This article was first published in the public account: Investment Banking Practice View
Two days ago, we pushed the audit status of an enterprise that was inspected on the spot, and issuers and intermediaries faced considerable pressure from on-site inspection, after all, the income statement for the first two years of the reporting period was heavily corrected, as can be seen:
[How tragic is the IPO on-site inspection, and the income statement of an issuer in the first two years has been changed?] 】
Previously, we also reported the on-site inspection and on-site supervision of IPOs in previous years, which can be seen:
[IPO project on-site supervision focuses on problem sorting] and
【One of the common problems of IPO companies that were inspected on the spot in 2021-2022】
Today, we will make a summary analysis of the current situation of issuers subject to on-site inspection and on-site supervision in 2022 and the key issues of concern of the supervision and inspection team.
1
Sector, industry distribution and current status of the project
In 2022, we found a total of 44 enterprises that were inspected and supervised on site, of which 34 were selected for on-site inspection and 10 were supervised on site, and the distribution of sectors and industries to which the above companies belong is as follows:
Note: The 44 cases screened in this article are the 2022 IPO feedback responses and cases released by the association, excluding cases that have been mentioned in previous annual articles and completed this year.
It can be seen from the previous that among the enterprises that have been inspected and supervised on the spot, ChiNext has the largest number of enterprises, accounting for nearly 50%, reaching 20, followed by 12 on the main board.
From the perspective of industry distribution, there are more computer, communication and other electronic equipment manufacturing industries, with a total of 8, followed by electrical equipment and equipment manufacturing with a total of 5.
The current project status of these 44 issuers is as follows:
It can be seen from the above that 19 of these 44 enterprises have been determined to have failed, accounting for 43.18%, that is, nearly half of the enterprises that have been selected for on-site inspection or on-site supervision have failed, including but not limited to the project directly withdrawing materials or advancing to the stage of the meeting, but was rejected by the Listing Committee or the Issuance Review Committee. Among them, there are 4 issuers that have advanced to the stage of the listing committee, but have been rejected, including , , and . These four issuers and intermediaries also worked hard, surviving supervision and inspection, thinking that they could keep the clouds open and see the moon, but were sentenced to failure.
Regarding the company Suzhou Weijia Technology Co., Ltd., the author has pushed two articles in a row for analysis, which can be seen:
【【IPO Case No. 24】Strangely, an on-site supervision company sponsored by a leading securities firm deleted the inquiry questions? Answering fewer questions? Avoid sensitive information? ] and
【【IPO Case No. 25】Weijia Technology, which was supervised on the spot, not only discussed its financial doubts, but also found its brilliance].
In addition to the above 4 companies, the remaining 15 have chosen to withdraw their application materials for issuers or sponsors. The power of on-site inspections and on-site supervision is evident.
It is worth noting that among the 44 enterprises, 4 enterprises were selected for on-site inspection or on-site supervision for the second declaration, of which 2 are still insisting and 2 have failed, as follows:
2
Sponsors, accounting firms and project profit distribution
The sponsors, accounting firms and law firms corresponding to the 44 issuers are as follows:
It can be seen from the above that Sanzhong Yihua and Haitong Securities, which have the most projects, are not many projects that have been selected for on-site inspection or on-site supervision, and the securities firms that have been selected the most are Minsheng Securities.
Accounting firms are relatively concentrated, Tianjian Accounting Firm was selected 11 orders, Rong Cheng and Lixin were selected 7 orders each.;; , the rest are still under review. In terms of law firms, Beijing Zhong Lun, Shanghai AllBright and DeHeng Law Firms were more selected.
Among them, the distribution of net profit in the latest 1 year of the projects selected for on-site inspection or on-site supervision is as follows:
Among them, 2 of the 4 enterprises with a net profit of less than 50 million yuan have all withdrawn materials, 1 of the 2 STAR Board companies has passed the listing committee meeting, and one is still under review. After all, the science and technology innovation board does not look at profits, and if it meets the evaluation guidance of science and technology attributes, you can rest assured and be bold:
[IPO case Shengbang Security: How much is the science and technology innovation board a "garbage" containment station...]
