Sealand Securities Co.Ltd(000750) financial statements and audit report for the year ended December 31, 2021
Sealand Securities Co.Ltd(000750) financial statements and audit report for the year ended December 31, 2021
Content page audit report 1 - 5 consolidation and parent company balance sheet 6 - 7 consolidation and parent company income statement 8 consolidation and parent company cash flow statement 9 consolidated and parent company's statement of changes in shareholders' equity 10 - 11 notes to financial statements 12 - 116
audit report
DSB (s) Zi (22) No. p01147 (Page 1 of 5) Sealand Securities Co.Ltd(000750) all shareholders:
1、 Audit opinion
We have audited the financial statements of Sealand Securities Co.Ltd(000750) (hereinafter referred to as " Sealand Securities Co.Ltd(000750) "), 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 financial position of Sealand Securities Co.Ltd(000750) the consolidated and parent company as of December 31, 2021, as well as the consolidated and parent company's operating results and consolidated and parent company's 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 Sealand Securities Co.Ltd(000750) , 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 consider to be the audit of this year's 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） Determination of consolidation scope
Sealand Securities Co.Ltd(000750) manages and invests in various structured entities in the process of conducting business, including securities investment funds, asset management plans and partnerships. According to the accounting policies of Sealand Securities Co.Ltd(000750) , for the structured entities that can implement control, Sealand Securities Co.Ltd(000750) will incorporate them into the consolidation scope of the consolidated financial statements; Structured entities that cannot be controlled will not be included in the consolidation scope of the consolidated financial statements. As stated in notes 8 and 3 and notes 8 and 5 to the financial statements, as of December 31, 2021, the net assets of the structured entities included in the consolidation scope of the consolidated financial statements amounted to RMB 2.717 billion; The net assets of structured entities not included in the consolidation scope of the consolidated financial statements initiated by the group and held financial interests are RMB 47.178 billion. When determining whether the structured entity is included in the consolidation scope of the consolidated financial statements, Sealand Securities Co.Ltd(000750) management needs to judge whether Sealand Securities Co.Ltd(000750) controls the structured entity according to the definition of "control" in the accounting standards for business enterprises and relevant contract terms. The above judgment has certain complexity and subjectivity, and the judgment result is widely related to the financial statements. Therefore, we believe that this matter belongs to the key audit matter of the audit of the consolidated financial statements.
DSB (s) Zi (22) No. p01147 (page 2 of 5) III. key audit matters (Continued)
（1） Determination of consolidation scope (Continued)
For the matters determined in the scope of Sealand Securities Co.Ltd(000750) merger, we have implemented the following main audit procedures to deal with them:
1. Inquire the management's judgment process on whether the structured entity is consolidated, evaluate whether the design of key internal control established when determining whether the structured entity is included in the consolidation scope of the consolidated financial statements is reasonable, and test whether its operation is effective;
2. Take samples to review relevant contracts, understand the purpose of setting up the structured subject and Sealand Securities Co.Ltd(000750) participation in the structured subject, and evaluate the rationality of the management's judgment on whether it has power over the structured subject;
3. Take samples to evaluate the rationality and accuracy of the methods and data used by the management in calculating the magnitude and variability of variable returns, and recalculate them;
4. On the basis of implementing the above procedures, evaluate whether the judgment made by the management is reasonable in three aspects: the power owned by the structured product, the variable return enjoyed by the structured subject and the ability to use the power to affect the amount of return.
（2） Provision for credit impairment of financial assets purchased for resale and other creditor's rights investment of financed funds and stock pledge repurchase business
As stated in notes VI and 3 to the financial statements, as of December 31, 2021, Sealand Securities Co.Ltd(000750) the book value of the financed funds presented in the consolidated and parent company's financial statements was RMB 8.854 billion.
As mentioned in Notes 6 and 7 and notes 9 and 2, as of December 31, 2021, Sealand Securities Co.Ltd(000750) in the consolidated and parent company's financial statements, the book value of the purchased and resold financial assets of the stock pledge repurchase business is RMB 2.182 billion. As stated in notes VI and 10 to the financial statements, as of December 31, 2021, Sealand Securities Co.Ltd(000750) the book value of other debt investments presented in the consolidated and parent company's financial statements was RMB 13.118 billion.
