Audit report
Zhonghui kuaishan [2021] No. 6678 all shareholders of wankai new materials Co., Ltd.:
1、 Audit opinion
We have audited the financial statements of wankai New Material Co., Ltd. (hereinafter referred to as wankai new material), including the consolidated and parent company’s balance sheets on December 31, 2018, December 31, 2019, December 31, 2020 and June 30, 2021, the consolidated and parent company’s income statement, consolidated and parent company’s cash flow statement for 2018, 2019, 2020 and January June 2021 Consolidated and parent company’s statement of changes in owner’s equity and notes to financial statements. In our opinion, the attached financial statements are prepared in accordance with the accounting standards for business enterprises in all major aspects, and fairly reflect the consolidated and parent company’s financial position of wankai new material as of December 31, 2018, December 31, 2019, December 31, 2020 and June 30, 2021, as well as the consolidated and parent company’s operating results and cash flow in 2018, 2019, 2020 and January June 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 for Chinese certified public accountants, we are independent of wankaixincai 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
Key audit matters are the most important matters that we believe are the audit of financial statements for 2018, 2019, 2020 and January June 2021 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.
The key audit matters identified in our audit are summarized as follows:
（1） Revenue recognition
1. Event description
The operating income of wankai new material mainly comes from the production and sales of bottle grade PET and the trade of raw materials. The operating revenue of wankai new material in 2018, 2019, 2020 and January June 2021 was RMB 11.725 billion, RMB 9.682 billion, RMB 9.298 billion and RMB 4.421 billion respectively. See note V (39) to the financial statements for relevant information disclosure. As the operating revenue is one of the key performance indicators of wankai new material, we have identified the revenue recognition as a key audit matter.
2. Audit response
(1) Understand the internal control related to revenue recognition, evaluate whether its design and implementation are effective, and test the operation effectiveness of relevant internal control;
(2) Select samples of revenue transactions recorded in each reporting period, check internal and external evidence such as sales contract, sales order, product sales delivery form, receipt, customs declaration form and bill of lading, and evaluate whether relevant revenue recognition complies with the accounting policies of the company for revenue recognition;
(3) Select major customers to implement the letter confirmation procedure and confirm the revenue amount and accounts receivable balance recognized by customers in each reporting period;
(4) Check the sales collection of main customers and verify the authenticity of the collection;
(5) Carry out analytical review procedures, focusing on the analysis of the fluctuation of gross profit margin, accounts receivable turnover rate and sales unit price, so as to determine whether there are abnormal changes.
4、 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 continuous operation ability of wankai new material, disclosing matters related to continuous operation (if applicable), and applying the assumption of continuous operation, unless the management plans to liquidate wankai new material, terminate operation or has no other realistic choice.
The management layer of wankai new material (hereinafter referred to as the management layer) is responsible for supervising the financial reporting process of wankai new material.
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 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 the sustainable operation ability of wankai new material. 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 wankai new material 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 wankai new materials 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 (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. (there is no text on this page, which is the signature and seal page of Zhonghui Certified Public Accountants (special general partnership) on the audit report of wankai new materials Co., Ltd. from June 2018 to 2021)
Zhonghui Certified Public Accountants (special general partnership) Chinese certified public accountant:
(project partner)
Hangzhou, China Certified Public Accountant:
Report date: September 6, 2021
Wankai New Material Co., Ltd
Notes to financial statements
January 1, 2018 to June 30, 2021
1、 Basic information of the company
（1） Company profile
Wankai new materials Co., Ltd. (hereinafter referred to as the company or the company) was formerly Zhejiang wankai new materials Co., Ltd. (formerly known as Zhejiang Haining Zhengkai differentiated Fiber Co., Ltd., hereinafter referred to as wankai Co., Ltd.), and wankai Co., Ltd. established the company by overall change on November 30, 2019. The company was registered with Jiaxing market supervision administration on March 31, 2020 and obtained the business license of enterprise legal person with unified social credit code of 91330481673858589x. The registered capital is RMB 25754540000 and the total share capital is 25754540000 shares (par value of RMB 1 per share). Registered address: No. 15, Wenlan Road, Jianshan new area, Haining City, Jiaxing City, Zhejiang Province. Legal representative: Shen Zhigang.
Basic organizational structure of the company: in accordance with the provisions of national laws and regulations and the articles of association, a standardized multi-level governance structure composed of the general meeting of shareholders, the board of directors, the board of supervisors and the management has been established; The board of Directors consists of four special committees and the office of the board of directors, including the strategy committee, the audit committee, the remuneration and assessment committee and the nomination committee. The company has procurement center, domestic trade center, foreign trade center, production center, quality center, Research Institute, property management center, administrative center, financial center, internal audit department and other main functional departments.