3
On-site supervision and on-site inspection of concerns summary
1. On-site inspection
Up to now, among the feedback responses of the selected enterprises for on-site inspection, only Hebei Jinghe Electronic Technology Co., Ltd. and Xi'an Eagle Aviation Technology Co., Ltd. have disclosed the feedback responses, the details of which are as follows:
Jinghe Electronics: (5) According to the on-site inspection report, the issuer has not revised the sales revenue recognition system in a timely manner and the internal audit system has not been effectively implemented, and it intends to improve it from June 2022.
(3) According to the on-site inspection report, the issuer did not pay the goods in a timely manner as agreed in the contract during the reporting period to the customer A001-1 and A007, a subsidiary of Shaanxi Electronic Information Group Co., Ltd., and the issuer did not suspend the delivery to them;
(4) According to the on-site inspection report, the issuer used the tax-inclusive selling price as the estimated selling price of the net realizable value in the practical operation of preparing for inventory price decline, resulting in.
According to the on-site inspection report, the audit report disclosed that the equipment was depreciated using the sum of years method, but in practice, the average age method was used for equipment purchased before January 1, 2015, and the depreciation was calculated using the sum of years method for equipment purchased after that;
Eagle Voyage: The description of the on-site inspection problem of the project is more complicated, the author will make some brief summary, the main problems are as follows:
； After testing the revenue details of Xiangyang 3015, a subsidiary of the issuer, it was found that from 2018 to January to September 2021, there were 3, 6, 2 and 5 handover orders earlier than the date of U8 outbound orders, respectively;
……
The accounting firm's income details test has no sampling method and sampling process, no book-to-physical inspection process or physical-to-book process, no specific book record voucher number, cannot be associated with the book record, and is inconsistent with the audit procedure described in the draft.
。 Although HNA began bankruptcy restructuring in early 2021 and the issuer signed relevant agreements with HNA to ensure the collection, there is uncertainty about whether the payment can be collected before the end of 2020 and the proportion of the payment will be collected;
。 The accounting firm has not issued a letter to the issuer for the commodity. The reason why the accountant did not carry out the letter procedure for the issued goods in the substantive procedure, but directly adopted the alternative test, the reason is that the issuer issued the goods mainly for a small amount and a large number of repair parts, and according to the previous correspondence, the customer did not reply to the letter, so the alternative procedure was directly used for verification. However, the draft does not record the previous issuance of commodity letters, nor does it contain any control tests related to the issuance of goods.
As mentioned earlier, Eagle Voyage has been declared for the second time, and there are many problems with this on-site inspection, so we hope that the project can go smoothly.
2. On-site supervision
(1) Income-related issues
WEINIG Transmission:,
The issuer did not accurately confirm and present the amount of the guarantee to its major customer, Goldwind. The contract between the issuer and Xinjiang Goldwind Technology Co., Ltd., one of its top five customers, stipulates that the final payment shall be 5% of the total price, and the final payment shall be paid after 365 days after each batch of products arrives at the designated delivery place without quality problems and the guarantee letter is received, or the final payment shall be paid within 365 days after arriving at the designated delivery place and receiving the warranty letter. During the Reporting Period, the issuer did not issue a letter of guarantee to Goldwind; According to the payment details exported by Goldwind's supply chain collaboration platform, as of the supervision period, Goldwind has not paid the final payment of all transactions with the issuer since 2018; The issuer recognized the final payment of the transaction with Goldwind from 2018 to 2019 as a guarantee payment, but did not recognize the final payment of the transaction from 2020 to June 2021 as a guarantee payment, resulting in the issuer's accounts receivable in the balance sheet at the end of 2020 and June 2021 being overstated and other current assets (contract assets) understating by RMB4.2746 million and RMB9.2415 million, respectively;
Weijia Technology: The on-site supervision of the sponsor business found that when the issuer sold equipment to some customers during the reporting period, it provided warranty services ranging from 2 to 5 years, which exceeded the regular period disclosed by the issuer of "the warranty period of the whole machine is 1 year, and the warranty period of the spindle is half a year", which is a service warranty. The issuer failed to share the transaction price and recognize revenue for warranty services beyond the regular warranty period as a single performance obligation, in accordance with the relevant provisions of the new revenue standard.