On December 31, 2021, Sealand Securities Co.Ltd(000750) adopts the expected credit loss model ("ECL model") to make provision for credit losses on the financed funds (measured at amortized cost), financial assets bought for resale (measured at amortized cost) of stock pledge repo business and other debt investments (measured at fair value and the changes are included in other comprehensive income). Since the management needs to make a significant judgment on the selection of assumptions and parameters involved in ECL model, and the results have a significant impact on the financial statements, we believe that this matter is a key audit matter of the consolidated and parent company's financial statements audit.
For the withdrawal of credit impairment provision for Sealand Securities Co.Ltd(000750) financed funds, financial assets purchased for resale in stock pledge repo business and other creditor's rights investment, we have implemented the following main audit procedures:
1. Understand the key internal control of Sealand Securities Co.Ltd(000750) and the provision for credit loss, and test whether its operation is effective;
2. Evaluate the appropriateness of the credit impairment model of Sealand Securities Co.Ltd(000750) related financial assets and the rationality of the default probability and default loss rate and other parameters involved in the calculation of expected credit loss with the assistance of the internal impairment experts of the firm;
DSB (s) Zi (22) No. p01147 (page 3 of 5) III. key audit matters (Continued)
（2） Provision for credit impairment of financial assets purchased for resale and other creditor's rights investment of financed funds and stock pledge repurchase business (Continued)
3. Select samples to check the rationality of the management's judgment on whether the credit risk of relevant financial assets has increased significantly and whether there has been credit impairment;
4. Select samples and check whether the main input values of the expected credit loss model are correct, including credit risk exposure, credit risk rating, maintenance guarantee ratio and performance guarantee ratio;
5. For relevant financial assets with credit impairment, check the expected future cash flow of relevant financial assets, the financial status of debtors and guarantors and the realizability of collateral;
6. Review the calculation process and results of the management's expected credit loss of relevant financial assets.
（3） Valuation of financial assets measured at fair value and classified as the third level
As stated in notes 12 and 2 to the financial statements, as of December 31, 2021, Sealand Securities Co.Ltd(000750) financial assets presented in the consolidated financial statements and measured at the third level fair value were RMB 2.349 billion, and their fair value was measured with important unobservable input values ("unobservable parameters") as key assumptions. As the amount of financial assets measured at the fair value of the third level is significant, and the management adopts unobservable parameters as key assumptions during valuation, which requires significant judgment, we believe that this matter belongs to the key audit matter of the consolidated and parent company's financial statement audit.
For Sealand Securities Co.Ltd(000750) the valuation of financial assets measured at the third level fair value, we have implemented the following main audit procedures:
1. Understand the valuation process and key internal control of Sealand Securities Co.Ltd(000750) for financial assets measured at the third level fair value, and test whether its operation is effective;
2. Based on our understanding of industry practices, evaluate whether the model adopted by the management in the valuation of the third level financial assets is appropriate;
3. Select samples to evaluate whether the unobservable input value and observable input value adopted by the management in the valuation of the third level financial assets are appropriate;
4. Select samples, conduct independent valuation of the third level financial assets with the assistance of impairment experts in the firm, compare and analyze the independent valuation results with the valuation results of Sealand Securities Co.Ltd(000750) to judge whether the valuation results of Sealand Securities Co.Ltd(000750) are appropriate.
DSB (s) Zi (22) No. p01147 (page 4 of 5) IV. other information
Sealand Securities Co.Ltd(000750) management is responsible for other information. Other information includes the information covered in the 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 have learned 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
Sealand Securities Co.Ltd(000750) 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 due to fraud or error.
When preparing the financial statements, the management is responsible for evaluating the going concern ability of Sealand Securities Co.Ltd(000750) and disclosing the matters related to going concern (if applicable), and applying the going concern assumption, unless the management plans to liquidate Sealand Securities Co.Ltd(000750) , terminate the operation or has no other realistic choice.
The management is responsible for supervising the financial reporting process of Sealand Securities Co.Ltd(000750) .
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
