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    CGN   SG1DG3000004

BEST WORLD INTERNATIONAL LIMITED

(CGN)
  Report
Delayed Singapore Stock Exchange  -  04:10 2022-12-08 am EST
1.760 SGD    0.00%
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Financial Statements And Related Announcement :: Auditor's Comments Of Accounts

07/08/2022 | 11:54am EST

BEST WORLD INTERNATIONAL LIMITED

(Company Registration Number: 199006030Z)

(Incorporated in the Republic of Singapore)

QUALIFIED OPINION BY INDEPENDENT AUDITOR ON THE FINANCIAL STATEMENTS FOR THE FINANACIAL YEAR ENED 31 DECEMBER 2021

1. QUALIFIED OPINION

  1. Pursuant to Rule 704(5) of the Listing Manual of the Singapore Exchange Securities Trading Limited, the Board of Directors (the "Board") of Best World International Limited (the "Company" and together with its subsidiaries, the "Group") wishes to announce that the Company's independent auditor, Nexia TS Public Accounting Corporation, has issued a qualified opinion in its Independent Auditor's Report dated 16 June 2022 (the "Independent Auditor's Report") in relation to the Group's financial statements for the financial year ended 31 December 2021 ("FY2021") (the "Financial Statements").
  2. With reference to the Independent Auditor's Report, it is the independent auditor's qualified opinion that, except for the possible effects of the matters described in the Basis for Qualified Opinion section therein, the accompanying consolidated financial statements of the Group and the statement of financial position of the Company are properly drawn up in accordance with the provisions of the Companies Act 1967 and Singapore Financial Reporting Standards (International) (SFRS(I)s) so as to give a true and fair view of the consolidated financial position of the Group and the financial position of the Company as at 31 December 2021, and of the consolidated financial performance, consolidated changes in equity and consolidated cash flows of the Group for the financial year ended on that date.
  3. A copy of the Independent Auditor's Report (pages 97 to 104) and an extract of Note 2.1 to the Financial Statements (pages 112 to 115) are attached to this announcement. Shareholders are advised to read this announcement in conjunction with the Company's Annual Report for FY2021, which will be released on SGXNET and despatched (or disseminated in accordance with applicable laws or regulations) to Shareholders in due course.

2. TRADING SUSPENSION

  1. Shareholders are reminded that the trading suspension of the Company's shares will only be lifted subject to the Company addressing the concerns in the regulatory announcement made by Singapore Exchange Regulation Pte. Ltd. ("SGX RegCo") on 23 July 2020.
  2. The Company remains in consultation with SGX RegCo and will provide an update to shareholders on any material developments in relation to the trading suspension of the Company.

3. DIRECTORS' RESPONSIBILITY STATEMENT

3.1 The Directors (including those who have delegated detailed supervision of the preparation of this announcement) have taken all reasonable care to ensure that the facts stated, and all opinions expressed in this announcement are fair and accurate and that no material facts have been omitted from this announcement, and they jointly and severally accept responsibility accordingly.

1

4. CAUTIONARY STATEMENT

  1. Shareholders are advised to read this announcement and any further announcements by the Company carefully. Shareholders and potential investors should consult their stockbrokers, bankers, solicitors or other professional advisers if they have any doubt about the actions they should take.
  2. Shareholders are further advised that this announcement serves as only an update to shareholders and does not constitute an offer.

By Order of the Board

BEST WORLD INTERNATIONAL LIMITED

Huang Ban Chin

Chief Operating Officer and Executive Director

8 July 2022

2

INDEPENDENT AUDITOR'S REPORT

to the Members of Best World International Limited

Report on the Audit of the Financial Statements

Qualified Opinion

We have audited the financial statements of Best World International Limited (the "Company") and its subsidiary corporations (the "Group"), which comprise the consolidated statement of financial position of the Group and the statement of financial position of the Company as at 31 December 2021, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows of the Group for the financial year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion section of our report, the accompanying consolidated financial statements of the Group and the statement of financial position of the Company are properly drawn up in accordance with the provisions of the Companies Act 1967 (the "Act") and Singapore Financial Reporting Standards (International) (SFRS(I)s) so as to give a true and fair view of the consolidated financial position of the Group and the financial position of the Company as at 31 December 2021 and of the consolidated financial performance, consolidated changes in equity and consolidated cash flows of the Group for the financial year ended on that date.

Basis for Qualified Opinion

The financial statements of Best World International Limited for the financial year ended 31 December 2020 were audited by an independent auditor (the "predecessor auditor") other than Nexia TS Public Accounting Corporation. The independent auditor's opinion on the consolidated financial statements of the Group and the statement of financial position and the statement of changes in equity of the Company for the financial year ended 31 December 2020 were disclaimed by the predecessor auditor in respect of the areas relating to the following:

  1. Relationship with the Group's import agents and marketing agent
    The predecessor auditor was not able to obtain sufficient audit evidence to establish the business rationale for the arrangements between the Group, its import agents and marketing agent, or the exact nature of the relationship between the Group and these entities. Due to a lack of evidence available to the predecessor auditor, they were unable to consider all the relevant facts and circumstances to assess if the entities are related to the Group or whether the financial results of these entities should be included in the consolidated financial statements of the Group for the prior financial years. The predecessor auditor was also unable to determine whether these arrangements are in compliance with the applicable laws and regulations or if there will be any consequential impact to the financial statements.

