Guangdong Huiyun Titanium Industry Co.Ltd(300891)
audit report
Dhsz [2020] No. 000117
Dahua Certified Public Accountants (special general partnership)
DaHuaCertifiedPublicAccountants（SpecialGeneralPartnership）
Guangdong Huiyun Titanium Industry Co.Ltd(300891)
Audit report and financial statements
(from January 1, 2017 to December 31, 2019)
Contents page I. audit report 1-7 II. Audited financial statements
Consolidated balance sheet 8-9 consolidated income statement 10 consolidated cash flow statement 11 consolidated statement of changes in shareholders’ equity 12-14 parent company balance sheet 15-16 parent company income statement 17 parent company cash flow Table 18 statement of changes in shareholders’ equity of parent company 19-21 notes to financial statements 22-136
Dhsz [2020] No. 000117 audit report
Audit report
Dhsz [2020] No. 000117 Guangdong Huiyun Titanium Industry Co.Ltd(300891) all shareholders:
1、 Audit opinion
We have audited the financial statements of Guangdong Huiyun Titanium Industry Co.Ltd(300891) (hereinafter referred to as Guangdong Huiyun Titanium Industry Co.Ltd(300891) ), including the consolidated and parent company’s balance sheets as of December 31, 2019, December 31, 2018 and December 31, 2017, 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 relevant financial statements for 2019, 2018 and 2017.
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 Guangdong Huiyun Titanium Industry Co.Ltd(300891) the consolidated and parent company as of December 31, 2019, December 31, 2018 and December 31, 2017, as well as the operating results and cash flows of the consolidated and parent company in 2019, 2018 and 2017.
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 Guangdong Huiyun Titanium Industry Co.Ltd(300891) , 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.
Dhsz [2020] No. 000117 audit report
3、 Key audit matters
Key audit matters are the most important matters that we believe are the audit of the financial statements in 2019, 2018 and 2017 according to our professional judgment. We shall not express an opinion on these matters based on the overall audit of the financial statements.
The key audit matters identified in our audit are summarized as follows:
1. Recognition of income;
2. Provision for bad debts of accounts receivable.
(I) recognition of income
1. Event description
Accounting years applicable to key audit matters: 2019, 2018 and 2017.
Guangdong Huiyun Titanium Industry Co.Ltd(300891) in 2019, 2018 and 2017, the operating revenue was 1.002 billion yuan, 906 million yuan and 825 million yuan respectively Guangdong Huiyun Titanium Industry Co.Ltd(300891) please refer to note IV (XXIX) and note VI and note 28 of the financial statements for the accounting policies and carrying amount information related to revenue recognition.
As operating revenue is one of the key performance indicators of Guangdong Huiyun Titanium Industry Co.Ltd(300891) and revenue recognition has inherent risks, we determine revenue recognition as a key audit matter.
2. Audit response
In the audit of financial statements in 2019, 2018 and 2017, our important audit procedures for revenue recognition include:
(1) Understand and test the internal control related to the recognition of product sales revenue;
(2) Check the supporting documents related to revenue recognition, including sales contracts, orders
Dhsz [2020] No. 000117 audit report
Sales invoice, product transportation document, customer receipt, customs declaration, etc;
(3) Check the revenue recognized before and after the balance sheet date to the customer’s receipt, customs declaration and other supporting documents to assess whether the sales revenue is recognized in an appropriate period;
(4) Implement analytical review procedures to evaluate the rationality of changes in product sales revenue and gross profit margin;
(5) Select customers to send letters independently to confirm the sales revenue and the ending balance of accounts receivable in the reporting period;
(6) Select customers for field visit.
According to the audit work performed, we believe that the revenue recognition is in line with the accounting policy of Guangdong Huiyun Titanium Industry Co.Ltd(300891) .
(II) provision for bad debts of accounts receivable
1. Event description
Accounting years applicable to key audit matters: 2019, 2018 and 2017.
Guangdong Huiyun Titanium Industry Co.Ltd(300891) as of December 31, 2019, the book balance of accounts receivable was 608308 million yuan and the bad debt provision was 7.852 million yuan; as of December 31, 2018, the book balance of accounts receivable was 611773 million yuan and the bad debt provision was 5.6134 million yuan; as of December 31, 2017, the book balance of accounts receivable was 587366 million yuan and the bad debt provision was 5.5311 million yuan Guangdong Huiyun Titanium Industry Co.Ltd(300891) please refer to note IV (XII) and (XIII) and note VI and note 3 of the financial statements for the accounting policies and carrying amount information related to the bad debt provision of accounts receivable.
Guangdong Huiyun Titanium Industry Co.Ltd(300891) when determining the expected recoverable amount of accounts receivable, the management needs to identify the items and objective evidence of impairment, evaluate the expected credit loss rate or expected future availability
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The cash flow and the determination of its present value involve the management’s use of significant accounting estimates and judgments, and the amount of impact is large. Therefore, we determine the bad debt provision of accounts receivable as a key audit event. 2. Audit response
In the audit of financial statements in 2019, 2018 and 2017, our main procedures for bad debt provision of accounts receivable include:
(1) Evaluate and test the management’s internal control related to the aging analysis of accounts receivable, the evaluation of end of period recoverability and the determination of bad debt reserves of accounts receivable;
(2) Analyze the rationality of accounting estimation of bad debt provision of accounts receivable, including the determination of expected credit loss rate, basis of accounts receivable combination, judgment of significant amount, judgment of separate provision for bad debt provision, etc;
(3) For accounts receivable for which bad debt provision is withdrawn by aging analysis method, analyze the rationality of accounting policies for withdrawing bad debt provision of accounts receivable, including the basis for determining the combination of credit risk characteristics, analyzing the actual loss rate of accounts receivable with similar credit risk characteristics in previous years, judging the withdrawal proportion of withdrawing bad debt provision by aging analysis method, and recheck whether relevant accounting policies are consistently applied;
(4) Analyze and calculate the ratio between the amount of bad debt provision and the balance of accounts receivable on the balance sheet date, compare the amount of bad debt provision in the previous period with the actual amount, and analyze whether the provision for bad debt of accounts receivable is sufficient;
(5) Evaluate the rationality of the provision for bad debts of accounts receivable by analyzing the aging of accounts receivable and customer reputation, and implementing the procedures of accounts receivable correspondence and substitution test.
According to the audit work performed, we believe that the relevant judgments and estimates of Guangdong Huiyun Titanium Industry Co.Ltd(300891) management on the expected credit loss rate and recoverability of accounts receivable are reasonable.
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4、 Responsibilities of management and governance for financial statements
Guangdong Huiyun Titanium Industry Co.Ltd(300891) the management is responsible for preparing the financial statements in accordance with 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 due to fraud or error.
. The management is responsible for supervising the financial reporting process of Guangdong Huiyun Titanium Industry Co.Ltd(300891) .
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.
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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 Guangdong Huiyun Titanium Industry Co.Ltd(300891) 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 Guangdong Huiyun Titanium Industry Co.Ltd(300891) unable to continue its business.
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 on the financial information of entities or business activities in Guangdong Huiyun Titanium Industry Co.Ltd(300891) to express an opinion on the consolidated 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 important to the financial performance of the reporting period
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Statement audit is the most important and therefore constitutes a key audit matter. We describe these matters in the audit report, unless laws and regulations prohibit the public disclosure of these matters, or in rare cases
