management. There is a risk that the management will advance or delay the recognition of revenue in order to achieve specific goals or expectations, Therefore, we recognize revenue recognition as a key audit matter.
2. Audit response
Our important audit procedures for revenue recognition include:
(1) Understand the internal control of key financial reports related to revenue recognition, and evaluate the rationality of its design and the effectiveness of its operation;
(2) Select the service contract signed between Shenzhen Huakong Seg Co.Ltd(000068) company and customers, check its main terms, and evaluate whether the accounting policies for revenue recognition of Shenzhen Huakong Seg Co.Ltd(000068) company meet the requirements of accounting standards for business enterprises;
(3) Select the project execution detail test and cut-off test, and check the supporting documents and evidence corresponding to the key terms of the business contract and the performance progress: the technical consulting business shall check the review certificate of construction drawing design documents, construction project planning permit, review opinions of construction project design scheme, etc., and check whether the judgment of the performance progress of the project is correct, Whether it is consistent with the settlement conditions of the contract; Check and find out the receipt document, settlement document, invoice and capital flow, and check whether the revenue confirmation actually occurs;
(4) Select project samples for recalculation and check whether the revenue recognition amount is accurate; (5) Select the revenue items of the current year and implement the letter confirmation procedure for the completed workload of the project and the amount of goods sold;
(6) Select the revenue recognition records close to the balance sheet date and check them to the supporting documents of relevant revenue recognition to evaluate whether the revenue is recorded in the appropriate accounting period.
Based on the audit work performed, we believe that the accounting treatment of revenue recognition by the management meets the requirements of the accounting standards for business enterprises.
(II) confirmation of book value of PPP project in sponge City
1. Event description
Please refer to note VI to the financial statements and notes to the consolidated financial statements (notes 7 and 19). The book value of sponge City PPP project is 242314647605 yuan, accounting for 60.16% of the total assets.
The company will regularly collect the progress data of each project and calculate the PPP project. As the book value of sponge City PPP project is large and has a significant impact on the overall financial statements, we determine the confirmation of the book value of sponge City PPP project as a key audit event.
2. Audit response
(1) We understand, evaluate and test the design and operation effectiveness of Shenzhen Huakong Seg Co.Ltd(000068) company’s internal control related to the confirmation of the book value of sponge City PPP project;
(2) Review the correctness of the collection of various costs and expenses by the management;
(3) Obtain the data used by the company’s management to judge the project construction progress, and discuss with the company’s management whether such data can correspond to the project progress at the end of the year;
(4) Check the project progress on site;
(5) Inspect the construction contracts of PPP projects in major sponge cities;
(6) Confirm the year-end progress of PPP projects in major sponge cities to the construction party;
(7) Assess whether the management’s disclosure of the book value of sponge City PPP project in the financial statements is appropriate.
Based on the audit work performed, we believe that the management of Shenzhen Huakong Seg Co.Ltd(000068) company’s presentation and disclosure of the book value of sponge City PPP project is appropriate.
5、 Other information
Shenzhen Huakong Seg Co.Ltd(000068) the management of the company is responsible for other information. Other information includes the information covered in the 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 understand 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.
6、 Responsibilities of management and governance for financial statements
Shenzhen Huakong Seg Co.Ltd(000068) the management of the company 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 due to fraud or error.
When preparing the financial statements, the management of Shenzhen Huakong Seg Co.Ltd(000068) company is responsible for evaluating the continuous operation ability of Shenzhen Huakong Seg Co.Ltd(000068) company, disclosing matters related to continuous operation (if applicable), and applying the assumption of continuous operation, unless the management plans to liquidate Shenzhen Huakong Seg Co.Ltd(000068) company, terminate operation or has no other realistic choice.
The management is responsible for supervising the financial reporting process of Shenzhen Huakong Seg Co.Ltd(000068) company.
7、 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 Shenzhen Huakong Seg Co.Ltd(000068) company. 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 cause Shenzhen Huakong Seg Co.Ltd(000068) company to be 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 Shenzhen Huakong Seg Co.Ltd(000068) company 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.
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