Zhengye Design: The on-site supervisor also found that the contracts of the issuer's 4 projects during the reporting period did not stipulate the right to receive qualified collections. (1) sort out the survey and design and planning consulting business contracts during the reporting period, explain the specific terms of the "qualified collection right" stipulated in the above-mentioned contract terms, and determine whether the issuer's revenue recognition meets the third paragraph of Article 11 of the Accounting Standard for Business Enterprises No. 14 - Revenue;
Beijing Agricultural University: (1) The logistics situation calculated in the sponsor's draft is inconsistent with the logistics situation shown in some of the detailed test samples randomly checked by the supervision team, and the "classification of main business income according to logistics mode" disclosed in the issuer's prospectus is inaccurate.
(2) Among the 265 sales detail test samples randomly inspected by the supervision group, 199 sample issuers could not provide logistics certificates (including entrusted third-party delivery agreements, documents or internal vehicle delivery records of the issuer), nor could they prove that the relevant goods were picked up by customers, or the logistics order information could not correspond to the order and outbound order information, accounting for 75.09%, resulting in difficulty in accurately verifying the logistics situation of the relevant sales;
(2) The sponsor's interview questionnaire with the distributor Li Peigao showed that Li Peigao's main end customers included Zhang Rong, Fan Benchun and Fan Benqing. According to the mobile phone numbers of Zhang Rong, Fan Benchun, Fan Benqing and Fan Benran recorded in the interview questionnaire, after searching WeChat, it was found that the WeChat names of the four people all displayed the word "Donghui", such as "Donghui fresh egg direct sales Fan Benqing"; At the same time, the business personnel displayed in the publicity information of Hai'an County Donghui Agricultural and Sideline Products Co., Ltd. (hereinafter referred to as Haian Donghui) on the network platform include "Zhang Rong 13914358548 in Nanjing Area", "Fan Benchun 13773681592 in Changzhou Area", "Fan Benqing 13348097865 in Jiangyin Area" and "Fan Benran 13506299563 in Wuxi Area", and their names and mobile phone numbers are consistent with Li Peigao's main end customers and Fan Benran, and can reasonably be judged to be the same person;
It is worth noting that although the project of Beijing Agricultural University has been rejected by the listing committee meeting, it belongs to the agricultural and sideline food processing industry, and the business model has a distribution situation, and the work ideas of the on-site inspection team are very worthy of learning from the intermediary personnel.
To take the example mentioned above, the supervision team searched WeChat through mobile phone numbers and found that the four WeChat names of the end customers of an issuer's distributor all displayed the same word, so as to reasonably judge that they were the same customer.
Regarding dealer verification, the Exchange has published a sample of dealer verification, which can be seen at:
[Exchange Releases Example of IPO Dealer Verification Procedure]
(2) Cost-related issues
PowerPower: The relevant situation of on-site supervision shows that the sponsor has not implemented the verification procedures for the accuracy and completeness of the issuer's direct labor and manufacturing expense accounting.
……
, spot check the issuer's ERP system computer log found that the operation records of the account "sys-admin" include arrival list entry, purchase receipt entry, material outbound order entry, finished product storage list entry, sales order entry, filling voucher and audit voucher. The account has all the permissions of each link of the ERP system and has operation records, and has logged in and operated on 38 computers with different names.
Weijia Technology: During the reporting period, for the sale of equipment through financial leasing, the issuer will bear a certain financial leasing service fee in some cases, which will be included in the financial expense as financing interest. After inspection, the contract signed between the issuer and the financial leasing company was a consulting service contract, and the invoice received by the issuer was also an invoice for consulting service fees, not financing interest expenses.
Hengmao Hi-Tech: (1) The issuer began to change from the Yonyou system to the SAP system on November 1, 2019. The on-site supervision found that there were differences in the material code, balance quantity and amount of the issuer's inventory when the two systems were connected, among which the balance amount of 2,268 inventory materials such as "321304703" was less in the UF system than in the SAP system, with a total difference of 1,448,100 yuan, and the balance amount of 2,389 inventory materials with code "320200139" was more in the UF system than in the SAP system, with a total difference of 906,800 yuan.
