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No. 16 of 2016 (General Serial No. 247): The Audit Results of the Financial Revenues and Expenditures of China Electronics Corporation for the Year 20
2017-06-08日   Soure : 【www.9455.com:International Cooperation Department】 :

No. 16 of 2016 (General Serial No. 247):

The Audit Results of the Financial Revenues and Expenditures of China Electronics Corporation for the Year 2014

In accordance with the stipulations of the Audit Law of the People’s Republic of China, in 2015 the National Audit Office (CNAO) conducted an audit over financial revenues and expenditures of the year 2014 of China Electronics Corporation (hereinafter referred to as CEC). The auditing work focused on the headquarters of CEC and 7 subunits including Nanjing CEC Panda Information Industry Group Co., Ltd and China CEC International Information Services Ltd. (hereinafter respectively referred to as CEC Panda and CEC Information), with the extension and tracing back to relevant items.

I. Overview

CEC was founded in May 1989. The main business areas it engages in include the manufacturing of electronic products and the trade, services and software design and application of electronic products etc. As reflected in the consolidated financial statement, in the end of 2014, CEC possessed 679 wholly-owned or holding subsidiaries, 84 shareholding companies and 4 public institutions; registered capital amounted to RMB12.482 billion, the total assets reached RMB234.317 billion, the total liabilities was RMB173.173 billion, owners equity was RMB61.144 billion and the asset-liability ratio was 73.91%; The realized operating revenue of the same year was RMB203.852 billion, a net profit of RMB3.42 billion was earned, return on equity was 5.62% and the rate of the value maintenance and increase of state-owned capital was 111.2%.

Entrusted by the CEC, Daxin Accounting Firm audited the consolidated financial statement of 2014 of the corporation and issued an unqualified audit report.

The audit results conducted by the CNAO indicated that through adjusting strategic planning, CEC has focused on the development of five main business sectors such as information security and new display etc., gradually improved the corporate governance structure, regulated the internal management, adjusted and optimized the asset structure and promoted high-quality assets and businesses to get listed on the market. The results also demonstrated that some problems still existed in fields such as financial management and accounting, major corporate decision making and management, development potential and professional ethics of CEC.

II. Major Problems Found in the Audit

(I) Financial management and accounting

u In 2014, when CEC consolidated the financial statement, incomplete range and incorrect offset of intra-group transaction resulted in an understatement of RMB286 million asset, an understatement of RMB1.593 billion liabilities, an overstatement of RMB1.307 billion owners equity, an overstatement of RMB47 million revenue, an understatement of RMB30 million costs and an overstatement of RMB77 million profit.

u In 2012, the subunit Nanjing CEC Panda LCD Technology Co., Ltd. included RMB84 million deferred income into the non-operating revenue of the same year that should be amortized in and after 2013, resulting in an understatement of RMB84 million non-operating revenue in 2013 and 2014 respectively.

u By June 2015, RMB200 million of special funds that the subunit CEC Panda allocated for the stock rights repurchase program to 3 affiliated subsidiaries had been idled for more than 2 years.

u The subunit Shenzhen CEC Investment Corporation postponed till 2012 to confirm RMB68.0987 million shop sales revenue and RMB26.2813 million related costs of 2011, resulting in inaccurate accounting of revenue, and expenses and income that went beyond the year.

u From 2011 to 2014, the headquarters of CEC and 3 companies including the subunit China Electronic Finance Company had listed and paid for such wage subsidies as staff holiday costs and bonus in management costs in excess of the total payment, resulting in an overstatement of RMB16.7593 million of costs, among which the amount in 2014 was RMB4.3506 million.

u From 2011 to 2014, three enterprises including the subunit CEC Information had failed to clear shop rents that should have been collected in time, resulting in an understatement of RMB9.5713 million revenue, among which the amount in2014 was RMB3.2604 million.

u The subunit China Electronic Equipment Corporation failed to include 300 thousand shares in the accounting that was obtained in 2013 as an offset to payment for goods owned to it, involving an amount of RMB4.23 million.

u In 2014, the subunit CEC Information irregularly listed and paid for the personal income tax that should be paid by the staff, involving an amount of RMB1.0012 million.

u From 2013 to 2014, the subunit Wuhan Zhongyuan Communications Co., Ltd. had failed to examine strictly the reimbursement for sales expenses, resulting in RMB853,800 false invoices that was listed and paid, among which the amount in 2014 was RMB310 thousand.

u In 2014, 2 enterprises including CEC Information failed to account the revenue of house rent and utilities on accrual basis, resulting in an understatement of RMB764,100 revenue.

