Nuode Investment Co.Ltd(600110)
audit report
Dhsz [2022] 006397
Dahua Certified Public Accountants (special general partnership)
DaHuaCertifiedPublicAccountants（SpecialGeneralPartnership）
Nuode Investment Co.Ltd(600110)
Audit report and financial statements
(from January 1, 2021 to December 31, 2021)
Contents page I. audit report 1-7 II. Audited financial statements
Consolidated balance sheet 1-2 consolidated income statement 3 consolidated cash flow statement 4 consolidated statement of changes in shareholders’ equity 5-6 parent company balance sheet 7-8 parent company income statement 9 parent company cash flow statement 10. Statement of changes in shareholders’ equity of the parent company 11-12 notes to financial statements 1-127
Dahua Certified Public Accountants (special general partnership) 12 / F, building 7, No. 16 courtyard, Middle West Fourth Ring Road, Haidian District, Beijing [100039] Tel: 86 (10) 58350011 Fax: 86 (10) 58350006 www.dahua-cpa com. Audit report
Dhsz [2022] 006397 Nuode Investment Co.Ltd(600110) all shareholders:
1、 Audit opinion
We have audited the financial statements of Nuode Investment Co.Ltd(600110) (hereinafter referred to as Nuode Investment Co.Ltd(600110) ), 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 relevant notes to 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 financial position of Nuode Investment Co.Ltd(600110) the consolidated and parent company as of December 31, 2021, and the consolidated and parent 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 Nuode Investment Co.Ltd(600110) , 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.
We determined that the following matters are the key audit matters that need to be communicated in the audit report: 1 Provision for bad debt of accounts receivable
2. Revenue recognition
（1） Provision for bad debt of accounts receivable
1. Event description
Please refer to the accounting policies described in “IV. (XII) accounts receivable” and “note VI, note 3 accounts receivable” in the notes to the financial statements.
On December 31, 2021, the original value of accounts receivable in Nuode Investment Co.Ltd(600110) consolidated financial statements was 162144572265 yuan, and the bad debt provision was 7859012752 yuan.
Nuode Investment Co.Ltd(600110) the management needs to evaluate the credit status of relevant customers, including the status of available mortgages or pledges and the actual repayment when determining the expected recoverable amount of accounts receivable. Since Nuode Investment Co.Ltd(600110) management needs to use significant accounting estimates and judgments when determining the estimated recoverable amount of accounts receivable, and the amount affected is significant, we identify the provision for bad debts of accounts receivable as a key audit event.
2. Audit response
Our main audit procedures for the provision for bad debts of accounts receivable include:
(1) Understand, evaluate and test the internal control related to the aging analysis of accounts receivable and the determination of bad debt reserves of accounts receivable.
(2) Review the relevant considerations and objective evidence of the management’s impairment test on accounts receivable, and pay attention to whether the management has fully identified the items that have been impaired.
(3) Select a sample of accounts receivable with separate bad debt provision, and review the basis and rationality of the management’s estimation of the expected future cash flow.
(4) For the accounts receivable for which the management withdraws bad debt reserves according to the combination of credit risk characteristics, evaluate whether the proportion of bad debt reserves determined by the management is reasonable.
(6) Evaluate the rationality of the management’s provision for bad debt reserves in combination with the inspection of the payment collection after the period.
（2） Revenue recognition
1. Event description
Please refer to the accounting policies described in “note IV (35), income” and “note VI, note 42, operating income and operating cost” of the consolidated financial statements.
In 2021, the consolidated operating income of Nord shares was 444567616683 yuan.
As operating revenue is one of the company’s key performance indicators, and there is an inherent risk that the revenue recognition time point may be manipulated to achieve specific goals or expectations, we recognize the recognition of operating revenue as a key audit matter.
2. Audit response
Our main audit procedures for revenue recognition include:
(1) Understand, evaluate and test key internal controls related to revenue recognition.
(2) Select a sample to check the sales contract, identify the contract terms and conditions related to the customer’s acquisition of control over relevant goods or services, and evaluate whether the revenue recognition time point meets the requirements of the accounting standards for business enterprises.
(3) Analyze the income and gross profit in combination with the product type to judge whether there is abnormal fluctuation in the amount of income in the current period.
(4) Select samples of the sales revenue recorded in this year to conduct detailed test, and evaluate whether the relevant revenue recognition is in line with the accounting policies of the company for revenue recognition.
(5) Perform a cut-off test on the sales revenue recorded before and after the balance sheet date to evaluate whether the revenue is recorded in the appropriate accounting period.
(6) Query the industrial and commercial information of major customers and review the unrelated opinions issued by external lawyers hired by the enterprise.
(7) Select appropriate samples to perform the confirmation procedure.
(8) For the revenue recognition related to bulk trade business, the following procedures are mainly implemented: ① understand, evaluate and test the key internal control related to bulk trade business, and understand the commercial rationality of trade business.
② Select the sales contract of trade business, identify the contract terms and conditions related to the risk and reward transfer of commodity ownership, and evaluate whether the time point of revenue recognition meets the requirements of accounting standards for business enterprises.
③ Analyze the income and gross profit in combination with the product type to judge whether there is abnormal fluctuation in the amount of income in the current period.
④ Select samples of trade income recorded in this year, perform detail test, and check purchase contract, warehousing order, invoice, sales contract and delivery order.
⑤ Perform a cut-off test on the trade income recorded before and after the balance sheet date to evaluate whether the income is recorded in the appropriate accounting period.
⑥ Conduct background investigation on suppliers and customers of bulk trade business, and obtain and verify the opinions of unrelated lawyers issued by Nuode Investment Co.Ltd(600110) hired external lawyers.
⑦ Select suppliers and customers of trade business and implement letter confirmation procedures.
4、 Other information
Nuode Investment Co.Ltd(600110) management is responsible for other information. Other information includes the information covered in the 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 understand 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
Nuode Investment Co.Ltd(600110) 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, Nuode Investment Co.Ltd(600110) management is responsible for assessing Nuode Investment Co.Ltd(600110) ‘s ability to continue as a going concern, disclosing matters related to going concern (if applicable), and applying the assumption of going concern, unless the management plans to liquidate Nuode Investment Co.Ltd(600110) , terminate the operation or has no other realistic choice. The management is responsible for supervising the financial reporting process of Nuode Investment Co.Ltd(600110) .
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 a conclusion on the appropriateness of the going concern assumption used by the management. 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 Nuode Investment Co.Ltd(600110) going concern ability. If we conclude that there are significant uncertainties, the auditing standards require us to draw the attention of report 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 Nuode Investment Co.Ltd(600110) unable 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 Nuode Investment Co.Ltd(600110) to express an opinion on the financial statements. We are responsible for guiding, supervising and executing the group audit. We are fully responsible 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 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 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 public disclosure