(2) The issuer did not separately account for the outsourcing processing products, resulting in inaccurate accounting of the gross profit margin of some products, in addition, due to the failure to separately account for the outsourcing processing products, the issuer could not accurately measure the balance amount of the entrusted processing materials at the end of the period, and the amount of the entrusted processing materials disclosed in the prospectus was inaccurate.
(3) The on-site supervision did not see the sponsor's recalculation of the direct materials and the verification of whether the BOM was updated, and the sponsor did not write to the outsourcing processor to report the balance amount of the commissioned processing materials at the end of each period.
(3) Internal control and verification procedures
WEINIG Transmission: There is an anomaly in the issuer's warehouse management system.
In January 2020, the system was officially launched. Regarding the operation of the system, on 15 December 2021, the issuer stated that the system could only be operated on the intranet, and could not be displayed online on that day, and could only be operated on the issuer's office computer and filmed on mobile phones the next day. On December 16, during the system demonstration, it was shown that the domain name of the demo system was different from the sponsor's paper record. According to the domain name recorded in the sponsor's paper, the domain name can be logged in to the on-site extranet. ......,。
The sponsor supplier correspondence procedure is not in place. A total of 84 supplier letters were issued by the sponsor at the time of initial filing, and 81 responses were obtained. There are no records of sending and receiving courier bills, checking the address of the sending letter and the address of sending the letter in the draft, the unit stamping the reply letter is inconsistent with the letter unit, the sending address of the 3 reply letters is far from the receiving address, and there is no record of the sponsor paying attention to and verifying the situation.
Dexin Technology: During the reporting period, there were many defects in the issuer's internal control related to sales and procurement, such as the manufacturer and reviewer of sales orders were the same person, some key information of contracts was missing, the date of some outbound orders was earlier than the date of signing the contract, the date of receipt was earlier than the date of delivery, and some procurement contracts were not implemented in accordance with the internal control system. The Internal Control Assurance Report issued by the reporting accountant believes that the issuer made a statement on December 31, 2021... Effective internal control over financial reporting was maintained.
Weijia Technology: The original documents of the issuer's production personnel filling in the production hours are lost or have not been approved by the head of the production department; Labor outsourcing and labor dispatch personnel are not counted into production hours; There are significant differences in production hours for the same product produced in the same month; Failure to accurately distinguish the working hours of production personnel engaged in R&D, quality assurance, marketing, etc.; The purchase payment requisition has the same person as the approver and the delivery note is not seen.
Ketuo shares: (1) the delivery date of 162 sales contracts of the issuer was earlier than the date of signing the contract, of which the largest span was that the first shipment date was 199 days earlier than the date of signing the contract; The revenue recognition date of 296 operation management contracts of the issuer was earlier than the date of contract review, accounting for 8.98% of the relevant contracts.
(2) Among the 73 equipment sales detail test samples sampled by the on-site supervision of the sponsor business, 6 sample contracts did not have corresponding sales orders. The issuer part of the sales order maker and the approver are the same person. The sponsor explained that from 2018 to January to June 2021, the number of sales orders with relevant circumstances was 1,212, 1,557, 136 and 0, respectively.
(3) none of the 3,681 customer letters issued by the sponsor had retained the courier slip of the letter of dispatch, and no alternative test papers for inconsistency in the reply letter were found; 619 unanswered correspondence did not see alternative testing; The recipients and replies, of the 11 letters sent to 5 customers, were all employees of the issuer, and 4 of the replies and sending addresses were inconsistent with the customer's business registration address; Some of the correspondence addresses are residential communities and are inconsistent with the registered addresses of industry and commerce.
Beinong University: The on-site supervision found that the same courier reply letter corresponds to 2 customers (Taizhou Gornamei Breeding Professional Cooperative, Taizhou Aiqao Poultry and Egg Professional Cooperative), and the relationship between the sender and the two customers recorded in the sponsor's letter control form is an employee and a courier respectively. The sponsor explained that the above-mentioned reply letter was collected and sent back by the salesman of the issuer's subsidiary. There are also cases in the sponsor's letter control table that some of the senders of the reply letter are recorded as clerks of the issuer's subsidiaries.
