Non standard audit opinion on the company’s 2021 financial report
Description of special matters involved
1、 Matters involved in issuing qualified opinion audit report
Dahua Certified Public Accountants (special general partnership) (hereinafter referred to as “Dahua certified public accountants”) is the audit institution of the 2021 annual financial report of Liaoning Sg Automotive Group Co.Ltd(600303) (hereinafter referred to as “the company” or ” Liaoning Sg Automotive Group Co.Ltd(600303) “), and issued the audit report with qualified opinion of Dahua He Zi [2022] No. 009135. In accordance with the relevant provisions of the rules for the preparation and reporting of information disclosure of companies that offer securities to the public No. 14 – handling of non-standard audit opinions and matters involved and the stock listing rules of Shanghai Stock Exchange, the board of directors of the company explains the matters involved in the audit opinions as follows:
(I) main contents involved in non-standard audit opinions
Liaoning Sg Automotive Group Co.Ltd(600303) at the 36th meeting of the ninth board of directors held on September 24, 2021, the company reviewed and approved the related party transaction proposal of the company to acquire the automobile assets of Tianjin Meiya New Energy Vehicle Co., Ltd. (hereinafter referred to as “Tianjin Meiya”), a wholly-owned subsidiary of the controlling shareholder, and signed an asset purchase agreement with Tianjin Meiya with a total price of RMB 132.3 million (hereinafter referred to as “the agreement”) on September 26, 2021, It also paid an advance payment of 66.15 million yuan to Tianjin Meiya on September 27, 2021, and signed a supplementary agreement with Tianjin Meiya on December 15, 2021. Note the following:
(1) Liaoning Sg Automotive Group Co.Ltd(600303) before signing the agreement, it did not fully investigate the actual situation of the subject assets, nor did it hire a professional evaluation institution filed by the securities business to evaluate the value of the subject assets; The agreement does not fully stipulate the possible quality defects, deficiencies, ownership disputes and liabilities for breach of contract of the subject assets; During the execution of the agreement, Liaoning Sg Automotive Group Co.Ltd(600303) found that there were problems such as damage, inventory loss and ownership of assets, and Liaoning Sg Automotive Group Co.Ltd(600303) management did not timely perform sufficient discussion and decision-making procedures on the impact of these matters on the realization of transaction objectives.
(2) During the audit, we repeatedly asked to communicate with the signing appraiser. The Liaoning Sg Automotive Group Co.Ltd(600303) management failed to provide contact information and provided us with the asset evaluation instructions related to the above related party transactions on April 24, 2022, resulting in our failure to obtain sufficient and appropriate audit evidence on the appropriateness of the valuation basis and the fairness of the valuation.
(3) Liaoning Sg Automotive Group Co.Ltd(600303) will hold an extraordinary general meeting on May 5, 2022 to consider the proposal on terminating the purchase of Tianjin Meiya automobile assets, which shows that the dispute over the necessity and rationality of the related party transaction has not been eliminated, and there is some uncertainty about whether the related party transaction agreement can be finally performed.
Based on the above circumstances, we are unable to obtain sufficient and appropriate audit evidence on the fairness of the pricing of Liaoning Sg Automotive Group Co.Ltd(600303) above related party transactions, the nature and recoverability of the amount of RMB 66.15 million paid to Tianjin Meiya.
(II) reasons and basis for issuing reservations
(1) Overall importance level of consolidated financial statements
During the audit of the financial statements of 6 Jiangsu Chuanzhiboke Education Technology Co.Ltd(003032) 021, we determined that the overall importance level of the consolidated financial statements was 12 million yuan Liaoning Sg Automotive Group Co.Ltd(600303) is a profit-making entity. Due to its huge loss of operating pre tax profit in the current period, we use the operating income of 247988 million yuan as the benchmark, multiply the benchmark by 0.50%, and the overall importance level of the consolidated financial statements is 12 million yuan (rounded). The calculation method of importance level in this period has not changed compared with that in the previous period.
(2) Reasons and basis for issuing reservations
According to Article 8 of the auditing standards for Chinese certified public accountants No. 1502 – issuing unqualified opinions in the audit report, when the certified public accountant is unable to obtain sufficient and appropriate audit evidence as the basis for forming the audit opinion, but believes that the undetected misstatement (if any) may have a significant impact on the financial statements, but it is not extensive, the certified public accountant shall issue a qualified opinion.
