Guangdong Jinming Machinery Co.Ltd(300281) : error in 2021 annual audit report! Reference source not found.
audit report
Dhsz [2022] No. 001631
Dahua Certified Public Accountants (special general partnership)
DaHuaCertifiedPublicAccountants（SpecialGeneralPartnership）
Wrong! Reference source not found.
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 1-89
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
Dhsz [2022] 001631 error! Reference source not found. All shareholders:
1、 Audit opinion
We made a mistake! Reference source not found. (hereinafter referred to as error! Reference source not found.) The financial statements include 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 have been prepared in accordance with the accounting standards for business enterprises in all material aspects and fairly reflect the errors! Reference source not found. The financial position of 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. According to the code of professional ethics of Chinese certified public accountants, we are independent of mistakes! Reference source not found., And 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. Net realizable value of inventories;
2. Revenue recognition.
（1） Net realizable value of inventories
1. Event description
See note 4 (XIV) and note 8 of note 6 to the financial statements for relevant information disclosure.
As of December 31, 2021, Guangdong Jinming Machinery Co.Ltd(300281) company’s inventory book balance is RMB 27994047700, the amount of inventory falling price reserves is RMB 36407444, and the book value is RMB 27957640256.
On the balance sheet date, inventories are measured at the lower of cost and net realizable value, and inventory falling price reserves are withdrawn according to the difference between the cost of a single inventory and the net realizable value. On the basis of considering the purpose of holding the inventory, the management determines the estimated selling price according to the selling price agreed in the contract, and determines the net realizable value of the inventory according to the estimated selling price minus the estimated cost to be incurred at the time of completion, estimated selling expenses and relevant taxes.
Since the amount of inventory is significant and the determination of net realizable value of inventory involves significant management judgment, we determine the net realizable value of inventory as a key audit event.
2. Audit response
Our audit procedures for net realizable value of inventories include:
(1) Understand the key internal controls related to the net realizable value of inventory, evaluate the design of these controls, determine whether they are implemented, and test the operation effectiveness of relevant internal controls; (2) Review the management’s forecast of net realizable value of inventories and actual operating results in previous years, and evaluate the accuracy of the management’s previous forecasts;
(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) Evaluate the rationality of the management’s estimation of the costs, selling expenses and relevant taxes to be incurred from the completion of the inventory;
(5) Test whether the management’s calculation of the net realizable value of inventory is accurate;
(6) Combined with inventory supervision, check whether there are long stock age, old model, decline in output, fluctuation of production cost or selling price, changes in technology or market demand in the ending inventory, and evaluate whether the management has reasonably estimated the net realizable value;
(7) Check whether the information related to the net realizable value of inventories has been properly presented in the financial statements.
According to the audit work performed, we believe that the estimation of net realizable value of inventories and the provision for inventory falling price reserves of Guangdong Jinming Machinery Co.Ltd(300281) company are appropriate.
（2） Revenue recognition
1. Event description
See note 4 (30) and note 36 of note 6 to the financial statements for relevant information disclosure Guangdong Jinming Machinery Co.Ltd(300281) company’s operating income mainly comes from the sales of plastic machinery and equipment such as film blowing unit and salivation unit, as well as film and bag products. In 2021, Guangdong Jinming Machinery Co.Ltd(300281) company’s operating revenue was 52327345358 yuan, of which the main business revenue was 51594319650 yuan, accounting for 98.60% of the operating revenue.
Since operating revenue is one of the key performance indicators of Guangdong Jinming Machinery Co.Ltd(300281) company, there may be inherent risks that the management of Guangdong Jinming Machinery Co.Ltd(300281) company may achieve specific goals or expectations through inappropriate revenue recognition. Therefore, we identified revenue recognition as a key audit matter.
2. Audit response
Our important audit procedures for revenue recognition include:
(1) Understand the key internal controls related to revenue recognition, evaluate the design of these controls, determine whether they are implemented, and test the operation effectiveness of relevant internal controls;
(2) Check the main sales contracts, identify the terms related to the transfer of commodity control, and evaluate whether the revenue recognition policies comply with the provisions of the accounting standards for business enterprises;
(3) Implement substantive analysis procedures for operating revenue and gross profit margin on a monthly basis, products, customers, etc., identify whether there are significant or abnormal fluctuations, and find out the causes of fluctuations;
(4) For domestic sales revenue, check the supporting documents related to revenue recognition by sampling, including sales contract, order, sales invoice, delivery order, transportation order, customer arrival receipt, acceptance confirmation, customer confirmed bill of lading, etc; For export revenue, the sales contract, export declaration form, freight bill of lading, sales invoice and other supporting documents shall be inspected by sampling;
(5) Combined with the letter of accounts receivable, the current sales volume is confirmed to the main customers by sampling;
(6) Conduct a cut-off test on the operating income recognized before and after the balance sheet date to evaluate whether the operating income is recognized in an appropriate 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;
(8) Check whether the information related to operating income has been properly presented in the financial statements.
Based on the audit work performed, we believe that the revenue recognition is in line with the accounting policies of Guangdong Jinming Machinery Co.Ltd(300281) company.
4、 Other information
Wrong! Reference source not found. The management is responsible for other information. Other information includes the information covered in the 2021 annual report of Guangdong Jinming Machinery Co.Ltd(300281) company, 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.
5、 Responsibilities of management and governance for financial statements
Wrong! Reference source not found. 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.
Error in preparing financial statements! Reference source not found. Management is responsible for evaluating errors! Reference source not found. Ability to continue as a going concern, disclose matters related to going concern (if applicable), and apply the going concern assumption, unless the management plans to make liquidation errors! Reference source not found Terminate the operation or have no other realistic choice.
The management is responsible for monitoring errors! Reference source not found. Financial reporting process.
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 opinions 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 a conclusion on the appropriateness of the going concern assumption used by the management. At the same time, according to the audit evidence obtained, it may lead to errors! Reference source not found. Draw a conclusion on whether there is significant uncertainty in the matters or circumstances that have major doubts about the ability to continue as a going concern. 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 errors! Reference source not found. Unable to continue as a going concern. 5. Evaluate the overall presentation, structure and content of the financial statements, and evaluate whether the financial statements are fairly reflected