The company belongs to the manufacturing industry of chemical raw materials and chemical products. Business scope: general items: manufacturing, processing and sales of polyester materials and plastic woven bags (excluding printing); Wholesale and retail of coal water slurry; Operate the export business of self-produced products of the enterprise and the import business of raw and auxiliary materials, mechanical equipment, spare parts and technologies required by the enterprise (except those restricted and prohibited by the state; except those involving pre-approval); Warehousing services (excluding dangerous goods); Own house lease. (except for the items that must be approved according to law, the company shall independently carry out business activities according to law with its business license).
（2） Company history
Wankai Co., Ltd., the predecessor of the company, was registered in Haining Administration for Industry and Commerce on March 31, 2008 and obtained the business license for enterprise legal person with the registration number of 330481 Shenzhen Kaifa Technology Co.Ltd(000021) 266. At the time of establishment, the registered capital was 50 million yuan, and Zhejiang Zhengkai Group Co., Ltd. (hereinafter referred to as Zhengkai group) promised to invest 50 million yuan, accounting for 100% of the registered capital.
According to the resolution of shareholders on May 12, 2008, wankai Co., Ltd. increased its registered capital by 50 million yuan, which was subscribed by Zhengkai group in currency, and completed the industrial and commercial change registration formalities on May 16, 2008.
According to the resolution of shareholders on September 1, 2009, wankai Co., Ltd. increased its registered capital by 50 million yuan, which was subscribed by Zhengkai group in currency, and completed the industrial and commercial change registration formalities on September 16, 2009.
According to the resolution of shareholders on August 19, 2011, Zhengkai group transferred its 15.00% equity, i.e. RMB 22.5 million, to Shen Zhigang; Zhengkai group transferred its 5.00% equity, namely RMB 7.5 million, to Shen Yuexiu, and completed the industrial and commercial change registration formalities on August 23, 2011.
According to the resolution of the shareholders’ meeting on September 15, 2011, wankai Co., Ltd. increased its registered capital by 37.5 million yuan, of which 24.375 million yuan was subscribed in currency by Shanghai Xinhu Venture Capital Co., Ltd. and 13.125 million yuan was subscribed in currency by Zhejiang Kexiang Equity Investment Co., Ltd, And completed the industrial and commercial change registration procedures on September 21, 2011. According to the resolution of the shareholders’ meeting on December 25, 2011, wankai Co., Ltd. increased its registered capital by 12.5 million yuan, including Yang Fengchun, Qiu Zengming, Wang Xinglai, Zhu Jianhua, Wang Chunbo, Hu Jianyong, Tong Minghai, Wang Jianfeng, Xiao Haijun, Shen Xiaoling, Zhu Hongdan, Ding Xiaoxiang, Xiang Jun, Zhu Xinsheng Xu Yadi and 16 new shareholders of Haining Wanxing enterprise management center (limited partnership) (the former Haining Wanxing Investment Management Center (limited partnership) (hereinafter referred to as Haining Wanxing) subscribed in monetary form, and completed the industrial and commercial change registration formalities on December 30, 2011.
According to the resolution of the shareholders’ meeting on June 8, 2012, Shanghai Xinhu Venture Capital Co., Ltd. transferred its 12.19% equity, i.e. 24.375 million yuan, to Xinhu Holding Co., Ltd. and completed the industrial and commercial change registration formalities on June 29, 2012.
According to the resolution of the shareholders’ meeting on December 23, 2014, Zhejiang Kexiang Equity Investment Co., Ltd. transferred its 1.71% equity, i.e. RMB 3.4125 million, to Zhengkai group; Xinhu Holding Co., Ltd. transferred its 3.17% equity, i.e. RMB 6.3375 million, to Zhengkai group; Xinhu Holding Co., Ltd. transferred its 9.02% equity, i.e. RMB 180375 million, to Zhejiang Xinhu Venture Capital Co., Ltd. and completed the industrial and commercial change registration procedures on December 31, 2014.
According to the resolution of the shareholders’ meeting on April 19, 2016, Zhejiang Xinhu Venture Capital Co., Ltd. transferred its 9.02% equity, i.e. RMB 180375 million, to Zhengkai group; Zhejiang Kexiang Equity Investment Co., Ltd. transferred its 4.86% equity, i.e. RMB 9.7125 million, to Zhengkai group; Xu Qichen transferred his 0.25% equity, i.e. 500000 yuan, to Zhengkai group; Zhu Hongdan transferred its 0.15% equity, i.e. 300000 yuan, to Zhengkai group; Ding Xiaoxiang transferred his 0.15% equity, i.e. 300000 yuan, to Zhengkai group, and completed the industrial and commercial change registration formalities on May 10, 2016.
