Shenzhen United Winners Laser Co.Ltd(688518)
audit report
catalogue
1、 Audit report…………………………………… page 1-7 II Financial statements page 8-15 (I) consolidated and parent company balance sheet page 8-9 (II) consolidated and parent company income statement page 10 (III) consolidated and parent company cash flow statement page 11 (IV) Consolidated and parent company’s statement of changes in owner’s equity page 12-15 III. notes to financial statements page 16-110
Audit report
TJS [2020] No. 3-261
Shenzhen United Winners Laser Co.Ltd(688518) all shareholders:
1、 Audit opinion
We have audited the financial statements of Shenzhen United Winners Laser Co.Ltd(688518) (hereinafter referred to as Lianying Co., Ltd.), including the consolidated and parent company’s balance sheets as of December 31, 2017, December 31, 2018 and December 31, 2019, 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 owner’s equity and notes to relevant financial statements for 2017, 2018 and 2019.
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 parent company’s financial position of Lianying Co., Ltd. on December 31, 2017, December 31, 2018 and December 31, 2019, as well as the consolidated and parent company’s operating results and cash flow in 2017, 2018 and 2019.
2、 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 Lianying Co., Ltd. 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.
3、 Key audit matters
The key audit matters are the most important matters that we consider to audit the financial statements of 2017, 2018 and 2019 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. Event description
Relevant accounting periods: 2017, 2018 and 2019
See notes III (XXIII), V (II) 1 and XIII (II) of the financial statements for relevant information disclosure. The operating income of Lianying Co., Ltd. mainly comes from the sales of laser welding machines. The operating revenue of Lianying Co., Ltd. in 2017, 2018 and 2019 was 72777424584 yuan, 9813 Sinopec Oilfield Equipment Corporation(000852) 0 yuan and 101093383546 yuan respectively.
The accounting policy adopted for the revenue recognition of domestic products is: the company delivers the goods agreed in the contract to the buyer according to the time, delivery method and delivery place agreed in the sales contract and passes the acceptance. The company recognizes the revenue after obtaining the acceptance certificate confirmed by the buyer; The accounting policy adopted for the recognition of income from export products is: customs declaration and departure of export goods, and the export income is recognized after obtaining the bill of lading. As operating revenue is one of the key performance indicators of Lianying Co., Ltd., there may be inherent risks that the management of Lianying Co., Ltd. (hereinafter referred to as the management) may achieve specific goals or expectations through inappropriate revenue recognition. Therefore, we identified revenue recognition as a key audit matter.
2. Audit response
For revenue recognition, our main audit procedures are as follows:
(1) Understand the key internal control related to revenue recognition, evaluate whether its design is effective, determine whether it has been implemented, and test the operation effectiveness of relevant internal control;
(2) Check the main sales contracts, identify the terms related to the transfer of main risks and rewards of commodity ownership, and evaluate whether the revenue recognition policy is in line with the provisions of the accounting standards for business enterprises;
(3) For the income of domestic products, check the supporting documents related to income recognition by sampling, including sales contract, order, sales invoice, delivery note, acceptance note, etc; For the income of export products, check the supporting documents related to income recognition by sampling, including sales contract, order, sales invoice, delivery note, customs declaration, bill of lading, etc;
(4) Implement substantive analysis procedures for operating revenue and gross profit margin on a monthly basis, products, customers, etc., identify whether there are significant or abnormal fluctuations, and analyze the causes of fluctuations;
(5) Combined with the letter of accounts receivable, inquire and verify the balance of accounts receivable on the balance sheet date and the sales volume in the reporting period from the main customers by sampling;
(6) Check the operating income recognized before and after the balance sheet date by sampling to the supporting documents such as delivery note, delivery note, acceptance note, customs declaration and bill of lading, and evaluate whether the operating income is recognized in an appropriate period;
(7) Check whether the information related to operating income has been properly presented in the financial statements.
（2） Net realizable value of inventories
1. Event description
Relevant accounting periods: 2017, 2018 and 2019
See notes III (XII) and V (I) 8 of the financial statements for relevant information disclosure.
As of December 31, 2017, the book balance of inventory was 89794711897 yuan, the provision for falling price was 2053938255 yuan, and the book value was 87740773642 yuan; As of December 31, 2018, the book balance of inventories was 72712441625 yuan, the provision for falling price was 1591264643 yuan, and the book value was 71121176982 yuan; As of December 31, 2019, the book balance of inventory was 57760786355 yuan, the provision for falling price was 538914780 yuan, and the book value was 57221871575 yuan.
On the balance sheet date, inventories are measured at the lower of cost and net realizable value, and inventory falling price reserves are withdrawn according to the difference between the cost of a single inventory and the net realizable value.
On the basis of considering the purpose of holding the inventory, the management determines the estimated selling price according to the selling price agreed in the contract, the market selling price of the same or similar products and the future market trend, and determines the net realizable value of the inventory according to the amount of the estimated selling price minus the estimated cost to be incurred at the time of completion, the estimated selling expenses and the corresponding tariff.
