Special Explanation on Non-Standard Opinion Internal Control Verification Report
Zhongxinghua Accounting Firm (Special General Partnership) issued a non-standard opinion internal control verification report for Changcheng Film Co., Ltd. (hereinafter referred to as "the Company" or "Changcheng Film") for the year 2020. According to the relevant provisions of the "Stock Listing Rules," the Company's board of directors provides the following special explanation regarding the matters involved:
1. Basic Situation of the Matters Involved
The internal control verification report (Zhongxinghua Audit No. (2021) 020951) states: "From 2016 to 2019, Changcheng Film failed to follow the deliberation procedures of the board of directors and shareholders' meetings, providing five illegal guarantees for the controlling shareholder Zhejiang Qingfeng Original Culture Co., Ltd. and its related enterprises Changcheng International Animation Game Co., Ltd., totaling 852 million RMB, and did not disclose them as required. This indicates a failure of Changcheng Film's internal control systems related to information disclosure, seal management, and guarantee matters. Although these guarantees occurred before 2020, their impact is significant and ongoing, and the relevant internal controls continued to fail in 2020. Significant defects exist in the internal controls related to sales operations of the Company's subsidiaries, including Nanjing Phoenix Holiday Travel Co., Ltd., Hangzhou Spring Voice Travel Agency Co., Ltd., Anhui Baozhong Investment International Travel Agency Co., Ltd., Shanghai Haixin International Travel Agency Co., Ltd., Nanjing Sihai Yijia Travel Agency Co., Ltd., and Hangzhou Jinbang Travel Agency Co., Ltd., with incomplete accounting data affecting the accuracy of revenue and cost recognition, as well as the valuation of financial statement items. We believe that due to the above matters, Changcheng Film failed to maintain effective internal controls related to financial statements in all material respects as of December 31, 2020."