Special Explanation on Non-standard Audit Opinions
1. Special Explanation on Non-standard Audit Opinions for Beixun Group Co., Ltd. 2020 Financial Report
Shenzhen Stock Exchange: We have been entrusted to audit the financial statements of Beixun Group Co., Ltd. (hereinafter referred to as "Beixun Group") for the year 2020, including the consolidated and company balance sheets as of December 31, 2020, the consolidated and company income statements, consolidated and company cash flow statements, consolidated and company statements of changes in equity, and related financial statement notes. On June 25, 2021, we issued an audit report with a disclaimer of opinion (Report No.: Pengsheng A Audit [2021] No. 30). In accordance with the relevant requirements of the China Securities Regulatory Commission Announcement [2020] No. 20 "Rules for the Disclosure of Information by Companies Issuing Securities to the Public No. 14 - Handling of Non-standard Audit Opinions and Related Matters (2020 Revision)", "Guidelines for the Application of Regulatory Rules - Audit Category No. 1", and "Shenzhen Stock Exchange Listing Rules (2020 Revision)" (Shenzhen Stock Exchange [2020] No. 1294), we provide the following explanations regarding the relevant matters:
1. Main Contents Related to Non-standard Audit Opinions
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Multiple Significant Uncertainties Related to Going Concern
Beixun Group has incurred losses for three consecutive years (2018, 2019, and 2020), with cumulative losses exceeding 4.9 billion yuan. As of December 31, 2020, overdue debts exceeded 5.1 billion yuan. Beixun Group is unable to repay its debts, faces numerous unresolved lawsuits, and has many bank accounts, subsidiary equity, and some engineering materials frozen. Some subsidiary properties have been auctioned, and inventory materials have been seized. The company is unable to pay base station rents and electricity fees, leading to a large-scale shutdown of its operational base stations, and its telecommunications segment is currently inactive. These matters indicate multiple significant uncertainties that have a substantial impact on the overall financial statements. Although the reasons for the significant doubts about the company's ability to continue as a going concern and the proposed improvement measures have been disclosed in financial statement notes two and thirteen, as of the date of approval of the financial report, we were unable to obtain sufficient and appropriate audit evidence regarding Beixun Group's measures related to improving its going concern ability. Therefore, we cannot assess whether management's use of the going concern assumption in preparing the 2020 financial statements is appropriate. -
Severe Failure of Internal Control over Financial Reporting
Beixun Group is involved in numerous lawsuits due to debt defaults, has many bank accounts frozen, owes employee wages, and has stopped paying employee social security, resulting in significant personnel loss, including severe shortages in multiple key positions. The internal control related to financial reporting has severely failed, making it impossible to effectively reduce the risk of material misstatement in revenue, operating costs, cash, inventory, fixed assets, construction in progress, goodwill, estimated liabilities, and contingent matters. We were unable to perform necessary audit procedures such as confirmations, observations, interviews, and checks of original documents. As of the date of approval of the financial report, we could not obtain sufficient and appropriate audit evidence to determine whether there are material misstatements in the relevant financial statement items, whether adjustments are necessary, or the amounts that should be adjusted. The related situation has a significant and widespread impact on the financial statements.