Cayman aluminum (Sanmenxia) Co., Ltd
Three year and one-year audit report
catalogue
1、 Audit report Page 1-6 II. Financial statements Page 7-14
(I) consolidated and parent company’s balance sheet Page 7-8
(II) consolidated and parent company’s income statement Page 9
(III) consolidated and parent company cash flow statement Page 10
(IV) consolidated and statement of changes in owner’s equity of the parent company Page 11-14 III. notes to financial statements Page 15-230
The key audit matters are the most important matters that we consider to audit the financial statements of 2018, 2019, 2020 and January September 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.
（1） Revenue recognition
1. Event description
Relevant accounting years: 2018, 2019, 2020 and January September 2021. See notes III (XXII), V (Ⅱ) 1 and XIV for relevant information disclosure.
The operating income of Sanmenxia Aluminum Co., Ltd. comes from the sales of alumina, caustic soda, metal gallium and related trade businesses. In 2018, 2019, 2020 and January September 2021, the operating revenue amounts to 29529196600 yuan, 24764511300 yuan, 19892460400 yuan and 14928361600 yuan respectively, of which alumina is the main operating revenue of the company, with the revenue amounts of 16899733400 yuan, 16228493200 yuan, 13907061500 yuan and 12273132900 yuan respectively, accounting for 57.23% and 65.53% of the operating revenue of the current year, 69.91% and 82.21%.
Sanmenxia Aluminum Co., Ltd. signs corresponding sales contracts or orders with customers. When the contract or order stipulates that the customers pick up the goods themselves, the revenue is recognized when the goods are delivered from the warehouse; When the delivery package is agreed in the contract or order, the revenue is recognized when the goods are transported to the delivery place agreed in the contract, accepted and settled by the customer.
As operating income is one of the key performance indicators of Sanmenxia aluminum company, there may be inherent risks that the management of Sanmenxia Aluminum Company (hereinafter referred to as the management) may achieve specific goals or expectations through inappropriate revenue recognition. Therefore, we identified revenue recognition as a key audit matter.
2. Audit response
(1) Understand the key internal controls related to revenue recognition, evaluate the design of these controls, determine whether they are implemented, and test the operation effectiveness of relevant internal controls;
(2) Check the sales contract, understand the main contract terms or conditions, and evaluate whether the revenue recognition method is appropriate; (3) Implement analysis procedures for operating revenue and gross profit margin according to products, identify whether there are significant or abnormal fluctuations, and find out the causes of fluctuations;
(4) Check the supporting documents related to revenue recognition by sampling, including sales contract, order, sales invoice, delivery order, receipt confirmation, etc;
(5) Combined with accounts receivable letters, the sales volume in the reporting period is confirmed to major customers by sampling, and some important customers are selected for on-site visits to verify the authenticity of revenue recognition;
(6) Whether the business income is properly recognized before the balance sheet date;
(7) Check whether the information related to operating income has been properly presented in the financial statements.
（2） Book value of fixed assets
1. Event description
Relevant fiscal years: 2018, 2019, 2020, January September 2021
See note III (XIV) and V (I) 13 for relevant information disclosure.
The book value of fixed assets of Sanmenxia Aluminum Co., Ltd. on December 31, 2018, December 31, 2019, December 31, 2020 and September 30, 2021 were 7878942400 yuan, 803839000 yuan, 7428374400 yuan and 6816014100 yuan respectively, accounting for 21.06%, 20.39%, 18.52% and 25.00% of the total assets. The management’s judgment on the following aspects will have an important impact on the determination of the book value of fixed assets, including: the time point when the construction in progress is transferred into fixed assets; Depreciation life and residual value of fixed assets; Impairment of fixed assets. We identified the above judgments related to the book value of fixed assets as key audit matters.
2. Audit response
(1) Understand and evaluate the design and operation effectiveness of the management’s key internal controls related to fixed assets, and test the effectiveness of the implementation of key controls;
(2) Check the ownership or control of fixed assets, and obtain different evidences for all kinds of fixed assets to determine whether they belong to the company.
(3) Check the important fixed assets on the spot to determine whether they exist. At the same time, combined with the supervision of fixed assets and projects under construction, verify whether there are projects under construction that have reached the expected usable state but have not been carried forward; (4) Check the increase and decrease of fixed assets, and check whether the subsequent expenditure related to fixed assets meets the asset recognition conditions. For those that do not meet the asset recognition conditions, check whether the expenditure is included in the current profit and loss when the subsequent expenditure occurs.
(5) By comparing with the same industry, analyze whether the depreciation method adopted can reasonably allocate the cost within the expected service life of fixed assets, whether the previous and subsequent periods are consistent, and whether the expected service life is reasonable. At the same time, review whether the accrual and allocation of depreciation expenses are accurate.
