Beijing Originwater Technology Co.Ltd(300070)
Audit report
Dxsz [2022] No. 101560
Daxin Certified Public Accountants (special general partnership)
WUYIGE CERTIFIED PUBLIC ACCOUNTANTS LLP.
No.1zhichun Road, Haidian dist, 15th floor, College International Building. Website: www.daxincpa com. cn. Postal Code: Beijing, China 100083
Audit report
Dxsz [2022] No. 101560 Beijing Originwater Technology Co.Ltd(300070) all shareholders:
1、 Audit opinion
We have audited the financial statements of Beijing Originwater Technology Co.Ltd(300070) (hereinafter referred to as “the company”), 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 financial statements in 2021.
In our opinion, the attached financial statements are prepared in accordance with the provisions of the accounting standards for business enterprises in all material aspects, and fairly reflect the financial position of your company as of December 31, 2021 and the operating results and cash flows of your company and the parent company 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 your 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
We believe that the audit matters are the most important ones for the current period. 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.
(I) impairment test of franchise rights
1. Item description
The franchise right of your company is mainly the franchise right of sewage treatment project. For franchise assets with signs of impairment, the management of your company shall conduct impairment test to determine the recoverable amount of relevant franchise assets. Franchise rights
No.1zhichun Road, Haidian dist, 15th floor, College International Building. Website: www.daxincpa com. cn. Postal Code: Beijing, China 100083
The recoverable amount of assets is determined by the discounted cash flow method, which involves significant judgment and estimation. The management of your company estimates the future sewage treatment capacity, operating costs and adopts a reasonable discount rate to evaluate the recoverable amount of assets.
2. Audit response
(1) We evaluated and tested the internal control of your company’s franchise asset impairment test process;
(2) Ask the management about the determination criteria of impairment signs of sewage treatment projects to evaluate whether the projects identified by the management are complete
(3) Evaluated the professional competence, professional quality and objectivity of the external experts hired by the management, understood their implementation procedures, and evaluated the appropriateness of the relevant supporting evidence used in the implementation of the procedures;
(4) Evaluate the rationality of the basis and assumptions used in the future cash flow forecast, including the designed sewage treatment capacity and the operation status of franchise assets;
(5) Compare the forecast of previous years with the actual performance in 2021; The rationality of cash flow discount rate is evaluated.
(II) recognition of construction contract revenue
1. Item description
Your company is mainly engaged in technical research and development, equipment manufacturing and sales, engineering design and contracting construction in the field of sewage treatment and sewage recycling. See note III, (XXV) revenue recognition principles and measurement methods and note V, (XLVI) operating revenue and operating cost of the financial statements for the information of construction contract revenue. In 2021, your company recognized the construction contract revenue of 5.684 billion yuan, accounting for 59.52% of the total operating revenue of that year. Your company adopts the percentage of completion method to recognize the business income of construction contract, and determines the completion schedule based on the proportion of the cost incurred in the estimated total cost. The calculation of the estimated total cost of the contract involves significant accounting estimates and judgments, including unforeseen expenses that exist or may occur before completion. The relevant accounting involves significant accounting estimates and judgments. Therefore, we recognize the revenue of the percentage of completion method of the construction contract as a key audit event.
2. Audit response
For the recognition of construction contract revenue, the main audit procedures we perform include:
(1) Understand and evaluate the management’s internal control design related to the recording of construction contract business income and cost, and test the effectiveness of the implementation of key controls, including the internal control related to the actual project cost and the estimated total contract cost.
No.1zhichun Road, Haidian dist, 15th floor, College International Building. Website: www.daxincpa com. cn. Postal Code: Beijing, China 100083
(2) By sampling, the actual total cost of the completed project is compared with the total contract cost estimated by the management before the completion of the project, and the constituent items of the estimated total cost are checked to the purchase contract and other supporting documents, so as to evaluate the management’s experience and ability to make this accounting estimation.
(3) The calculation table of the revenue recognized by the percentage of completion was obtained and the accuracy of the revenue calculation was checked.
(4) For the actual project cost, the following procedures are implemented by sampling:
① Check the contract, invoice, equipment receipt, project progress confirmation and other supporting documents of the actual project cost; ② Select large-scale projects, collect the images of the project site, verify the actual project progress, collect the output sheet confirmed by Party A and the supervisor, and review the project progress and settlement;
③ Check the actual project cost recognized before and after the balance sheet date to the equipment receipt, project progress confirmation and other supporting documents to assess whether the actual cost is recognized in an appropriate period;
(5) For those who cannot check the progress on site during the epidemic, the remote real-time video method is adopted to complete the survey of the construction site.
4、 Other information
The management of your company (hereinafter referred to as the management) is responsible for other information. Other information includes the information covered in your 2021 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
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.
No.1zhichun Road, Haidian dist, 15th floor, College International Building. Website: www.daxincpa com. cn.
Postal Code: Beijing, China 100083
In preparing the financial statements, the management is responsible for assessing the company’s ability to continue as a going concern, disclosing matters related to going concern (if applicable), and applying the going concern assumption, unless the management plans to liquidate the company, terminate the operation or has no other realistic choice.
The management is responsible for supervising the financial reporting process of your 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:
(I) 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.
(II) understand the internal control related to audit to design appropriate audit procedures.
(III) evaluate the appropriateness of accounting policies selected by the management and the rationality of accounting estimates and related disclosures.
(IV) draw a conclusion on the appropriateness of the management’s use of the going concern assumption. 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 your 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 cause your company to be unable to continue its business. (V) evaluate the overall presentation, structure and content of the financial statements, and evaluate whether the financial statements fairly reflect relevant transactions and events.
No.1zhichun Road, Haidian dist, 15th floor, College International Building. Website: www.daxincpa com. cn. Postal Code: Beijing, China 100083
(VI) obtain sufficient and appropriate audit evidence on the financial information of entities or business activities in your company to express audit opinions on the financial statements. We are responsible for guiding, supervising and implementing the group audit, and assume full responsibility 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 statements to the management on compliance with the professional ethics requirements related to independence, and communicate with the management on 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 the most important for the audit of the current financial statements, 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 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.
Daxin Certified Public Accountants (special general partnership) Chinese certified public accountant: Chen Lixin
(project partner)
Beijing, China Certified Public Accountant: Li Ben
April 7, 2002
No.1zhichun Road, Haidian dist, 15th floor, College International Building. Website: www.daxincpa com. cn. Postal Code: Beijing, China 100083
No.1zhichun Road, Haidian dist, 15th floor, College International Building. Website: www.daxincpa com. cn. Postal Code: Beijing, China 100083
No.1zhichun Road, Haidian dist., 15th floor, College International Building
