Kingenta Ecological Engineering Group Co.Ltd(002470)
Audit report
Zhongxinghua Certified Public Accountants (special general partnership)
catalogue
1、 Audit report II. Attachment of audit report
1. Consolidated balance sheet
2. Consolidated income statement
3. Consolidated cash flow statement
4. Consolidated statement of changes in owner’s equity
5. Balance sheet of parent company
6. Income statement of parent company
7. Cash flow statement of parent company
8. Statement of changes in owner’s equity of the parent company
9. Notes III to the consolidated and parent company’s financial statements and annexes to the audit report
1. Business license of enterprise legal person of zhongxinghua Certified Public Accountants (special general partnership) (copy) 2 Practicing qualification certificate of zhongxinghua Certified Public Accountants (special general partnership) (copy)
3. License of zhongxinghua Certified Public Accountants (special general partnership) to engage in securities service business (copy) 4 Signed CPA certificate (copy)
Zhongxinghua Certified Public Accountants (special general partnership) Z ho N G x i n g h u a c e r t i f i e d p u b l i c a c o n t a n t s l p address (l o c a t i o n): 20 / F, 20 floor, Tower B, Lize SOHO, 20 Lize Road, Fengtai District, No. 20 Lize Road, Fengtai District, Fengtai District, Beijing, Beijing PR China Tel (t e l): 0 1 0 – 5 1 4 2 3 8 1 8 fax (f a x): 0 1 0 – 5 1 4 2 3 8 1 6 Audit Report
ZTE Huashen Zi (2022) No. 021316 Kingenta Ecological Engineering Group Co.Ltd(002470) all shareholders:
1、 Reservations
We have audited the financial statements of Kingenta Ecological Engineering Group Co.Ltd(002470) (hereinafter referred to as “Kim Jong Il”), 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 notes to relevant financial statements in 2021.
In our opinion, in addition to the impact of the matters described in the “basis for forming a qualified opinion”, the attached financial statements are prepared in accordance with the accounting standards for business enterprises in all material aspects, and fairly reflect the consolidated and parent company’s financial position as of December 31, 2021 and the consolidated and parent company’s operating results and consolidated and parent company’s cash flow in 2021.
2、 Basis for forming reservations
(I) provision for bad debts of other receivables
As stated in notes VI and 7 to the financial statements, as of December 31, 2021, Jinzhengda company has assumed the payment responsibility for issuing acceptance bills and carrying out factoring and confirmation warehouse business, forming other receivables of RMB 1.859 billion, and Jinzhengda company has accrued bad debt reserves of RMB 360 million. We are unable to obtain sufficient and appropriate audit evidence to judge the recoverability of the above receivables, the adequacy of bad debt provision and its impact on the financial statements.
(II) investor litigation cases
As stated in note 12 and 1 of the financial statements, Kim Jong Il company was involved in a number of disputes over the liability of investors for Securities Misrepresentation. Because some litigation materials, case pleadings and other necessary information had not been fully transmitted to the company, the number and amount of litigation could not be fully sorted out, and Kim Jong Il company could not reasonably estimate the estimated amount of liabilities. As of the approval date of this financial report, we are unable to obtain sufficient and appropriate audit evidence to judge the accuracy of the amount of estimated liabilities to be accrued on the balance sheet date of Kim Jong Il.
(III) unaudited overseas subsidiaries sold
As described in notes 14 and 4 to the financial statements, in July 2021, the holding subsidiary of Kim Jong Il, compoinvestco GmbH, sold 100% equity of its 23 companies engaged in Horticulture business (hereinafter referred to as “German Kangpu consumer sector”), and the consolidated financial statements of Kim Jong Il included the unaudited operating results and cash flow of German Kangpu consumer sector from January to July 2021. Due to the impact of the global epidemic and other aspects, The external auditor failed to complete the audit of the financial statements of Germany Kangpu consumer sector from January to July 2021 in time. Although we have implemented analytical procedures for the financial statements of Kangpu consumer sector in Germany from January to July 2021, we are still unable to judge its possible impact on the consolidated financial statements of Kim Jong Il.
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 Kim Jong Il 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 expressing qualified opinions.
3、 Highlight matters
As stated in Notes 6 and 7 of the financial statements and notes 11, 5 and 4 of the financial statements, as of December 31, 2021, the non operating capital balance of Jinzhengda company occupied by the related party nobefeng (China) Agriculture Co., Ltd. was 497 million yuan. As of the date of this report, the above non operating occupation has been fully paid off.
The contents of this paragraph shall not affect the issued audit opinion.
4、 Other information
The management of Kim Jong Il is responsible for other information. Other information includes the information covered in the 2021 annual report of Kim Jong Il, 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.