The work of the supervision team and the inspection team are all around the existing documents and drafts of the issuer and the intermediary, as mentioned above, such as the test sample taken without an order, the letter did not see the letter sheet, the reply letter was sent back for the company's employees, etc., which can indeed be avoided in actual work, but sometimes it is true that these minutiae are too cumbersome to pay attention to, and sometimes it is not easy to solve the enterprise problems and normative matters when the project is promoted. There is really no energy to resample or resend letters for these small problems with correspondence or walk-through tests, but it is okay that regulators can always find these problems on the project site.
(4) The problem of capital flow
Dexin Technology: (1) From January 31, 2019 to May 13, 2021, Sun Yu, the actual controller of the issuer, made a total of 8 transfers to Li Jun, R&D director, with a total transfer amount of 13.62 million yuan, and returned 11.62 million yuan of principal. After receiving the money, Li Jun purchased bank wealth management, and the wealth management proceeds were retained in Li Jun's bank account and used by Li Jun.
(2) During the Reporting Period, 33 people, including the issuer's major shareholders and their close relatives, directors, supervisors and their close relatives, and some employees, made small and high-frequency cash withdrawals, with a total of 2,774 transactions and a total amount of 28.3521 million yuan. The sponsor failed to verify and explain the actual use of the aforementioned cash withdrawal.
Ketuo shares: (2) From August to October 2019, Zhang Dongmei transferred 3.4 million yuan to Wu Mao in multiple transactions. The sponsor explained that Wu Mao's loan from Zhang Dongmei was due to business payment needs. The time of Wu Mao's business payment voucher provided by the sponsor does not match the time of Zhang Dongmei's payment collection, and there is no repayment certificate.
(3) Zhang Dongmei's mother Bian Xiuzhen withdrew 2.3 million yuan on May 24, 2019, and Zhang Dongmei deposited 2.3 million yuan in her account on the same day, and the corresponding turnover remark was "Xu Yuefeng". ，。
Beijing Agricultural University: (1) The sponsor's verification of the integrity of the escrow card, including... Escrow Card Integrity Statement; The sponsor will only ... , to confirm whether the other customers are escrow card customers;
(2) The sponsor can only obtain 29 escrow cards, and 23 of the escrow cards have the situation that the non-card-opening customer has transferred funds or cannot identify the name of the payer; According to the supplementary statistics of the sponsor, for the above 23 escrow cards, the total amount of repayment from 2017 to 2020 was 40.1066 million yuan, and the amount of repayment that could be confirmed by bank flow verification was 12.7278 million yuan, accounting for only 31.73%;
Personal card funds flow, sometimes the draft is done carefully, the inspection team can always find problems, not to mention the above in the North Agricultural University has 29 bank cards that are managed by the issuer, such a big project, can be perfected that it simply takes a lot of effort.
summary
As mentioned in the previous article, the pressure of on-site inspection and on-site supervision is really not small, but it can be seen from the above summary that the basic work idea of the supervision team is also based on the current situation and working papers of the issuer and the sponsor, which requires the intermediary to really do a solid job in the practice process. No issuer or intermediary is willing to be selected for on-site inspection, but a good job in the manuscript and corporate specifications is the key to whether the company can survive the inspection.
The above are some of the key issues that the author has sorted out the on-site supervisors pay attention to, and the words of the family only represent personal views. Due to space limitations, many questions have been deleted, if you are interested in getting the full version of feedback questions and answers, please leave a message in this article or in the background.
Past articles
1. On-site supervision mentioned in the new GEM review dynamics: the issuer withdraws materials due to the actual controller's determination that it has been supervised
2. One of the common problems of IPO enterprises that have been inspected on-site in 2021-2022 3. Sorting out the key issues of on-site supervision of IPO projects 4. Examples of IPO dealer verification procedures issued by the exchange
5. CPA business: 2 of the relationship between the report items - VAT, cash flow, etc
6. [IPO Case No. 24] It is strange that an on-site supervision company sponsored by a leading securities firm deleted the inquiry questions? Answering fewer questions? Avoid sensitive information? 7. [IPO Case No. 25] Weijia Technology, which was supervised on the spot, not only discussed its financial doubts, but also found its brilliance
8. How tragic is the on-site inspection of the IPO, and the income statement of an issuer has been changed in the first two years?
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