3 Rongyu Group Co.Ltd(002622) 021 annual financial statements and audit report
catalogue
Content page
audit report
Consolidated balance sheet 1-2 as of December 31, 2021
Balance sheet 3-4 of the company as of December 31, 2021
Consolidated income statement for 2021 5
Profit statement of the company in 2021 6
Consolidated cash flow statement for 2021 7
Cash flow statement of the company in 2021 8
Consolidated statement of changes in owner’s equity in 2021 9-10
Statement of changes in owner’s equity of the company in 202111-12
Notes to financial statements 13-122
Audit report
Zhong Hui Zi (2022) No. 04348 Safbon Water Service (Holding) Inc.Shanghai(300262) all shareholders:
(I) audit opinion
We have audited the financial statements of Safbon Water Service (Holding) Inc.Shanghai(300262) (hereinafter referred to as ” Safbon Water Service (Holding) Inc.Shanghai(300262) company”), including the consolidated and company’s balance sheet as of December 31, 2021, the consolidated and company’s income statement, consolidated and company’s cash flow statement, consolidated and 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 consolidated and financial position of Safbon Water Service (Holding) Inc.Shanghai(300262) company as of December 31, 2021 and the consolidated and operating results and cash flow of the company in 2021.
(II) 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 Safbon Water Service (Holding) Inc.Shanghai(300262) 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.
(III) key audit matters
Key audit matters are the most important matters that we consider to audit the financial statements of 2021 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) I. description of matters
See note III, 34 revenue recognition principles and note V, 43 revenue of the financial statements for relevant information disclosure.
Safbon Water Service (Holding) Inc.Shanghai(300262) in 2021, the operating revenue was 13421970337 yuan. Since the operating revenue is one of the key performance indicators of Safbon Water Service (Holding) Inc.Shanghai(300262) and there may be inherent risks for Safbon Water Service (Holding) Inc.Shanghai(300262) management to achieve specific goals or expectations through inappropriate revenue recognition, we identified revenue recognition as a key audit item.
(2) I. Countermeasures
1) Understand the key internal controls related to revenue recognition, evaluate the design of these controls, determine whether they are implemented, and test the operation of relevant internal controls
Effectiveness;
2) Check the construction contract, supplementary contract or agreement, letter of acceptance and other contracts and original documents of the project, review the key contract terms, and identify various performance obligations and transaction prices in the contract; Verify whether the revenue recognition meets the relevant requirements of Safbon Water Service (Holding) Inc.Shanghai(300262) accounting policies and accounting standards for business enterprises;
3) According to the project data provided by the company, including the project contract, project image progress, completion degree, etc., confirm the completion progress and completion quantity at the end of the period;
4) Select the important engineering projects of this year for on-site visits, conduct on-site interviews with the main participants of the project, check the on-site construction of the project, and confirm whether the actual progress of the project is consistent with the book records;
5) Compare the fluctuations of various income and costs in each month of the current period, analyze whether the change trend is normal, whether it is in line with the seasonal and cyclical business law of the auditee, and find out the reasons for abnormal and significant fluctuations;
6) Compare the changes of gross profit margin of similar projects in the current period and the previous period, pay attention to whether the income and cost are matched, and find out the reasons for major fluctuations and abnormalities;
7) Select samples of transactions recorded in this year, check invoices, contracts, delivery orders, logistics orders and acceptance orders, and check whether relevant revenue recognition complies with the accounting policies of Safbon Water Service (Holding) Inc.Shanghai(300262) revenue recognition;
8) By checking the operating income and cost before and after the balance sheet date for cut-off test, it is confirmed that the income and cost have been included in the appropriate period; 9) Check whether the information related to operating income has been properly presented in the financial statements.
2. Impairment test of long-term equity investment
(1) I. description of matters
As described in “notes III and 26” and “notes V and 13” of the financial statements, the company acquired 49.00% of the equity of Beijing Longyuan Environmental Protection Engineering Co., Ltd. in 2019, and the book is accounted with the equity method. As of December 31, 2021, the book value of the long-term equity investment was 408.32 million yuan. In 2021, the company made an impairment provision of 1324936 million yuan for the long-term equity investment. As the amount of long-term equity investment is significant, and the impairment test involves significant judgment and estimation of the management. Therefore, we regard it as a key audit matter.
