Shenzhen Changfang Group Co.Ltd(300301) board of directors
Special instructions on matters involved in the company’s non-standard audit opinions
Shenzhen Changfang Group Co.Ltd(300301) (hereinafter referred to as “the company”) hired Dahua Certified Public Accountants (special general partnership) (hereinafter referred to as “Dahua certified public accountants”) as the auditor of the company’s 2021 annual financial report. Dahua Certified Public Accountants issued an audit report (Dahua Shen Zi [2022] No. 0011571) for the company’s 2021 annual financial report, and the board of directors of the company explained the matters involved in the audit opinion as follows:
1、 Opinions of the board of directors on audit reports that cannot express opinions
The board of directors of the company attaches great importance to the possible adverse impact of the matters involved in the audit report issued by Dahua Certified Public Accountants on the company. The board of directors of the company will actively take corresponding effective measures to eliminate the matters involved in the inability to express opinions as soon as possible and actively safeguard the interests of the majority of investors.
2、 Opinions of independent directors on audit reports that cannot express opinions
Dahua Certified Public Accountants (special general partnership) issued an audit report (dhsz [2022] No. 0011571) on the company’s financial statements in 2021. After many communications with Dahua certified public accountants, we have exchanged opinions on relevant matters that cannot be expressed. We respect and accept the audit opinion issued by Dahua Certified Public Accountants (special general partnership) and have no objection to the type of audit report opinion.
We agree with the special instructions of the board of directors on matters involved in the company’s non-standard audit opinions. In addition, we will continue to pay attention to and supervise the corresponding measures taken by the board of directors and management of the company, and hope that the company can properly handle relevant matters, effectively resolve risks, and effectively safeguard the legitimate rights and interests of listed companies and shareholders, especially minority shareholders. Specific measures include but are not limited to:
1. Take the audit results seriously, reflect and sort out the company’s internal control system and financial system, make necessary amendments, and hire professional institutions to assist when necessary; After this audit, organize the financial personnel of the company and its subsidiaries to seriously study the accounting law, the new accounting standards and relevant accounting supervision rules. At the same time, strengthen the construction of internal audit system, strengthen internal audit force and internal audit work, and hire external institutions to assist the internal audit institutions to do regular internal audit work when necessary.
2. Urge the company to set up a special governance and rectification working group, carefully feed back various financial questions raised by the accounting firm, and explain relevant problems in detail; At the same time, on the basis of comprehensively revising and improving the financial management system, start the rectification and follow-up audit of relevant matters in the accounting information that lead to the issuance of audit reports that cannot express opinions by accountants as soon as possible, and renew or newly hire qualified audit institutions to re audit the company’s 2021 financial statements within a limited time, For the audit report that makes the accountant unable to express his opinion, adjust the relevant matters on the premise of clear verification, especially the sales rebate of the subsidiary kangmingsheng of 168 million yuan, check the authenticity of the relevant matters, the effectiveness of the transaction contract, whether the sales rebate involving customers involves multiple accounting periods, and whether the previous financial statements are restated according to accounting errors, Strive to eliminate relevant matters that may lead to non-standard audit opinions issued by audit institutions.
3. Hold an investor performance briefing as soon as possible to seriously answer investors’ questions about the possible impact of this audit report on the company’s operation.
3、 Contents that cannot be expressed in the audit report
As stated in the audit report (dhsz [2022] No. 0011571) “(II) forming the basis of unable to express opinions”:
1. Impairment of goodwill
As shown in note VI / Note 13 of the financial statements, as of December 31, 2021, the original book value of goodwill formed by Shenzhen Changfang Group Co.Ltd(300301) acquisition of kangmingsheng was 383378500 yuan, and the amount of goodwill impairment provision was 383378500 yuan Shenzhen Changfang Group Co.Ltd(300301) conducted an impairment test on goodwill at the end of 2021 and accrued the amount of goodwill impairment of 148839000 yuan. Since the cost report cannot express opinions on the “recognition of sales rebate” in the event, we cannot judge whether the event has an impact on the amount of goodwill impairment at the beginning of the reporting period.
2. Inventory management
Shenzhen Changfang Group Co.Ltd(300301) subsidiary kangmingsheng had a closing inventory book balance of 191112500 yuan and a closing inventory falling price reserve balance of 19537400 yuan. The project team found a large number of dead goods in the process of annual audit and supervision, and asked the company to provide a true and complete list of dead goods and relevant materials forming the dead process. According to the list of dead goods provided by Kang Mingsheng, as of December 31, 2021, the book balance of inventory in the list of dead goods was 17.938 million yuan. Due to the failure to further obtain sufficient and appropriate audit evidence to prove the completeness and formation time of the relevant list of dead goods, we are unable to judge the rationality of the overall amount of dead goods and the provision for falling price.
3. The customer collects the payment through a third party
Kangmingsheng, a Shenzhen Changfang Group Co.Ltd(300301) subsidiary, adopts the sales mode of combining dealers and traders. Domestic sales are mainly in the mode of dealers, with third-party payment collection. Due to the influence of foreign exchange management policies, exchange rate fluctuations and other factors of the country where the overseas sales are located, there is a situation of third-party payment collection. The third-party collection amount involving domestic and overseas sales accounts for a high proportion of the amount of tax included income in this year. Due to the failure to obtain sufficient and appropriate audit evidence to prove the source of the third-party payment, we cannot judge the authenticity and rationality of the third-party payment.
4. Confirmation of sales rebate
For example, on April 22, 2022, kangmingsheng, a Shenzhen Changfang Group Co.Ltd(300301) subsidiary, found that there were unrecorded sales rebates in its 2021 financial statements through self-examination. Due to the failure to obtain sufficient and appropriate audit evidence to prove the authenticity, integrity and commercial rationality of the above sales rebate contract, we are unable to judge the impact of the above matters on Shenzhen Changfang Group Co.Ltd(300301) financial statements.
5. Internal control failure
As stated in “confirmation of sales rebate and inventory management” in the matters that cannot be expressed in this report, it indicates that Shenzhen Changfang Group Co.Ltd(300301) has major defects in the management of subsidiaries and the inventory management, sales and collection management and information system management of kangmingsheng company. Due to the above-mentioned major defects, the company failed to maintain the effectiveness of internal control, and we are unable to judge the impact of relevant internal control defects on the financial statements.
4、 Eliminate the impact of relevant matters and measures
1. Strengthen the internal management of subsidiaries, urge subsidiaries to establish and improve the internal control system, improve the management system of subsidiaries, refine and clarify the processes and systems for controlling the operation, personnel, finance, funds, rewards and punishments of subsidiaries, strengthen the internal audit management and supervision of subsidiaries, strengthen the participation in major decisions of subsidiaries, and effectively implement the control and management of subsidiaries.
2. Gradually transition to the unified use of the company’s SAP system, further consolidate the financial foundation, improve the quality and efficiency of financial accounting information, and ensure the timeliness and accuracy of information disclosure. Further improve the information system and internal control system related to inventory management, improve the system and approval process related to inventory clearance, and improve the collection and storage of original documents and data related to inventory clearance.
3. Whether the audit institution issues the accounting statements that may lead to the authenticity or renewal of the non profit related transactions during the audit period, and strive to eliminate the authenticity of the non profit related transactions that may lead to the re employment of the audit institution.
4. Improve the sales collection system, gradually reduce the third-party collection, and conduct regular special audit on the sales collection every month to ensure the effective internal control of sales related processes and ensure the safety of the company’s funds.
It is hereby explained.
Shenzhen Changfang Group Co.Ltd(300301) board of directors
April 29, 2022