As mentioned in the above “basis for forming qualified opinions”, we are unable to obtain sufficient and appropriate audit evidence on the recoverability and sufficiency of bad debt provision of other receivables formed by Kim Jong Il company due to the issuance of acceptance bills and the factoring and confirmation warehouse business on December 31, 2021, the accuracy of estimated liability provision in the case of Securities Misrepresentation liability correction, and the fairness of the financial statements of Kangpu consumer sector in Germany. Therefore, we are unable to determine whether there is any material misstatement in other information related to the above matters.
5、 Key audit matters
Key audit matters are the most important matters in the audit of 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 confirm that the following matters are the key audit matters that need to be communicated in the audit report.
(I) revenue recognition:
1. Item description
As described in notes VI and 41 to the financial statements, Kim Jong Il achieved a main business income of RMB 9233294100 in 2021. The amount of main business income is significant and is a key performance indicator. According to the accounting policies described in notes IV and 23 to the financial statements, there may be risks related to income recognition. Therefore, we regard the recognition of income as a key audit matter.
2. Audit response
(1) Understand, test and evaluate the design and implementation of key internal control related to revenue cycle to confirm the effectiveness of internal control;
(2) Through sampling inspection of sales contracts and interviews with management, the time point of control transfer related to the recognition of sales revenue is analyzed and evaluated to evaluate the recognition policy of the company’s product sales revenue;
(3) Inquire the management and management, and understand and evaluate the integrity and fraud risk of the management in combination with the previous audit;
(4) Based on the investigation of production capacity, the rationality of the scale of marketable finished products in this period is analyzed through the verification of the purchase amount and production input amount of main materials.
(5) Carry out analytical procedures for income and cost, including: analysis of the fluctuation of income, cost and gross profit margin in the current period, comparison of income, cost and gross profit margin of main products in the current period with that in the previous period, and analyze the rationality of income fluctuation. (6) Take enough samples to confirm the amount and balance of accounts receivable and advances, and conduct substitution test on the samples that have not replied; Check the contracts, invoices, delivery orders and other documents related to revenue recognition, as well as the sales collection, and verify the authenticity of revenue recognition.
(7) Conduct a cut-off test on the revenue, pay attention to whether there is a significant cross period, and check the sales return after the period to assess whether the sales revenue is recognized in the appropriate period.
(8) Understand the industry background and operating capacity of the new key customers this year, and pay attention to whether there is a related party relationship and whether the related transactions belong to related transactions.
(II) impairment of fixed assets:
1. Event description
As stated in notes VI and 13 to the financial statements, as of December 31, 2021, the book value of fixed assets of Kim Jong Il company was 48705355 million yuan, accounting for 34.37% of the total assets. In 2021, the provision for impairment of fixed assets was 2977337 million yuan. As fixed assets are an important part of the assets of Kim Jong Il, and the management needs to make major judgments and assumptions in the process of impairment test, we regard the impairment test of fixed assets as a key audit matter.
2. Audit response
(1) Evaluate the design and operation effectiveness of the management’s key internal control related to the construction cost of fixed assets and projects under construction.
(2) Make a sampling of important fixed assets to check the status of fixed assets and the use of the current year.
(3) Evaluate the competence, professional quality and objectivity of external experts employed by the management of Jinzhengda company.
(4) Discuss the methods used in the asset impairment test with the external experts hired by the management of Jinzhengda company, and evaluate the rationality of the selection of parameters involved in the evaluated assets.
(5) Evaluate the assumptions used by the management to estimate the value in use in combination with the industry information. (6) Evaluate whether the management of Jinzhengda company disclosed the impairment test results of fixed assets and financial statements properly on December 31, 2021.
6、 Responsibilities of management and governance for financial statements
The management of Jinzhengda 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 going concern ability of Kim Jong Il, disclosing matters related to going concern (if applicable), and applying the going concern assumption, unless the management plans to liquidate Kim Jong Il, stop operation or has no other realistic options.
The management is responsible for supervising the financial reporting process of Kim Jong Il.
7、 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 performing the audit in accordance with the audit standards, we applied professional judgment and maintained professional suspicion. At the same time, we also carry out the following work:
(I) 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.
(II) understand the internal control related to audit in order to design appropriate audit procedures, but the purpose is not to express opinions on the effectiveness of internal control.
(III) evaluate the appropriateness of accounting policies selected by the management and the rationality of accounting estimates and related disclosures.
(IV) draw a conclusion on the appropriateness of the management’s use of the going concern assumption. 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 Kim Jong Il. 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 Kim Jong Il to continue its business.
(V) evaluate the overall presentation, structure and content of the financial statements, and evaluate whether the financial statements fairly reflect relevant transactions and events.
(VI) obtain sufficient and appropriate audit evidence on the financial information of entities or business activities in Kim Jong Il 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 talked with the management about the plan
