Great Wall International Acg Co.Ltd(000835)
Special note on non-standard opinions and internal control audit report
Great Wall International Acg Co.Ltd(000835) (hereinafter referred to as “the company” or “Great Wall animation”) hired zhongtianyun Certified Public Accountants (special general partnership) (hereinafter referred to as “zhongtianyun”) as the auditor of the company’s 2021 annual financial report. Zhongtianyun Certified Public Accountants (special general partnership) issued an internal control audit report with a negative opinion of zhongtianyun [2022] Kong Zi No. 90004 on the company’s 2021 annual financial report. According to the requirements of relevant regulations, the relevant matters are described as follows:
1、 Matters leading to negative opinions
Great Wall animation’s internal control over financial reporting has the following major defects:
1. There are major defects in the reconciliation and collection of accounts receivable
Shanghai Tianrui economic and Trade Co., Ltd. (an important subsidiary of Great Wall animation, hereinafter referred to as “Shanghai Tianrui”) shall regularly reconcile with customers such as supermarkets and collect funds. Shanghai Tianrui has no reconciliation and dunning records with the supermarket in the current year. Due to the lack of timely reconciliation and collection, some accounts receivable of Shanghai Tianrui still cannot be recovered beyond the credit period, which also affects the accuracy of the ending balance of accounts receivable of Shanghai Tianrui. There are major defects in the internal control of accounts receivable reconciliation and collection of Shanghai Tianrui economic and Trade Co., Ltd.
2. There are major defects in inventory counting and accounting reconciliation
The inventory management system of Shanghai Tianrui economic and Trade Co., Ltd. stipulates that “at the end of March, June, September and December every year, the company’s business manager or the person in charge of each district’s business shall organize a careful inventory of all goods in the warehouse, and the inventory data shall be sent back to the company immediately after each inventory, and the company’s employees shall compare and verify the returned data with the inventory account”. Shanghai Tianrui economic and Trade Co., Ltd. only provided the inventory counting documents at the end of September 2021, and there was a large difference in the actual count amount, financial book amount and company inventory amount, which was not adjusted according to the actual situation. Shanghai Tianrui economic and Trade Co., Ltd. has major defects in internal control in inventory counting and account reconciliation.
3. There are major defects in some seal management
The seal management of Great Wall animation and some of its subsidiaries was out of control in 2019 and remained out of control until 2021. There are major defects in the company’s internal control related to seal management.
4. There are major defects in the management of some subsidiaries
Some subsidiaries of Great Wall animation operating in different places have major defects in items (I) to (III) above. Great Wall animation has major defects in the internal control related to the management of its subsidiaries.
2、 Opinions of the board of directors of the company and their impact on the effectiveness of the company’s internal control
The board of directors of the company agrees with the opinions in the internal control audit report. The management of the company has identified the above defects and included them in the internal control evaluation report of the company in 2021. In the audit of the company’s 2021 annual financial statements, the accountant has considered the impact of the above major defects on the nature, timing and scope of the audit procedures. This report has no impact on the audit report issued by the company’s 2021 financial statements. The board of directors and management of the company have started rectification and achieved certain results, and will continue to actively urge the implementation of various rectification measures to complete the rectification as soon as possible.
3、 Specific measures to eliminate the matter and its impact
1. The board of directors paid great attention to the defects and problems existing in the reconciliation and collection of accounts receivable, inventory counting and accounting reconciliation of Shanghai Tianrui. It has repeatedly requested the person in charge of Shanghai Tianrui in writing in 2020 and 2021 to make rectification within a time limit and make substantive collection of accounts receivable; Order Shanghai Tianrui to provide a detailed list of goods in the warehouse, require careful inventory of all items in the warehouse, transfer part of the inventory to the place designated by the company for storage, and strictly implement the relevant provisions of the inventory management system. However, due to the resignation of its key personnel and other reasons, the relevant rectification work encountered major obstacles. At present, Shanghai Tianrui has been applied for bankruptcy liquidation by creditors and designated by the court as the bankruptcy administrator. It will no longer be included in the scope of the company’s consolidated statements from January 6, 2022.
2. The defects in the company’s seal management are mainly caused by historical reasons such as the resignation of all the original relevant responsible personnel of the company and relevant subsidiaries and the change of management. At present, through unremitting efforts, the board of directors has basically completed the business registration change of the company and its subsidiaries, and will complete the renewal of relevant licenses and seals as soon as possible. In the next step, the company will continue to strengthen the seal management, and require the general manager’s office and the person in charge of seal use and supervision to strictly standardize the management in accordance with the company’s seal management system, and assign special personnel to be responsible for it. Ensure that all matters related to the company’s use of seals are safe and efficient, and strictly implement the corresponding approval, use, registration and storage procedures.
3. The defects in the management of the company’s subsidiaries are also mainly caused by historical reasons. The board of directors attaches great importance to and focuses on the rectification of the defects in the management of subsidiaries. Through efforts, the company has established a unified and layered electronic management approval system, strictly implemented the supervision and supervision mechanism, and comprehensively strengthened the control of the daily business activities of its subsidiaries. Next, the company will actively study and adopt plans including but not limited to establishment, integration and divestiture in accordance with the company law, the articles of association, the subsidiary management system and other relevant provisions, so as to further strengthen the management of subsidiaries and ensure that the internal control of the company and its subsidiaries is sound and effective.
4、 Opinions of the board of supervisors
The company held the first meeting of the ninth board of supervisors in 2022 on March 23, 2022, and carefully reviewed the special instructions of the board of directors on the internal control audit report with non-standard opinions prepared by the board of directors. The board of supervisors put forward the following written audit opinions:
1. The board of directors of the company issued a special statement on the negative internal control audit opinion. The board of supervisors considered that the special statement of the board of directors was objective, true and in line with the actual situation of the company, and agreed with the special statement issued by the board of directors. 2. As a supervisor of the company, we will actively supervise and urge the work of the board of directors of the company, continue to rectify various defects, and earnestly safeguard the interests of the company and investors, especially the legitimate rights and interests of minority shareholders. 5、 Opinions of independent directors
The company has conducted self-evaluation on the effectiveness of the company’s internal control in 2021 and issued the 2021 internal control evaluation report in accordance with the requirements of the guidelines on internal control of listed companies of Shenzhen Stock Exchange. Zhongtianyun Certified Public Accountants (special general partnership) issued the internal control audit report with zhongtianyun [2022] Kong Zi No. 90004 negative opinion on the company’s 2021 financial report.
As an independent director of Great Wall animation, after careful consideration of the above documents, I hereby explain the relevant situation and express independent opinions as follows:
1. We agree that the company has major defects in internal control.
2. As an independent director of the company, we require the board of directors and the management to promote the implementation of relevant rectification work, pay continuous attention to and supervise the implementation of the corresponding rectification measures of the company, eliminate defects as soon as possible and effectively safeguard the interests of the company and all shareholders.
It is hereby explained.
Great Wall International Acg Co.Ltd(000835) board of directors March 25, 2022
