Henan Kedi Dairy Co.Ltd(002770)
Special note on audit report with non-standard opinions
Henan Kedi Dairy Co.Ltd(002770) (hereinafter referred to as "the company") employs Zhejiang Tianping Certified Public Accountants (special general partnership) (hereinafter referred to as "Tianping") as the auditor of the company's 2021 annual financial report; Zhejiang Tianping issued the audit report of Tianping Shen No. 0389 for the company's 2021 annual financial report. According to the requirements of the Listing Rules of Shenzhen Stock Exchange, the rules for the preparation of information disclosure of companies offering securities to the public No. 14 - handling of non-standard unqualified audit opinions and matters involved, and the standards for the content and format of information disclosure of companies offering securities to the public No. 2 - the content and format of annual report, the company issued the following special instructions on the matters involved in the audit report that cannot express opinions:
1、 Matters involved in the issuance of audit reports that cannot express opinions
（1） Unable to express an opinion
We have been entrusted to audit the financial statements of Henan Kedi Dairy Co.Ltd(002770) (hereinafter referred to as "Kedi dairy company"), 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.
We do not express an audit opinion on the attached consolidated financial statements of Kedi dairy company and the parent company (hereinafter referred to as "financial statements"). Due to the importance of the matters described in the section "forming the basis of unable to express an opinion", we are unable to obtain sufficient and appropriate audit evidence as the basis for issuing an audit opinion on the financial statements.
(II) unable to express opinions on the basis of the matters involved
1. Rationality of provision for impairment
As stated in notes "V and 4" to the financial statements, Kedi dairy company shall receive 15.5% of the funds occupied by the controlling shareholder Kedi Food Group Co., Ltd. (hereinafter referred to as "Kedi group") There are still significant uncertainties in the receivable restructuring results of RMB 3.4 billion. We are unable to obtain sufficient and appropriate audit evidence to express our opinions on the recoverability and end of period impairment of the receivables.
2. False records in 20162018
As stated in notes V and 4 to the financial statements, according to the decision on administrative punishment (No. (2021) 1) issued by Henan regulatory bureau of China Securities Regulatory Commission on September 16, 2021, Kedi dairy company offset the accumulated inflated profit of 299828700 yuan from 2016 to 2018 against the capital occupation of Kedi group, the controlling shareholder. Due to the long duration of false records, large number of customers and suppliers, small amount of single transaction, wide range of transactions, and the company's failure to provide complete information related to the above matters, we are unable to obtain sufficient and appropriate audit evidence to express our opinion on the impact of the above matters on the beginning of the financial statements and whether adjustments are needed. 3. Going concern ability
Kedi dairy company involved in many lawsuits due to overdue debts and external guarantees, and some bank accounts were frozen. At the end of the period, there were uncertain matters such as litigation matters, bankruptcy and reorganization results of controlling shareholders and claim litigation of damaged investors caused by false records in the early stage. As stated in "II. Basis of preparation of financial statements 2. Evaluation of going concern ability" in the notes to the financial statements, the company's management plans to take measures to improve the company's operating and financial conditions. We are unable to obtain sufficient and appropriate audit evidence to judge whether Kedi dairy company is appropriate to prepare financial statements on the basis of going concern assumption.
3、 Responsibilities of management and governance for financial statements
The management of Kedi dairy company 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 Kedi dairy company, disclosing matters related to sustainable operation (if applicable), and applying the assumption of sustainable operation, unless the management plans to liquidate Kedi dairy company, terminate operation or has no other realistic choice.
The management is responsible for supervising the financial reporting process of Kedi dairy company.
4、 Responsibilities of certified public accountants for the audit of financial statements
Our responsibility is to audit the financial statements of Kedi dairy company in accordance with the auditing standards for Chinese certified public accountants, so as to issue the audit report. However, due to the matters described in the section "forming the basis for unable to express an opinion", we are unable to obtain sufficient and appropriate audit evidence as the basis for issuing an audit opinion on the financial statements.
In accordance with the code of professional ethics for Chinese certified public accountants, we are independent of Kedi dairy company and have fulfilled other responsibilities in terms of professional ethics.
2、 Special notes of the board of directors on the audit opinions that cannot be expressed in the audit report 1. The board of directors of the company believes that the financial statements of the company are prepared in accordance with the accounting standards for business enterprises in all major aspects and fairly reflect the financial position of the company as of December 31, 2021 and the operating results and cash flows of the company in 2021.
2. According to the self-examination and confirmation of the company, the company has no other major contract matters that should be approved and disclosed in time but have not been approved and disclosed in time.
3. According to the exchange of opinions between the company and Zhejiang Tianping certified public accountants, the other party's behavior did not leave the company time for communication. For the behavior of Zhejiang Tianping certified public accountants, the company reserves the right to investigate its responsibility and report to relevant departments, so as to safeguard the rights and interests of the company and all shareholders.
3、 Possibility and specific measures to eliminate the above matters and their impact
The board of directors of the company attaches great importance to the matters involved in the issuance of unable opinions by the accounting firm, and has actively taken corresponding measures in 2021 to eliminate the relevant matters and their impact of unable opinions as soon as possible, so as to effectively safeguard the interests of the majority of investors. Combined with the actual situation of the company, the measures taken and to be taken by the company are as follows:
In view of the internal control defects left by the company due to historical reasons, the board of directors attaches great importance to and resolutely rectifies them, and has achieved remarkable results in 2021. The responsibilities of the Third Committee of the company, the special committees under the board of directors, independent directors and managers are clear, the procedures are standardized, and the power has been effectively and normally exercised. In the next step, the company will actively improve the corporate governance structure, establish and improve the company's internal management and control system, and comprehensively improve the standard operation level of the company in accordance with the requirements of relevant laws and regulations.
In conclusion, the company has taken or will take more effective measures to improve its financial situation, reduce the pressure of working capital and corporate governance, and eliminate the impact of financial risks and internal control risks on the company's sustainable operation as soon as possible. In view of the above measures, after careful assessment, the company believes that although the company is temporarily facing difficulties and risks, based on the vigorous implementation of various measures and achieved results.
4、 Opinions of the board of supervisors
The company held the 9th meeting of the 4th board of supervisors on April 30, 2022, and carefully reviewed the special notes on audit report on non-standard opinions prepared by the board of directors. The board of supervisors put forward the following written audit opinions:
1. The financial report of the company objectively and fairly reflects the financial status and operating results of the company in 2021. The board of supervisors of the company understands and recognizes the audit report issued by the accounting firm that cannot express opinions.
The board of directors of the company issued a special statement on matters on which the accounting firm could not express its opinions. The board of supervisors considered that the special statement of the board of directors was objective, true and in line with the actual situation of the company, and agreed with the special statement issued by the board of directors.
2. As the company's supervisor, we will actively supervise the work of the company's board of directors, continue to pay attention to and urge the board of directors and management to promote the development of relevant work, and earnestly safeguard the interests of the company and investors, especially the legitimate rights and interests of minority shareholders.
5、 Opinions of independent directors
In a serious and responsible manner, we have checked the information in the report issued by the accounting firm according to the relevant information and disclosure provided by the company. Now we explain the relevant information and express independent opinions as follows:
1. The company's financial report objectively and fairly reflects the company's financial situation and operating results in 2021. We have no objection to the audit report.
2. The board of directors of the company has issued a special statement on the matters involved in which the accounting firm cannot express opinions. We believe that the special statement of the board of directors is objective and true, in line with the actual situation of the company, and agree with the special statement issued by the board of directors.
It is hereby explained.
Henan Kedi Dairy Co.Ltd(002770)
April 30, 2022
