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Henan Xinye Textile Co., Ltd. Audit Report Shouzhen Audit Zi [2024] No. 00096
Henan Shouzhen Certified Public Accountants (General Partnership) Date: April 29, 2024
Henan Shouzhen Certified Public Accountants (General Partnership) Address: 9th Floor, Building 9, Greenland New Metropolis, Intersection of Dongfeng Road and Jinshui East Road, Zhengzhou Area, Henan Pilot Free Trade Zone Tel: 0371-65335617 65335627
Audit Report Shouzhen Audit Zi [2024] No. 00096
To Henan Xinye Textile Co., Ltd.:
I. Disclaimer of Opinion
We were engaged to audit the financial statements of Henan Xinye Textile Co., Ltd. (hereinafter referred to as "Xinye Textile"), which comprise the consolidated and company balance sheets as of December 31, 2020, December 31, 2019, December 31, 2018, December 31, 2017, and December 31, 2016, and the consolidated and company income statements, consolidated and company cash flow statements, and consolidated and company statements of changes in equity for the years 2020, 2019, 2018, 2017, and 2016, as well as notes to the financial statements.
We do not express an opinion on the accompanying financial statements. Because of the significance of the matters described in the "Basis for Disclaimer of Opinion" section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.
II. Basis for Disclaimer of Opinion
(I) Failures in Financial-Related Internal Controls
Xinye Textile retrospectively adjusted its 2016-2020 financial reports, involving significant amounts, which changed the nature of the annual profits or losses. Xinye Textile failed to maintain and improve information systems supporting standardized enterprise management, leading to a disconnect between financial accounting and actual business operations. The management of Xinye Textile failed to organize relevant departments to effectively manage assets such as inventories and fixed assets, and failed to reconcile physical assets with accounting records.
The above matters indicate significant deficiencies in Xinye Textile's management of inventory, fixed assets, sales and collections, and financial reporting. Due to the impact of the aforementioned deficiencies, we are unable to determine the extent of the impact of these internal control deficiencies on the financial statements.
(II) Limitation of Audit Scope
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We performed inquiry and inspection procedures regarding Xinye Textile's monetary funds, accounts receivable/payable, sales, and procurement. During the execution of these procedures, we encountered instances where confirmations could not be sent, a large number of confirmations were returned, response rates were low, and discrepancies in confirmations could not be resolved. We performed alternative procedures, but because Xinye Textile failed to provide relevant bank statements, contracts, invoices, and warehouse entry/exit records in their entirety, we were unable to obtain sufficient and appropriate audit evidence to determine the authenticity, completeness, and accuracy of monetary funds, accounts receivable/payable, revenue, and costs.
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We performed observation, verification, and interview procedures regarding Xinye Textile's inventories, fixed assets, and other physical assets. Due to the impact of unsound internal controls related to asset management, physical inventory procedures could not be fully and effectively executed. Xinye Textile failed to provide key materials such as inventory ledgers, fixed asset cards, warehouse entry/exit records, logistics documents, contracts, and invoices consistent with the book data. We were unable to obtain sufficient and appropriate audit evidence to determine whether inventories, fixed assets, and other physical assets actually existed.
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We designed corresponding audit procedures for opening balances in accordance with the requirements of the Standards on Auditing for Certified Public Accountants of China. However, due to factors such as internal control failures and audit scope limitations at Xinye Textile, we were unable to obtain sufficient and appropriate audit evidence during the audit process to verify the authenticity, completeness, and accuracy of the opening balances and related accounting treatments. We are unable to determine whether the opening balances of the financial statements are correct.