(2) I. audit response
Our audit procedures for the impairment test of long-term equity investment mainly include:
1) Understand and test whether the internal control design and implementation related to long-term equity investment are effective;
2) Obtain relevant information about the operation of Beijing Longyuan from 2019 to 2021, and interview the management of Beijing Longyuan to understand the operation and future operation expectations from 2019 to 2021;
3) Compare the business situation of Beijing Longyuan learned with the gambling situation and profit forecast during the merger and acquisition of Beijing Longyuan to judge whether there are signs of impairment.
4) Communicate with the management and the external experts hired by the management, evaluate the professional competence, independence and objectivity of the external experts hired by the management, and understand and evaluate the appropriateness of the relevant supporting evidence used in the implementation of the procedures;
5) Obtain the evaluation report issued by external evaluation experts, and analyze and review the important judgments made in the impairment test.
3. Impairment of receivables and contract assets
(1) I. description of matters
As of December 31, 2021, as described in “note V, 2”, “note V, 3”, “note V, 4”, “note V, 6”, “note V, 8”, “note V, 10” and “note V, 21” of the financial statements, accounts receivable, accounts receivable financing, other receivables, contract assets The total balance of long-term receivables and other non current assets (hereinafter collectively referred to as “receivables and contract assets”) is 29079081 million yuan, the total provision for bad debts and impairment is 6859262 million yuan, and the book value is 22219819 million yuan, accounting for 57.18% of the total assets.
When there is objective evidence indicating the impairment of receivables and contract assets, the management of Safbon Water Service (Holding) Inc.Shanghai(300262) shares shall withdraw individual impairment reserves according to the difference between the present value of estimated future cash flow and the book value. For receivables and contract assets without objective evidence of impairment, the management of Safbon Water Service (Holding) Inc.Shanghai(300262) shares divides them into several combinations for evaluation according to the characteristics of credit risk. Due to the significant amount of receivables and contract assets and the significant judgment made by the management in determining the impairment of receivables and contract assets, we identified the impairment of receivables and contract assets as key audit matters.
1) Understand and evaluate the rationality of the design of the internal control system of the management of Safbon Water Service (Holding) Inc.Shanghai(300262) shares (hereinafter referred to as the management) for accounts receivable and contract assets management, and test the effectiveness of the implementation of the internal control of the provision for impairment of accounts receivable and contract assets of the management;
2) Obtain the data and relevant information on which the management evaluates whether the accounts receivable are impaired and confirms the expected loss rate, and evaluate its appropriateness and sufficiency;
3) For accounts receivable and contract assets with expected credit loss withdrawn individually, select samples to review the basis for the management to evaluate the expected credit loss based on the customer’s financial status, historical repayment and prediction of future economic conditions. We verify the management’s assessment with the evidence we obtained in the audit process to assess the rationality of the management’s provision for expected credit loss;
4) For the accounts receivable and contract assets that calculate the expected credit loss according to the combination of credit risk characteristics, evaluate the combination division of the management and the rationality of the estimated expected credit loss rate of different combinations based on the historical credit loss experience such as customers’ historical collection, settlement and aging, combined with the current situation and the prediction of future economic conditions. We recalculated the expected credit loss rate, reviewed the measurement of forward-looking information, tested the accuracy of aging division of receivables and contract assets, and recalculated the accuracy of the amount of expected credit loss;
5) Analyze the expected loss of the letter of credit to the owner and the possible impact of the letter of credit on the performance of the contract;
6) Check the post term collection of receivables, and evaluate the appropriateness of the management’s prediction of credit loss for the whole duration in combination with forward-looking information and other factors.
(IV) other information
Safbon Water Service (Holding) Inc.Shanghai(300262) the management of the company (hereinafter referred to as the management) is responsible for other information. Other information includes the information covered in the 2021 annual report of Safbon Water Service (Holding) Inc.Shanghai(300262) company, 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.
(V) responsibilities of management and governance for financial statements
Safbon Water Service (Holding) Inc.Shanghai(300262) the management of the company (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 Safbon Water Service (Holding) Inc.Shanghai(300262) company, disclosing matters related to sustainable operation, and applying the assumption of sustainable operation, unless the management plans to liquidate Safbon Water Service (Holding) Inc.Shanghai(300262) company, terminate operation or have no other realistic choice.
The management is responsible for supervising the financial reporting process of Safbon Water Service (Holding) Inc.Shanghai(300262) company.
(VI) 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 Safbon Water Service (Holding) Inc.Shanghai(300262) 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 lead to the inability of Safbon Water Service (Holding) Inc.Shanghai(300262) company 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) Just BAAN
