Shanghai Titan Scientific Co.Ltd(688133)
Audit report
Dxsz [2021] No. 4-00151
Daxin Certified Public Accountants (special general partnership)
WUYIGE CERTIFIED PUBLIC ACCOUNTANTS LLP.
Wuyige certified public accountants LLP telephone: + 86 (10) 82330558 Xueyuan International Tower, 15 / F, No. 1 Zhichun Road, Haidian District, Beijing Fax: + 86 (10) 82327668 no.1zhichun Road, Haidian dist, 15th floor, College International Building. Website: Internet: www.daxincpa com. cn. Postal Code: Beijing, China 100083
audit report
Dxsz [2021] No. 4-00151 Shanghai Titan Scientific Co.Ltd(688133) all shareholders:
1、 Audit opinion
We have audited the financial statements of Shanghai Titan Scientific Co.Ltd(688133) (hereinafter referred to as “your company”), including the consolidated and parent company’s balance sheet as of December 31, 2020, 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 financial statements in 2020.
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 as of December 31, 2020 and the consolidated and parent company’s operating results and cash flow in 2020.
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 your company 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 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.
Wuyige certified public accountants LLP telephone: + 86 (10) 82330558 Xueyuan International Tower, 15 / F, No. 1 Zhichun Road, Haidian District, Beijing Fax: + 86 (10) 82327668 no.1zhichun Road, Haidian dist, 15th floor, College International Building. Website: Internet: www.daxincpa com. cn. Postal Code: Beijing, China 100083
(I) inventory impairment
1. Event description
As stated in note V (VI) “inventory” to the financial statements, as of December 31, 2020, the inventory balance of your company was 263892360.91 yuan, the inventory falling price reserve was 2143399.10 yuan, the net inventory was 261748961.81 yuan, and the book value of inventory in the reporting period was high. If the technical products are updated rapidly, or the categories are increased, but the corresponding testing and management lag, there will be the risk of inventory falling price loss, and the management has made significant judgment when determining the inventory impairment. Therefore, we determine the inventory impairment as a key audit event.
2. Audit response
During the audit of this important matter, we implemented the following important procedures:
(1) Understand and evaluate the internal control of production and storage, and conduct control test to ensure that the relevant control is implemented and effective;
(2) Conduct on-site inventory of the ending inventory to determine whether the ending inventory exists. For the ending inventory with long aging, focus on whether the physical object exists and observe the status of its existence;
(3) Analyze the rationality of accounting estimation of inventory falling price reserves, including the basis for determining the net realizable value;
(4) Analyze and calculate the ratio between the amount of inventory falling price reserves and inventory balance on the balance sheet date, compare the accrued amount of inventory falling price reserves in the previous period with the actual amount, and analyze whether the accrued amount of inventory falling price reserves is sufficient.
(II) revenue recognition
1. Event description
As stated in note V (30) “operating revenue and operating cost” of the financial statements, the operating revenue of your company in 2020 is 1384484733.77 yuan. As revenue is one of the key indicators affecting performance, the management may recognize revenue in advance to meet specific expectations, so that the revenue is not reflected in the appropriate accounting period. Therefore, we regard revenue recognition as a key audit matter. 2. Audit response
During the audit of this important matter, we implemented the following important procedures:
Wuyige certified public accountants LLP telephone: + 86 (10) 82330558 Xueyuan International Tower, 15 / F, No. 1 Zhichun Road, Haidian District, Beijing Fax: + 86 (10) 82327668 no.1zhichun Road, Haidian dist, 15th floor, College International Building. Website: Internet: www.daxincpa com. cn. Postal Code: Beijing, China 100083
(1) Understand and evaluate the internal control in the sales and collection process, and conduct control test to ensure that the relevant control is implemented and effective;
(2) Understand the specific methods of revenue recognition, compare and analyze with the revenue recognition policies of Companies in the same industry, select the sample of sales contract, identify the terms related to the transfer of risks and rewards related to commodity ownership in the contract, and evaluate whether the corresponding revenue recognition time point is in line with the provisions of the accounting standards for business enterprises and consistent implementation of relevant accounting policies;
(3) Implement analytical procedures to verify and analyze the rationality of sales revenue and gross profit margin changes of various types of products;
(4) Carry out detailed test, select samples from sales delivery records and book records respectively, and check sales contracts (orders), sales delivery orders, logistics documents or acceptance reports, collection settlement documents, settlement invoices and other supporting documents;
(5) Select samples and confirm relevant transaction amount and other information in combination with accounts receivable letter confirmation;
(6) Select a sample of major sales contracts, compare the consistency between the collection schedule agreed in the contract and the actual settlement collection schedule, and confirm the rationality and prudence of revenue recognition;
(7) Check the details of sales returns in each year in detail, and pay attention to the reasons for sales returns, period distribution, amount and proportion in total revenue;
(8) Conduct a cut-off test on the income to confirm whether the income is included in the correct accounting period.
4、 Other information
The management of your company (hereinafter referred to as the management) is responsible for other information. Other information includes the information covered in your 2020 annual report, 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 do 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.
Wuyige certified public accountants LLP telephone: + 86 (10) 82330558
Xueyuan International Tower, 15 / F, No. 1, Zhichun Road, Haidian District, Beijing Fax: + 86 (10) 82327668
No.1zhichun Road, Haidian dist, 15th floor, College International Building. Website: www.daxincpa com. cn.
Postal Code: Beijing, China 100083
Based on the work we have performed, if we determine that there is a material misstatement in other information, we should report that fact. In this regard, we have nothing to report.
5、 Responsibilities of management and governance for financial statements
The management is responsible for preparing the financial statements in accordance with 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 is responsible for assessing the company’s ability to continue as a going concern, disclosing matters related to going concern (if applicable), and applying the going concern assumption, unless the management plans to liquidate the company, terminate the operation or has no other realistic choice.
The management is responsible for supervising the financial reporting process of your company.
6、 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 an audit performed in accordance with audit standards can 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 audit work in accordance with audit standards, we use professional judgment and maintain professional doubt. 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. As fraud may involve collusion, forgery, intentional omission, misrepresentation or override of internal control, the risk of failure to find material 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.
Wuyige certified public accountants LLP telephone: + 86 (10) 82330558
Xueyuan International Tower, 15 / F, No. 1, Zhichun Road, Haidian District, Beijing Fax: + 86 (10) 82327668
No.1zhichun Road, Haidian dist, 15th floor, College International Building. Website: www.daxincpa com. cn.
Postal Code: Beijing, China 100083
(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 cause major doubts about the company’s ability to continue as a going concern. 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,
