Zhejiang Renzhi Co.Ltd(002629)
audit report
Dhsz [2022] No. 004903
Dahua Certified Public Accountants (special general partnership)
DaHuaCertifiedPublicAccountants（SpecialGeneralPartnership）
Zhejiang Renzhi Co.Ltd(002629)
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 parent company cash flow statement 10 statement of changes in shareholders' equity of the parent company 11-12 notes to financial statements 1-96
Dahua Certified Public Accountants (special general partnership) 12 / F, building 7, No. 16 courtyard, 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. 004903 Zhejiang Renzhi Co.Ltd(002629) all shareholders:
1、 Audit opinion
We have audited the financial statements of Zhejiang Renzhi Co.Ltd(002629) (hereinafter referred to as Renzhi shares), 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 consolidated and parent company's financial position of Renzhi 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 Renzhi Co., Ltd. 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. Recognition of income
2. Provision for impairment of receivables
3. Provision of estimated liabilities
（1） Recognition of income
1. Event description
Please refer to the accounting policies described in note 30 of "IV. important accounting policies and accounting estimates" in the notes to the financial statements and note 33 of "VI. notes to main items of consolidated financial statements", operating revenue and operating cost. Revenue is an important performance indicator of Renzhi Co., Ltd, Focus on whether the company evades the delisting risk warning stipulated in article 9.3.1 of the stock listing rules (revised in 2022) through accounting adjustment. Therefore, we identify the recognition of revenue as a key audit matter.
2. Audit response
Our important audit procedures for revenue recognition include:
(1) Understand, evaluate and test the effectiveness of the design and operation of key internal controls related to revenue recognition.
(2) Whether the selection and implementation of the accounting standards meet the requirements of the management.
(3) Obtain the company's revenue account and check whether it is consistent with the revenue details.
(4) Implement detailed testing of revenue. Select samples for the sales business of this year. For the sales revenue of new materials and petrochemical products, check the relevant documents in the transaction process, including delivery documents, logistics documents, customer signing records, sales invoices, fund collection vouchers, etc; For the income from drilling engineering services and oil and gas field technical services, check the key terms of the sales contract, sales invoice, project settlement sheet, acceptance sheet, fund collection voucher, etc; For the equipment rental income, check the equipment rental contract, recalculate the current rental income and check it with the recorded income in the book, check the fund collection voucher, etc., and confirm the authenticity of the transaction.
(5) Select samples for the revenue transactions recorded before and after the balance sheet date, and check the delivery order, logistics order, customer signing record and sales invoice for the revenue from the sales of new materials and petrochemical products; For the income from drilling engineering services and oil and gas field technical services, check the key terms of the sales contract, sales invoice, project settlement sheet and acceptance sheet; Whether the income is properly recorded in the accounting period.
(6) Implement the letter procedure for the operating income, and check the letter result with the amount recorded by the management.
Based on the audit work performed, we believe that the management's judgment on the recognition of operating revenue is reasonable.
（2） Provision for impairment of receivables
1. Event description
Please refer to the accounting policies described in notes 10, 12 and 14 of "IV. important accounting policies and accounting estimates" and notes 3 and 6 of "VI. notes to main items of consolidated financial statements".
On December 31, 2021, the original value of accounts receivable in Renzhi's consolidated financial statements was 87864825 yuan, and the bad debt provision was 1940824923 yuan; The original value of other receivables is 35902338036 yuan, and the corresponding provision for bad debts is 35299116934 yuan.
Renzhi Co., Ltd. calculates the expected credit loss of receivables according to the "expected credit loss model", based on the expected credit loss of receivables in the whole duration, with reference to the experience of historical credit loss, combined with the current situation and the prediction of future economic conditions. There are inherent uncertainties in these major judgments. If they cannot be recovered on schedule or cannot be recovered, it will have a significant impact on the financial statements. Therefore, we recognize the provision for impairment of receivables of Renzhi shares as a key audit event.
2. Audit response
Our important audit procedures for the estimation of the provision for impairment of receivables include: (1) understanding, evaluating and testing the aging analysis of receivables and the internal control related to the determination of the provision for bad debts of receivables.
(2) For the accounts receivable for which the management withdraws bad debt reserves according to the combination of credit risk characteristics, evaluate whether the proportion of bad debt reserves determined by the management is reasonable.
(3) Implement the confirmation procedure and check the confirmation results with the amount recorded by the management.
(4) Evaluate the rationality of the management's provision for bad debt reserves in combination with the inspection of the payment collection after the period.
Based on the audit work performed, we believe that the relevant judgments and estimates of the management on the provision for impairment of receivables are reasonable.
（3） Provision of estimated liabilities
1. Event description
Please refer to the accounting policies described in note 28 of "IV. important accounting policies and accounting estimates" and note 26 of "VI. notes to main items of consolidated financial statements". As of December 31, 2021, Renzhi had accrued 1187249985 yuan of estimated liabilities based on the principle of prudence and the latest litigation situation, involving a significant amount. Therefore, we identified the accrual of estimated liabilities as a key audit event.
2. Audit response
Our important audit procedures for the provision of estimated liabilities include:
(1) Obtain the list of pending litigation of Renzhi shares as of December 31, 2021, and check whether the pending litigation cases have fully accrued the estimated liabilities one by one.
(2) Obtain the accrual statement of estimated liabilities of Renzhi shares, check the accrual basis of estimated liabilities, recalculate the accrual data of estimated liabilities in combination with relevant litigation materials, and check the accuracy of the accrual of estimated liabilities.
(3) We have executed the letter confirmation procedure with the attorney of Renzhi shares and obtained a reply to understand the pending litigation cases of Renzhi shares as of December 31, 2021, as well as the latest progress of the cases as of the reply date of the letter.
Based on the audit work performed, we believe that the management's provision for estimated liabilities is sufficient and reasonable.
4、 Other information
The management of Renzhi shares is responsible for other information. Other information includes the information covered in the 2021 annual report of Renzhi shares, 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
The management of Renzhi Co., Ltd. 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 Renzhi shares is responsible for evaluating the continuous operation ability of Renzhi shares, disclosing matters related to continuous operation (if applicable), and applying the assumption of continuous operation, unless the management plans to liquidate Renzhi shares, terminate operation or has no other realistic choice. The management is responsible for supervising the financial reporting process of Renzhi.
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 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 Renzhi shares. 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 Renzhi shares to be unable to continue to operate