97

Report on the Audit of the Financial Statements (cont'd)

Basis for Qualified Opinion (cont'd)

  1. Relationship with the Group's import agents and marketing agent (cont'd)
    Notwithstanding that the Group has terminated the arrangements with its import agents and marketing agent during the financial years 2019 and 2020 respectively, as disclosed in Note 2.1(b) to the financial statements, we were unable to carry out any alternative audit procedures to obtain sufficient and appropriate audit evidence to determine whether adjustments or disclosures, if any, are required to be made to the opening balances, and whether there will be possible effects on the comparability of current financial year's figures with corresponding financial year's figures.
  2. Classification of payments to promotional companies
    Due to lack of documentary evidence available to the predecessor auditor, they were unable to ascertain the breakdown between other payments to sales representatives and the service fee retained by the third-party promotional companies for services rendered by the sales representatives. Other payments to sales representatives could fall as consideration payable to customers under SFRS(I) 15 Revenue from Contracts with Customers and is to be recorded against revenue instead of operating expenses. Accordingly, the predecessor auditor was unable to determine if revenue and the related expenses were appropriately classified, presented and disclosed in the profit or loss for the prior financial year.

As disclosed in Note 2.1(c) to the financial statements, the sales representatives of the franchisees do not have any employment relationships with the Group, therefore, the Group is not obliged to make any payments to the sales representatives. The predecessor auditor's disclaimer opinion on classification of the payments to third-party promotional companies did not impact the Group's net profit for the prior financial year. Consequently, the current financial year's figures may not be entirely comparable to prior financial year's figures. We were unable to carry out any alternative audit procedures to obtain sufficient and appropriate audit evidence to determine whether there will be possible effects on the comparability of current year's figures with corresponding figures.

Other Information

Management is responsible for the other information. The other information comprises the information included in the annual report but does not include the financial statements and our auditor's report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

98

Report on the Audit of the Financial Statements (cont'd)

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements for the financial year ended 31 December 2021. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

  1. Business model in China [Refer to Note 2.1(a)]
    The legal opinion from Merits and Tree (Beijing) Law Office ("M&T") dated 22 July 2020 indicated potential risk areas relating to the Group's franchise business model in China, which was based on the facts between 1 June 2018 to 31 December 2019. To mitigate the risks of violation, the Group has made changes to their business process under the franchise model and engaged M&T to review the revised business process. Based on the supplemental legal opinion dated 30 May 2021, the risk of the Group's China operation violating the relevant Direct Selling and ChuanXiao Laws is remote or relatively low.
    The management had also engaged another legal firm, Dentons Beijing Office, part of the global law firm Dentons ("Dentons"), to review their franchise model for the period up to 19 May 2021. Based on the legal opinion dated 19 May 2021, Dentons is of the opinion that the Group's current franchise model is not similar to the ChuanXiao model as features of the franchise model distinguish it from the ChuanXiao model.
    Both legal opinions have also opined that the Group has not been administratively penalised by any China authorities for engaging in Direct Selling or ChuanXiao activities based on the searches of the Enterprise Credit Website of the State Administration for Market Regulation as of the date of audited financial statements. Further, the risks of violation will become remote with the passage of time as Article 36 of Law of the People Republic of China on Administrative Penalties ("Article 36") provides that the competent authorities will not launch an investigation of an unlawful act that does not involve a citizen's life and health security or financial security after two years of its commission. M&T have further clarified that if the potential non-compliance risk exists during the period from 1 June 2018 to 31 December 2019, and ended on 31 December 2019, 31 December 2019 will be the commencement date of the two years period. If any non-compliance risk ended on 31 December 2019 and is not discovered within the two years of its commission, an administrative penalty will not be imposed unless it involves citizens' life and health security or financial security and causes harmful consequences.
    Under the franchise business model, the Group has engaged third-party promotional companies to handle commission payments to sales representatives of the franchisees and related services disclosed in Note 2.1(c) to the financial statements. M&T and Dentons had reviewed the service agreements of SDIC Human Resources Service Co., Ltd. ("SDIC") and opined that the contracts were legal and valid and such services provided by SDIC do not violate the provisions of law and the franchise model of the Group.
    With reference to the legal opinions as mentioned above, the Company believes that the non- compliance risk of the Group's business model in China with regards to the direct selling and ChuanXiao laws continues to be remote and that the possibility of the China authority commissioning any penalty on the Group would be remote.
    We focused on this area due to complexities and judgements involved in determining the risks of violation of the Group's franchise business model with the Direct Selling and ChuanXiao Laws, potential tax implications and penalties, in any, which would be administered by competent authorities.

99

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Best World International Limited published this content on 08 July 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 July 2022 15:53:01 UTC.


ę Publicnow 2022
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Sales 2021 580 M 428 M 428 M
Net income 2021 154 M 113 M 113 M
Net cash 2021 475 M 350 M 350 M
P/E ratio 2021 4,81x
Yield 2021 -
Capitalization 769 M 567 M 567 M
EV / Sales 2020 0,74x
EV / Sales 2021 0,46x
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