Our reserved items for Liaoning Sg Automotive Group Co.Ltd(600303) , which may have a significant impact on the financial statements, are limited to the impact on other non current assets in the balance sheet and the cash paid for the purchase and construction of fixed assets, intangible assets and other long-term assets in the cash flow statement. Due to the possible impact of this matter on the financial statements, we have expressed reservations on the financial statements of 6 Jiangsu Chuanzhiboke Education Technology Co.Ltd(003032) 021.
(III) the impact of the matters involved in the reserved audit opinion on the company’s financial position, operating results and cash flow during the reporting period
We believe that the matters involved in the above qualified audit opinion may have a significant impact on other non current assets in the balance sheet of Liaoning Sg Automotive Group Co.Ltd(600303) December 31, 2021 and the cash paid for the purchase and construction of fixed assets, intangible assets and other long-term assets in the cash flow statement of 2021. However, due to the uncertainty of the matter, We cannot reasonably estimate the impact of the above matters on the financial position of Liaoning Sg Automotive Group Co.Ltd(600303) December 31, 2021 and the operating results and cash flow of 2021.
(IV) whether the matters involved in the reserved audit opinion obviously violate the accounting standards and relevant normative provisions on information disclosure. The matters involved in the above reserved audit opinion do not obviously violate the accounting standards and relevant normative provisions on information disclosure.
2、 Notes of the board of directors on matters involved in the qualified opinion audit report
Dahua office issued a qualified opinion audit report on the company, and the relevant financial data truly reflected the financial situation of the company in 2021; However, we disagree with the conclusion of the qualified audit report issued by the accountant.
Mainly because:
1. The company will hold an extraordinary general meeting on May 5, 2022 to consider the proposal on terminating the purchase of Tianjin Meiya automobile assets. The accountant believes that there is some uncertainty about whether the asset purchase agreement can be finally performed, and there is uncertainty about the recyclability of RMB 66.15 million. On the attitude of this matter, the company has repeatedly stated in relevant announcements that this transaction occurred in 2021 and has completed the approval procedures and delivery procedures, so there is no uncertainty. It is too subjective for accountants to determine that there are major defects in the company’s internal control.
2. This transaction has reference as the price standard. In addition, the price of materials used in the purchased assets has been rising in recent two years. Both parties have reasonable judgment on the transaction price. Comparing the agreed price with the evaluated price to determine the transaction price is a relatively fair transaction method. It is obviously unimportant whether it is necessary to hire a professional evaluation institution of the securities industry to evaluate the price of the underlying assets in advance; The company has deducted the possible quality defects, deficiencies, ownership disputes and liabilities for breach of contract of the subject assets of the agreement through the reduction fee. The total amount of the company without outsourced small part assets is small, and the replication cycle is no more than 3 months, which will not affect the progress of the company’s car production.
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 internal control audit report with negative opinions issued by the accounting firm and will actively take corresponding measures.
1. Eliminate the adverse impact of audit opinions on the company
The company will hire lawyers and industry experts again to further confirm the legality, compliance and effectiveness of the transaction in the internal control audit report issued by the accountant; Eliminate the impact of Accountants’ concerns about the implementation of the company’s internal control system caused by the transaction on the company’s internal control.
2. Strengthen the study of professional knowledge and standardize management
(1) Further strengthen the training of the company’s managers at all levels on the laws and regulations, normative documents and company rules and regulations of listed companies, so that they can truly understand and master the content, essence and operation specification requirements of various systems, especially strengthen the supervision and inspection in the actual implementation process, and effectively improve the standardized operation level of the company.
(2) Improve and strengthen the internal and external major information communication mechanism to ensure that relevant subjects notify the chairman / Secretary of the board of directors of the company at the first time of major events; Further strengthen the study of the company’s directors, supervisors, senior managers and relevant staff on relevant laws and regulations such as the Listing Rules of Shanghai Stock Exchange and the measures for the administration of information disclosure of listed companies and the company’s internal management system, and enhance the awareness of standardized operation.
3. Strengthen the function of internal audit
Timely recruit or adjust personnel with professional ability in internal audit, earnestly perform internal audit duties in accordance with the requirements of the company’s internal control management system and work specifications, timely report the company’s internal control to the audit committee under the board of directors as required, and strictly standardize the company’s internal control.
On the premise of protecting the legitimate rights and interests of the company and the majority of investors, the company will actively take effective measures to eliminate the impact of the above adverse factors on the company as soon as possible, and actively perform the corresponding information disclosure obligations on the progress of relevant matters in accordance with the provisions of laws and regulations.
It is hereby explained.
Liaoning Sg Automotive Group Co.Ltd(600303) board of directors
April 29, 2022
