Sichuan Qiaoyuan Gas Co., Ltd
audit report
Dhsz [2022] 003478
Dahua Certified Public Accountants (special general partnership)
DaHuaCertifiedPublicAccountants（SpecialGeneralPartnership）
Sichuan Qiaoyuan Gas Co., Ltd
Audit report and financial statements
(from January 1, 2019 to December 31, 2021)
Contents page 1. Audit report 1-6 II. Audited financial statements
Consolidated balance sheet 1-2 consolidated income statement 3 consolidated cash flow statement 4 consolidated statement of changes in shareholders' equity 5-7 parent company balance sheet 8-9 parent company income statement 10 parent company cash flow Table 11 statement of changes in shareholders' equity of parent company 12-14 notes to financial statements 1-121
Dahua Certified Public Accountants (special general partnership) 12 / F, building 7, No. 16 courtyard, Middle West Fourth Ring Road, Haidian District, Beijing [100039] Tel: 86 (10) 58350011 Fax: 86 (10) 58350006 www.dahua-cpa com. Audit report
Dhsz [2022] 003478 all shareholders of Sichuan Qiaoyuan Gas Co., Ltd.:
1、 Audit opinion
We have audited the financial statements of Sichuan Qiaoyuan Gas Co., Ltd. (hereinafter referred to as Qiaoyuan gas), including the consolidated and parent company's balance sheets as of December 31, 2021, 2020 and 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 shareholders' equity and notes to relevant financial statements for 2021, 2020 and 2019.
In our 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 of Qiaoyuan gas as of December 31, 2021, December 31, 2020 and December 31, 2019, as well as the consolidated and parent company's operating results and cash flows in 2021, 2020 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 Qiaoyuan gas 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 in 2021, 2020 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.
The key audit matters identified in our audit are summarized as follows:
1. Impairment of accounts receivable;
2. Revenue recognition.
（1） Impairment of accounts receivable
1. Event description
Accounting years applicable to key audit matters: 2021, 2020 and 2019.
For the accounting policies and carrying amount information related to the impairment of accounts receivable of Qiaoyuan gas, please refer to note IV, note VI and note 4 of the consolidated financial statements.
As stated in note VI and note 4 of the consolidated financial statements, the book balance of accounts receivable on December 31, 2021, 2020 and 2019 were 11054788746 yuan, 10109302730 yuan and 9267496954 yuan respectively, and the bad debt reserves were 1071149643 yuan, 719355143 yuan and 641780038 yuan respectively. Qiaoyuan gas recognizes the expected credit loss based on the recoverability of accounts receivable. The recoverability of accounts receivable depends on the management's acquisition and judgment based on the aging of accounts receivable, whether there are collection disputes, past payment conditions and other information affecting the other party's credit.
As the balance of accounts receivable is significant and the evaluation of expected credit loss involves significant judgment of the management, we regard the impairment of accounts receivable as a key audit matter.
2. Audit response
In the audit of financial statements in 2021, 2020 and 2019, our important audit procedures for the impairment of accounts receivable include:
(1) Review the rationality and consistency of the accounting policies for the provision of expected credit losses of accounts receivable of the management;
(2) Check the aging analysis of accounts receivable and review the rationality and accuracy of the provision of expected credit loss of accounts receivable;
(3) For accounts receivable with individual provision for expected credit loss, review the basis and rationality of the management's estimation of the expected future cash flow;
(4) Evaluate the rationality of the management's provision for expected credit loss in combination with historical collection, post period collection, accounts receivable letters and visits.
According to the audit work performed, we believe that the recognition of impairment of accounts receivable is in line with the accounting policy of Qiaoyuan gas.
（2） Revenue recognition
1. Event description
Accounting years applicable to key audit matters: 2021, 2020 and 2019.
For the accounting policies and carrying amount information related to revenue recognition of Qiaoyuan gas, please refer to note IV and note VI and note 38 of the consolidated financial statements.
The sales revenue of Qiaoyuan gas mainly includes the sales revenue of oxygen, nitrogen, argon and other gas products. As described in note VI. note 38 to the consolidated financial statements, the consolidated operating revenue in 2021, 2020 and 2019 is 83257140520 yuan, 73316626459 yuan and 77928785616 yuan respectively. The operating revenue is an important part of the income statement of Qiaoyuan gas. Therefore, we take the recognition of operating revenue as a key audit matter.
2. Audit response
In the audit of financial statements in 2021, 2020 and 2019, our important audit procedures for revenue recognition include:
(1) Understand the design and operation effectiveness of internal control related to sales of the testing company;
(2) Implement analytical procedures for revenue, including sales quantity, unit price, changes in gross profit margin and other analytical procedures;
(3) Select the sample sales letter and confirm the revenue on site;
(4) Sample and test the sales revenue of customers, and check contracts (orders), invoices, weighing documents, transportation records, shipping documents and settlement documents signed by customers;
(5) Perform a cut-off test on operating revenue and confirm that the revenue is recorded in the correct accounting period. According to the audit work performed, we believe that the recognition of operating income is in line with the accounting policy of Qiaoyuan gas.
4、 Responsibilities of management and governance for financial statements
The management of Qiaoyuan gas 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.
In preparing the financial statements, the management of Qiaoyuan gas is responsible for evaluating the sustainable operation ability of Qiaoyuan gas, disclosing matters related to sustainable operation (if applicable), and applying the assumption of sustainable operation, unless the management plans to liquidate Qiaoyuan gas, terminate operation or has no other realistic choice. The management is responsible for supervising the financial reporting process of Qiaoyuan gas.
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 to design appropriate audit procedures.
3. Evaluate the appropriateness of accounting policies selected by the management and the rationality of accounting estimates and related disclosures.
4. Draw a conclusion on the appropriateness of the going concern assumption used by the management. 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 Qiaoyuan gas. If we conclude that there are significant uncertainties, the auditing standards require us to draw the attention of report 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 unsustainable operation of Qiaoyuan gas.
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 Qiaoyuan gas 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 communicated with the management on the planned audit scope, schedule and major audit findings, including the internal control defects that we identified in the audit.
We also provide a statement to the management that we have complied with the professional ethics requirements related to independence, and communicate with the management all relationships and other matters that may reasonably be considered to affect our independence, as well as relevant preventive measures (if applicable).
From the matters communicated with the management, we determine which matters are the most important for the audit of the current financial statements, thus constituting key audit matters. We describe these matters in the audit report, unless laws and regulations prohibit the public disclosure of these matters, or in rare cases, if the negative consequences of communicating a matter in the audit report are reasonably expected to exceed the benefits in the public interest, we determine that we should not communicate the matter in the audit report. Dahua Certified Public Accountants (special general partnership) Chinese certified public accountant:
(project partner) he Shunxiang
Beijing, China Certified Public Accountant:
Liu Wei
March 31, 2002
Sichuan Qiaoyuan Gas Co., Ltd
