Farasis Energy (Gan Zhou) Co.Ltd(688567) (Ganzhou) Co., Ltd
audit report
Dhsz [2021] 007774
Dahua Certified Public Accountants (special general partnership)
Da Hua Certified Public Accountants（Special General Partnership）
Farasis Energy (Gan Zhou) Co.Ltd(688567) (Ganzhou) Co., Ltd
Audit report and financial statements
(from January 1, 2020 to December 31, 2020)
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 1-86
Audit report
All shareholders of dahuashen Zi [2021] 007774 Farasis Energy (Gan Zhou) Co.Ltd(688567) (Ganzhou) Co., Ltd.:
1、 Audit opinion
We have audited the financial statements of Farasis Energy (Gan Zhou) Co.Ltd(688567) (Ganzhou) Co., Ltd. (hereinafter referred to as Farasis Energy (Gan Zhou) Co.Ltd(688567) company), including the consolidated and parent company’s balance sheet as of December 31, 2020, 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 2020.
In our opinion, the attached financial statements are prepared in accordance with the provisions of the accounting standards for business enterprises in all major aspects and fairly reflect the consolidated and parent company’s financial position of Farasis Energy (Gan Zhou) Co.Ltd(688567) company as of December 31, 2020 and the consolidated and parent company’s operating results and cash flow in 2020. 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 Farasis Energy (Gan Zhou) Co.Ltd(688567) 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、 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. Provision for bad debts of accounts receivable and notes receivable
2. Inventory falling price reserves
（1） Bad debt provision for accounts receivable and notes receivable
1. Event description
As shown in note 3 and note 4 of note 6 to the financial statements, as of December 31, 2020, the book balance of notes receivable of the company was 5146858 million yuan, the bad debt provision was 13.093 million yuan, and the book value was 5015928 million yuan, accounting for 3.25% of the total assets at the end of the period; The book balance of accounts receivable is 7418722 million yuan, the bad debt provision is 2016.8 million yuan, and the book value is 7217042 million yuan, accounting for 4.68% of the total assets at the end of the period.
The management conducts separate credit risk assessment on major customers on a regular basis. The assessment focuses on the customer’s historical settlement records and current payment capacity, takes into account the specific information of the customer’s own economic environment and its industry, and appropriately takes forward-looking information into account. For accounts receivable that do not need to be assessed separately or have no impairment, the management has carried out a combined impairment assessment based on expected credit loss in combination with forward-looking information on the basis of considering the aging analysis of these customer groups and the historical records of impairment loss.
Farasis Energy (Gan Zhou) Co.Ltd(688567) company’s accounts receivable are mainly those of major customers. Accounts receivable at the end of the period are relatively concentrated. Changes in the credit and solvency of major customers have a significant impact on the recoverability of the company’s accounts receivable; Meanwhile, the notes receivable of Farasis Energy (Gan Zhou) Co.Ltd(688567) company at the end of the period are commercial acceptance bills, and their recoverability is lower than that of bank acceptance bills Farasis Energy (Gan Zhou) Co.Ltd(688567) company has a large amount of accounts receivable and notes receivable at the end of the period, and the calculation of relevant bad debt reserves requires significant judgment and estimation by the management. Therefore, we regard the bad debt reserves of accounts receivable and notes receivable as the key audit matters. 2. Audit response
Our important audit procedures for bad debt reserves of accounts and notes receivable include:
(1) Understand, evaluate and test the design and operation effectiveness of internal control related to daily management and recoverability evaluation of accounts receivable.
(2) Understand the accounting policy of withdrawing bad debt reserves for accounts receivable and notes receivable formulated by the company; Analyze the rationality of the accounting estimation of the company’s accounts receivable bad debt reserves, including the basis for determining the combination of accounts receivable, the judgment of significant amount, the judgment of separate provision for bad debt reserves, etc; (3) Interview the sales department to understand the cooperation and payment collection between the customer and the company, check the management’s analysis of the customer’s credit and the aging of accounts receivable, implement the letter of credit procedure for accounts receivable and notes receivable, and check the customer’s payment collection;
(4) Obtain the statement of bad debt provision for accounts receivable and notes receivable, and check whether the provision method is consistent with the accounting policy; Whether the amount of bad debt provision is recalculated accurately; (5) Check the recovery of the company’s accounts receivable and notes receivable after the period;
(6) Assess whether the management’s disclosure of bad debt reserves for accounts receivable and notes receivable is appropriate.
Based on the audit work performed, we believe that the relevant judgments and estimates of the management on the recoverability of accounts and notes receivable and the provision for bad debts are reasonable.
（2） Inventory falling price reserves
1. Event description
As shown in note 8 of note 6 to the financial report, as of December 31, 2020, Farasis Energy (Gan Zhou) Co.Ltd(688567) company’s inventory book balance was 14011401 million yuan, and the provision for inventory falling price was 1184164 million yuan. The inventory book balance and inventory falling price provision balance increased by 63428551 million yuan and 933497 million yuan respectively compared with the beginning of the period Farasis Energy (Gan Zhou) Co.Ltd(688567) company’s inventories are measured at the lower of cost and net realizable value, and inventory falling price reserves are estimated. When the book balance of inventories increases more, the provision for inventory falling price requires significant judgment and estimation by the management, so we regard it as a key audit event.
2. Audit response
(1) Understand and evaluate the design and operation effectiveness of key internal controls related to procurement business and inventory management;
(2) Implement the supervision procedure for the ending inventory;
(3) Interview the sales department to understand the changes of the company’s sales business and the holding purpose and purpose of the ending inventory;
(4) Check the relevant sales contracts signed by the company and the sales after the period;
(5) Analyze the ending inventory and implement the inventory falling price test review procedure to check whether the judgment and estimation made by the management on the inventory falling price are reasonable;
(6) Assess whether the management’s disclosure of inventory falling price reserves is appropriate.
Based on the audit work performed, we believe that the accounting of inventory falling price reserves is in line with the accounting policies of Farasis Energy (Gan Zhou) Co.Ltd(688567) company.
4、 Other information
Farasis Energy (Gan Zhou) Co.Ltd(688567) company management is responsible for other information. Other information includes the information covered in the 2020 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.
5、 Responsibilities of management and governance for financial statements
Farasis Energy (Gan Zhou) Co.Ltd(688567) 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 caused by fraud or error.
When preparing the financial statements, the management of Farasis Energy (Gan Zhou) Co.Ltd(688567) company is responsible for evaluating the continuous operation ability of Farasis Energy (Gan Zhou) Co.Ltd(688567) company, disclosing matters related to continuous operation (if applicable), and applying the assumption of continuous operation, unless the management plans to liquidate Farasis Energy (Gan Zhou) Co.Ltd(688567) company, terminate operation or have no other realistic choice.
The management is responsible for supervising the financial reporting process of Farasis Energy (Gan Zhou) Co.Ltd(688567) company.
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, 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 Farasis Energy (Gan Zhou) Co.Ltd(688567) 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 lead to the inability of Farasis Energy (Gan Zhou) Co.Ltd(688567) company 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 Farasis Energy (Gan Zhou) Co.Ltd(688567) 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).
We determine the most important matters in the financial statements through the audit. 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) Zhang Yan, Beijing, China Certified Public Accountant:
Jiang Wenwei April 28, 2001
Notes to financial statements of Farasis Energy (Gan Zhou) Co.Ltd(688567) (Ganzhou) Co., Ltd
Farasis Energy (Gan Zhou) Co.Ltd(688567) (Ganzhou) Co., Ltd
Fiscal year 2020
