Yingkou Fengguang New Material Co., Ltd
Year of 2021
audit report
Zhitong Certified Public Accountants (special general partnership)
catalogue
Audit report 1-6
Consolidated and company balance sheet 1-2
Consolidated and corporate income statement 3
Consolidated and company cash flow statement 4
Consolidated and statement of changes in shareholders' equity 5-8
Notes to financial statements 9-78
Zhitong Certified Public Accountants (special general partnership) 22 Jianguomenwai street, Chaoyang District, Beijing, China
5th floor, set square, 100004
Tel. + 86 1085665588
Fax + 86 1085665120
www.grantthornton. cn.
audit report
Zhi Tong Shen Zi (2022) No. 110a009602 all shareholders of Yingkou Fengguang New Material Co., Ltd.:
1、 Audit opinion
We have audited the financial statements of Yingkou Fengguang New Material Co., Ltd. (hereinafter referred to as Fengguang Co., Ltd.), including the consolidated and company balance sheet as of December 31, 2021, the consolidated and company income statement, consolidated and company cash flow statement, consolidated and company 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 company's financial position as of December 31, 2021 and the consolidated and 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 Fengguang 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.
(I) authenticity and cut-off of revenue recognition
See note iii-26 and note V-31 of the financial statements for relevant information disclosure.
1. Item description
The operating income of Fengguang Co., Ltd. in 2021 is 75365887574 yuan.
For the general sales mode, Fengguang Co., Ltd. organizes production according to the sales contract, agreement or order, entrusts the third-party logistics company to transport the goods to the place designated by the buyer, and after the buyer signs for confirmation, or after handling the goods exit formalities and relevant customs affairs with the customs, the realization of commodity sales revenue is confirmed.
For the consignment sales mode, after the buyer signs for confirmation, the company still retains the right to continue to manage the goods. The sales revenue is recognized when the buyer actually receives the goods according to its needs and notifies the settlement. As revenue is one of the key performance indicators of Fengguang Co., Ltd., the time point of revenue recognition will involve the judgment of the management, which may have a significant impact on the net profit. There is an inherent risk of material misstatement of revenue recognition manipulated by the management of Fengguang Co., Ltd. in order to achieve specific goals or expectations. Therefore, we have identified the authenticity and cut-off of sales revenue recognition as key audit matters.
2. Audit response
We have mainly implemented the following procedures for the authenticity and cut-off of revenue recognition:
(1) Understand and evaluate the effectiveness of internal control design related to the recognition of commodity sales revenue of Fengguang Co., Ltd., and test the effectiveness of key control operation.
(2) Through sampling inspection of sales contracts, understanding of hazardous chemicals industry practices and interviews with the management of Fengguang Co., Ltd., analyze and evaluate the time point of control transfer related to the recognition of sales revenue, and then evaluate the recognition policy of sales revenue of Fengguang Co., Ltd.
(3) Sample check the supporting documents related to revenue recognition: for the general sales mode, check the contract or order signed with the buyer, delivery note, acceptance note, export declaration form, etc., and check with the book records; For the consignment sales mode, check the contract or order, delivery note, acceptance note and settlement note signed with the buyer, and check with the book records. Implement analysis procedures for income and review the rationality of income; Whether there are abnormal changes in the amount of income in the same period and whether there are historical fluctuations in the same period.
(4) Carry out transaction letters for major, new customers and related party sales by means of positive letters, and form interview records to confirm the occurrence of transactions; Understand the background of key customers and check whether there are unidentified related party transactions.
(5) Carry out the sales cut-off test and check the large amount transactions or abnormal transactions near the end of the period and after the end of the period with the original vouchers; Sample and inspect the important sales orders executed near each balance sheet date to find out whether there are abnormal pricing, settlement, delivery, return, replacement or acceptance terms.
(6) Check the general ledger and sub ledger at a certain time after the period to find out whether there is any change or cancellation of sales orders, sales revenue reversal or large sales return.
(II) provision for bad debts of accounts receivable
See note iii-10 and note v-4 to the financial statements for relevant information disclosure.
1. Item description
On December 31, 2021, the book value of accounts receivable of Fengguang Co., Ltd. was 23689239679 yuan, accounting for 8.69% of the total assets, and the amount of bad debt provision was 1652094950 yuan.
The management of Fengguang Co., Ltd. withdraws loss reserves for accounts receivable according to the expected credit loss of the whole duration. When a single financial asset cannot evaluate the expected credit loss information at a reasonable cost, the company divides the accounts receivable into groups according to the credit risk characteristics and calculates the expected credit loss on the basis of the group. For the accounts receivable divided into groups, the company calculates the expected credit loss by referring to the historical credit loss experience and combining the current situation and the prediction of future economic conditions.
In view of the significant amount of accounts receivable, the provision for bad debts of accounts receivable depends on the management's judgment and estimation of objective evidence. If the accounts receivable cannot be recovered on schedule or cannot be recovered and bad debts occur, it will have a significant impact on the financial statements. Therefore, we determine the provision for bad debts of accounts receivable as a key audit event.
2. Audit response
Our provision for bad debt of accounts receivable mainly follows the following procedures:
(1) Understand and evaluate the effectiveness of credit policies and internal control design related to accounts receivable management of Fengguang Co., Ltd., and test the effectiveness of key control operation, including the control of identifying objective evidence of impairment and calculating impairment provision.
(2) Analyze the rationality of the accounting estimation of accounts receivable bad debt provision of Fengguang Co., Ltd., including the basis for determining the combination of accounts receivable, the judgment of significant amount and the judgment of separate withdrawal of bad debt provision; Understand and obtain the judgment made by the management of Fengguang Co., Ltd. on the recoverability of individually impaired accounts receivable by combining the current situation and future economic conditions; Evaluate the rationality of the measurement method of the expected credit loss model and check whether the accrual method is implemented in accordance with the bad debt policy.
(3) Use sampling method to check the rationality of aging division of accounts receivable; Test the accuracy of relevant historical credit loss data in the model and evaluate the proportion of historical default loss; Based on the understanding of the industry in which Fengguang Co., Ltd. is located and referring to external data, evaluate the rationality of the management of Fengguang Co., Ltd. for the adjustment of forward-looking information; The expected credit loss is recalculated according to the percentage of default loss adjusted for forward-looking information.
(4) Evaluate the management's disclosure of accounts receivable in the notes to the financial statements, understand the customer's reputation, implement the accounts receivable confirmation procedures and the collection after the inspection period, and evaluate the rationality of the provision for bad debts of accounts receivable.
4、 Responsibilities of management and governance for financial statements
The management of Fengguang Co., Ltd. (hereinafter referred to as 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 Fengguang Co., Ltd., disclosing matters related to sustainable operation (if applicable), and applying the assumption of sustainable operation, unless the management plans to liquidate Fengguang Co., Ltd., terminate operation or has no other realistic choice.
The management is responsible for supervising the financial reporting process of Fengguang Co., Ltd.
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 Fengguang Co., Ltd. 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 Fengguang Co., Ltd. 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 Fengguang Co., Ltd. to express an 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.
From the matters communicated with the management, we determine which matters are most important for the audit of the financial statements for the period of 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 to communicate the negative consequences of a matter in the audit report