(II) Corporate decision-making and management

u By June 2015, 31.48 hectares of industrial land and 29.53 hectares of residential land had been idle because 3 enterprises including the subunit Nanjing CEC Panda LCD Technology Co., Ltd. had had no use plan and failed to obtain the qualification for real estate development in time.

u By the end of 2014, the construction project in which the subunit China Electronic Information Security Technology Research Institute Co., Ltd had planned to invest RMB1.5 billion had progressed slowly. On the planned completion date, only RMB300 million of investment was in place.

u In January 2014, without conducting sufficient demonstration or determining the clear purposes of the increased bond financing, CEC approved the subunit China Electronics Holdings Co., Ltd. to increase its issuing of bonds from RMB1.5 billion to 2.75 billion. By May 2015, RMB999 million of all increased funds had still been idle, resulting in an unnecessary burden of RMB13.8098 million interest.

u From 2011 to 2014, six construction projects of six enterprises including the subunit Nanjing CEC Panda LCD Technology Co., Ltd. had failed to call for bids according to rules, involving a contract amount of RMB3.321 billion, among which the amount of 2014 was RMB2.331 billion.

u From May 2013 to 2014, two enterprises including the subunit CEC Basic Products Equipment Company had irregularly provided RMB180 million of financing to outside entities, among which the amount of 2014 was RMB159 million.

u In violation of the internal control regulations of the company, in 2011, the subunit Nanjing Panda Information Industry Co., Ltd. supplied goods to customers who had large amounts of overdue debt and exceeded the limit of credit insurance. Some payment for goods could not be obtained, resulting in RMB64.0054 million of loss.

u From 2011 to 2012, through signing false purchase agreements and paying advance prepayment, the subunit Nanjing CEC Panda Appliances Co., Ltd. had irregularly lent money to other companies and applied for discounting of bank acceptance bills from 2 non-financial institutions, involving a total amount of RMB59.2088 million, among which RMB10.488 million was faced with the risk of loss.

u From 2011 to 2014, the subunit China Electronic Systems Engineering Corporation had irregularly lent the qualification of construction to other companies and charged these companies RMB95 million management fee, among which the amount of 2014 was RMB31 million.

u In September 2012, when the subunit CEC Information sold the equities of its affiliated enterprises by public auction, CEC Information didnt fully disclose such management information as the time limit of the leasing contract, which led to the auction disputes and RMB23.4443 million was paid to the acquiring company as compensation by means such as rent relief.

u By the end of June 2015, the subunit Nanjing Keruida Electronic Equipment Co., Ltd. had not taken effective measures to clear and recover creditors rights of RMB10 million that had become due in 2008.

u From 2011 to 2014, when cooperating with other companies, the subunit China Zhenhua Electronics Group had not sent accredited financial personnel according to rules, resulting in an investment of RMB35 million receiving no supervision and facing the risk of loss.

u By the end of 2014, CEC had failed to complete the construction of information management and control platform in line with the overall goals of information construction. The data interface settings of accounting software of 2 subunit enterprises had failed to conform to the national standards, 19 enterprises hadnt established data backup centers and 15 enterprises hadnt established information evaluation mechanism.

(III) Development potential

u From 2011 to 2014, the proportion that the investment in science and technology accounted for in the operating revenue of the same year of CEC had failed to achieve the goal set in the "12th Five-Year" plan of the corporation.

u Because of inadequate demonstration in the early stage, the LCD project that the subunit CEC Panda invested and constructed had generated RMB2.927 billion operating loss in total from the projects completion to the end of 2014.

u The industrialized technology research and development project of sapphire crystal used for LED of the subunit Shanghai CEC Zhenhua Crystal Technology Co., Ltd. failed to achieve the expected effects, involving a total loss of RMB43.78 million of total.

(IV) Professional ethics

u From 2011 to 2014, 26 leaders of the headquarters of CEC and 2 affiliated units had irregularly taken RMB3.8717 million bonus in monetary form and in kind, among which the amount of 2014 was RMB2.0469.

u From 2013 to 2014, in violation of the spirits of the Eight Rules of the central government, four units including CEC Panda had purchased cars in excess of the standard and used public funds for traveling and paying for golf expenses, involving an amount of RMB2.4085 million, among which the amount of 2014 was RMB1.4938.

u By June 2015, five people above the middle-level of the subunit Nanjing Jinning Electronics Group Co., Ltd. and other units hadnt returned their holdings of shares of the affiliated companies according to rules, involving a total amount of RMB2.3099 million.

III. Audit Disposal and Rectification

In regard to issues discovered through auditing, the CNAO has issued audit report and released letters of audit decisions in accordance with laws, and CEC will notify the general public of the details of straightening and rectification.

Clues related to issues in violation of laws and disciplines discovered through the audit have been transferred to departments concerned for further investigation.

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