(6) Obtain the written reports and other supporting documents of the provision for impairment of fixed assets, and evaluate whether the data, assumptions and methods on which the provision for impairment of fixed assets is based are appropriate.
(7) Check whether the information related to fixed assets has been properly presented in the financial statements.
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 sustainable operation ability of Sanmenxia aluminum company, disclosing matters related to sustainable operation (if applicable), and applying the assumption of sustainable operation, unless it plans to liquidate, terminate operation or has no other realistic choice.
The governance layer of Sanmenxia Aluminum Company (hereinafter referred to as the governance layer) is responsible for supervising the financial reporting process of Sanmenxia aluminum company.
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 in order to design appropriate audit procedures, but the purpose is not to express an opinion 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 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 Sanmenxia aluminum company. 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 lead to the inability of Sanmenxia aluminum 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 Sanmenxia aluminum company 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 most important for the audit of financial statements in 2018, 2019, 2020 and January September 2021, 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 we reasonably expect the negative consequences of communicating a matter in the audit report to exceed the public interest
Cayman aluminum (Sanmenxia) Co., Ltd
Notes to financial statements
January 1, 2018 to September 30, 2021
Monetary unit: RMB 1. Basic information of the company
Cayman aluminum (Sanmenxia) Co., Ltd. (hereinafter referred to as the company or the company) is invested and established by Cayman Energy Development Co., Ltd. in the UK. It was registered with Sanmenxia Administration for Industry and Commerce on June 9, 2003. The company now holds a business license with a unified social credit code of 914112007507048163 and a registered capital of 396786624000 yuan.
The company belongs to non-ferrous metal smelting and calendering processing and manufacturing industry. The main business activities are the production and sales of alumina, aluminum hydroxide, caustic soda, metal gallium and other products; At the same time, it is engaged in some non-ferrous metal trading business.
The financial statements have been approved by the Fourth Board of directors of the company on March 29, 2022.
The company included 37 subsidiaries including Guangxi Tiandong Jinxin Chemical Co., Ltd., Guangxi Tiandong Jinsheng Chemical Co., Ltd., Shanxi Fusheng Aluminum Co., Ltd., Xiaoyi Xing’an Chemical Co., Ltd., Zhejiang Anxin Trade Co., Ltd. and Hangjin International Trade Co., Ltd. in the scope of consolidated financial statements in the reporting period. See notes VI and VII to the financial statements for details.
2、 Preparation basis of financial statements
（1） Preparation basis
The financial statements of the company are prepared on the basis of going concern.
（2） Evaluation of going concern ability
The company has no events or circumstances that cause major doubts about its ability to continue as a going concern within 12 months from the end of the reporting period. 3、 Important accounting policies and accounting estimates
（1） Statement of compliance with accounting standards for business enterprises
The financial statements prepared by the company comply with the requirements of the accounting standards for business enterprises and truly and completely reflect the company’s financial position, operating results, cash flow and other relevant information.
（2） Accounting period
The fiscal year starts on January 1 and ends on December 31 of the Gregorian calendar. The accounting period of the financial information contained in the financial statements is
From January 1, 2018 to September 30, 2021.
（3） Business cycle
The business cycle of the company’s business is relatively short, and 12 months is taken as the liquidity classification standard of assets and liabilities.
（4） Recording currency
RMB is adopted as the bookkeeping base currency.
（5） Accounting treatment methods for business combinations under the same control and not under the same control
1. Accounting treatment method of business combination under the same control
The assets and liabilities obtained by the company in business combination shall be measured according to the book value of the combined party in the consolidated financial statements of the final controller on the combination date. The company adjusts the capital reserve according to the difference between the book value share of the owner’s equity of the merged party in the consolidated financial statements of the final controller and the book value of the merger consideration paid or the total face value of the issued shares; If the capital reserve is insufficient to offset, the retained earnings shall be adjusted.
2. Accounting treatment methods for business combinations not under the same control
On the acquisition date, the company recognizes the difference between the combination cost and the fair value of the identifiable net assets of the acquiree obtained in the combination as goodwill; If the merger cost is less than the fair value of the identifiable net assets of the acquiree obtained in the merger, the fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree obtained and the measurement of the merger cost shall be reviewed first. If the merger cost is still less than the fair value of the identifiable net assets of the acquiree obtained in the merger after review, the difference shall be included in the current profit and loss.
（6） Preparation method of consolidated financial statements
The parent company brings all subsidiaries under its control into the consolidation scope of the consolidated financial statements. The consolidated financial statements are based on the financial statements of the parent company and its subsidiaries. According to other relevant materials, the parent company shall prepare the consolidated financial statements in accordance with the accounting standards for Business Enterprises No. 33 – consolidated financial statements
