Audit report Tongxing Environmental Protection Technology Co.Ltd(003027)
Rongcheng Shenzi [2022] No. 230z1055 Rongcheng Certified Public Accountants (special general partnership)
Beijing, China
Tongxing Environmental Protection Technology Co.Ltd(003027)
audit report
…… catalogue
Serial number content page number
1 audit report 1-6
2 consolidated balance sheet 7
3 consolidated income statement 8
4 consolidated cash flow statement 9
5 consolidated statement of changes in owner’s equity 10-11
6 balance sheet 12
7 income statement 13
8 cash flow statement 14
9. Statement of changes in owner’s equity 15-16
10 notes to financial statements 17-111
Rong Cheng Shen Zi [2022] No. 230z1055 audit report
Tongxing Environmental Protection Technology Co.Ltd(003027) all shareholders:
1、 Audit opinion
We have audited the financial statements of Tongxing Environmental Protection Technology Co.Ltd(003027) (hereinafter referred to as Tongxing Environmental Protection Technology Co.Ltd(003027) ), 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 owner’s equity and notes to relevant 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 the consolidated and parent company as of December 31, 20272021 and the operating results and cash flow of the consolidated and 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 Tongxing Environmental Protection Technology Co.Ltd(003027) , 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
Key audit matters are the most important matters we believe to audit the financial statements in the reporting period 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
According to notes III and 25 of Tongxing Environmental Protection Technology Co.Ltd(003027) financial statements, Tongxing Environmental Protection Technology Co.Ltd(003027) for the performance obligation of flue gas treatment project, denitration equipment and dust removal equipment construction, it shall be regarded as the performance obligation to be performed within a certain period of time, and the revenue shall be recognized according to the performance progress. The performance progress shall be determined according to the proportion of the actual contract cost incurred for the performance of the contract to the estimated total contract cost. The management needs to make a reasonable estimate of the estimated total cost of the above business to determine the performance progress, and shall continuously evaluate and revise it during the execution of the contract. As it involves significant accounting estimates and judgments of the management and has a significant impact on the amount and time of revenue recognition, as described in notes V and 37 to the financial statements, the revenue recognized by Tongxing Environmental Protection Technology Co.Ltd(003027) according to the performance progress in 2021 is 7664019 million yuan, accounting for 82.11% of the current operating revenue, accounting for a large proportion. Therefore, we recognize the revenue recognition of the above performance obligations performed in a certain period of time as a key audit event.
2. Audit response
The relevant procedures we implement include:
(1) Understand, evaluate and test internal control related to construction contract budgeting and revenue recognition;
(2) Obtain the contract list from the management, select samples to check with the contract information summary and income Sub Ledger; (3) Check the terms of the project contract and the cost budget data, and evaluate the appropriateness of the management’s estimation of the estimated total revenue and the estimated total cost;
(4) Test the accuracy of contract costs incurred; Perform a cut-off test to check that its contract costs have been recorded in the appropriate accounting period;
(5) Select contract samples for on-site inspection, understand the image progress of the project, discuss and confirm the completion progress of the project with the project management department, compare with the book records, and evaluate the rationality of the completion progress of the project;
(6) Calculate the performance progress based on the estimated total cost and the actually incurred cost, and check the accuracy of the calculation of contract revenue recognized based on the performance progress.
Based on the above work results, we believe that the relevant evidence can support the management’s judgment and estimation on revenue recognition.
（2） Estimation of provision for impairment of accounts receivable and contract assets
1. Event description
As stated in notes V, 4 and 9 to the financial statements, the book balance of accounts receivable and contract assets on December 31, 2021 was 710731800 yuan, the provision for impairment was 8412500 yuan, and the book value of accounts receivable and contract assets was 626606700 yuan, accounting for 27.69% of the total assets. See “9. Financial instruments” in “III. important accounting policies and accounting estimates” in the notes to the financial statements for the accounting policies for the provision for impairment of accounts receivable and contract assets.
The management needs to evaluate the recoverability of accounts receivable and contract assets based on the expected future available cash flow. As it involves significant accounting estimates and judgments of the management, and the amount of Tongxing Environmental Protection Technology Co.Ltd(003027) accounts receivable and contract assets is significant, its recoverability has a significant impact on the financial statements, and the provision for impairment involves a large number of management judgments and assumptions, therefore, we recognize the estimation of expected credit loss of accounts receivable and contract assets as a key audit matter.
2. Audit response
The relevant procedures we implement include:
(1) Understand and evaluate the rationality of internal control design related to sales and collection business, and test the effectiveness of its internal control implementation;
(2) Analyze the rationality of the accounting policy for the provision of expected credit loss of accounts receivable and contract assets, including the determination of the provision proportion, the basis of combination, the judgment of significant amount, the judgment of separate provision of expected credit loss, etc;
(3) Obtain the accrual table of expected credit loss, analyze and compare the rationality and consistency of expected credit loss in each period; Whether the recalculation of the accrued amount is accurate;
(4) Analyze the annual transactions of major customers, understand the possible recovery risks in combination with the management’s evaluation of the current and future collection of accounts receivable, and analyze and check the rationality of the management’s expected credit loss provision;
(5) Implement independent confirmation procedures for important accounts receivable.
Based on the above work results, we believe that the relevant evidence can support the management’s judgment and estimation on the provision of expected credit losses of accounts receivable and contract assets.
4、 Other information
Tongxing Environmental Protection Technology Co.Ltd(003027) Management (hereinafter referred to as management) is responsible for other information. Other information includes the information covered in Tongxing Environmental Protection Technology Co.Ltd(003027) 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.
When preparing the financial statements, the management is responsible for assessing Tongxing Environmental Protection Technology Co.Ltd(003027) ‘s ability to continue as a going concern, disclosing matters related to going concern and applying the assumption of going concern, unless the management plans to liquidate Tongxing Environmental Protection Technology Co.Ltd(003027) , terminate the operation or has no other realistic choice.
The management is responsible for supervising the financial reporting process of Tongxing Environmental Protection Technology Co.Ltd(003027) .
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. The risk of fraud, collusion or failure to control may be higher than that caused by the discovery of material misstatement or fraud.
(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 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 Tongxing Environmental Protection Technology Co.Ltd(003027) going concern ability. 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 result in Tongxing Environmental Protection Technology Co.Ltd(003027) inability to continue as a going concern.
(5) Evaluate the overall presentation, structure and content (including disclosure) of the financial statements, and evaluate whether the financial statements fairly reflect relevant transactions and events.
(6) Obtain sufficient and appropriate audit evidence for the financial information of the entity or business activities in Tongxing Environmental Protection Technology Co.Ltd(003027) 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.
From the matters communicated with the management, we determine which matters are the most important to the audit of the financial statements in the reporting period, 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.
(there is no text on this page, which is the signature and seal page of the audit report Tongxing Environmental Protection Technology Co.Ltd(003027) Rong Cheng Shen Zi [2022] No. 230z1055.)
Rongcheng certified public accountants China Certified Public Accountants:
(special general partnership) Liao Chuanbao (project partner)
Chinese certified public accountant:
Zhao Chuanye
Beijing, China Certified Public Accountant:
Hai Nan Yang
April 18, 2022
Consolidated balance sheet
December 31, 2021
Prepared by: Tongxing Environmental Protection Technology Co.Ltd(003027) unit: RMB currency: RMB
Project notes December 31, 2021 December 2020