Since the amount of inventory is significant and the determination of net realizable value of inventory involves significant management judgment, we determine the net realizable value of inventory as a key audit event.
2. Audit response
For the net realizable value of inventories, our main audit procedures are as follows:
(1) Understand the key internal control related to the net realizable value of inventory, evaluate whether its design is effective, determine whether it has been implemented, and test the operation effectiveness of relevant internal control;
(2) Review the management’s forecast of net realizable value of inventories and actual operating results in previous years, and evaluate the accuracy of the management’s previous forecasts;
(3) Review the management’s forecast of the estimated selling price of inventory by sampling, and compare the estimated selling price with historical data, future situation, market information, etc;
(4) Test whether the management’s calculation of the net realizable value of inventory is accurate;
(5) In combination with inventory supervision, check whether there are long stock age and old models in the ending inventory, and evaluate whether the management has reasonably estimated the net realizable value;
(6) Check whether there is any issue of goods on long-term account. If so, find out the reasons and make adjustments if necessary; (7) Check whether the information related to inventory has been properly presented in the financial statements.
（3） Impairment of accounts receivable
1. Event description
Relevant accounting period: 2019
See notes III (x) and V (I) 4 of the financial statements for relevant information disclosure.
As of December 31, 2019, the balance of accounts receivable of Lianying Co., Ltd. was 44962026629 yuan, the bad debt provision was 5020012849 yuan, and the book value was 39942013780 yuan.
According to the credit risk characteristics of various accounts receivable, the management measures its loss reserves according to the expected credit loss amount equivalent to the whole duration based on individual accounts receivable or combination of accounts receivable. For accounts receivable whose expected credit loss is measured on a single basis, the management comprehensively considers the reasonable and reliable information about past events, current situation and future economic situation forecast, estimates the expected cash flow received, and determines the bad debt provision to be withdrawn accordingly; For the accounts receivable whose expected credit loss is measured on the basis of portfolio, the management divides the portfolio based on the aging, refers to the historical credit loss experience, and adjusts it according to the forward-looking estimation, and prepares the comparison table between the aging of accounts receivable and the expected credit loss rate, so as to determine the accrued bad debt reserves. As the amount of accounts receivable is significant and the impairment of accounts receivable involves significant management judgment, we determine the impairment of accounts receivable as a key audit event.
2. Audit response
For the impairment of accounts receivable, our audit procedures mainly include:
(1) Understand the key internal controls related to the impairment of accounts receivable, evaluate the design of these controls, determine whether they have been implemented, and test the operation effectiveness of relevant internal controls;
(2) Review the subsequent actual write off or reversal of accounts receivable for which bad debt reserves have been accrued in previous years, and evaluate the accuracy of previous forecasts of the management;
(3) Review the relevant considerations and objective evidence of the management’s credit risk assessment of accounts receivable, and evaluate whether the management has properly identified the credit risk characteristics of various accounts receivable;
(4) For accounts receivable that measure the expected credit loss on a single basis, obtain and check the management’s prediction of the expected cash flow received, evaluate the rationality of the key assumptions used in the prediction and the accuracy of the data, and check with the obtained external evidence;
(5) For accounts receivable whose expected credit loss is measured on the basis of portfolio, evaluate the rationality of the management’s division of portfolio according to the characteristics of credit risk; Evaluate the rationality of the comparison table between the aging of accounts receivable and the expected credit loss rate determined by the management based on historical credit loss experience and forward-looking estimation; Test the accuracy and completeness of the data used by the management (including accounts receivable aging, historical loss rate, migration rate, etc.) and whether the calculation of bad debt reserves is accurate;
(6) Check the post period collection of accounts receivable and evaluate the rationality of the management’s provision for bad debts of accounts receivable;
(7) Check whether the information related to the impairment of accounts receivable has been properly presented in the financial statements. 4、 Responsibilities of management and governance for financial statements
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 Lianying Co., Ltd., disclosing matters related to sustainable operation (if applicable), and applying the assumption of sustainable operation, unless it plans to liquidate, terminate operation or has no other realistic choice.
The governance layer of Lianying Co., Ltd. (hereinafter referred to as the governance layer) is responsible for supervising the financial reporting process of Lianying Co., Ltd.
5、 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 Lianying Co., Ltd. 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 cause Lianying Co., Ltd. to be unable to continue its business.
（5） Evaluate the overall presentation, structure and content of the financial statements, and evaluate whether the financial statements fairly reflect relevant transactions and events.
（6） Obtain sufficient and appropriate audit evidence on the financial information of entities or business activities in Lianying Co., Ltd. to express an audit opinion on the financial statements. We are responsible for guiding, supervising and implementing the group audit, and assume full responsibility for the audit opinions
