Source: https://annualreport.singulus.de/en/2017/weitere-angaben-2/additional-information/auditors-report.html
Timestamp: 2019-03-25 06:45:47
Document Index: 628804896

Matched Legal Cases: ['Art. 315', 'Art. 322', 'Art. 317', 'Art. 10', 'Art. 5', 'Art 315', 'Art. 317', 'Art. 315', 'Art. 10', 'Art. 11']

To the Singulus Technologies AG, Kahl am Main
Opinion regarding the audit of the consolidated financial statements and the Status Report
We audited the consolidated financial statements of the SINGULUS TECHNOLOGIES AG, Kahl am Main, (hereinafter Singulus AG or the “Company”) and its subsidiaries (the Group) – consisting of the consolidated balance sheet as of December 31, 2017, the consolidated profit-and-loss statement, the consolidated statement of income and accumulated earn, the consolidated change in shareholders’ equity and the consolidated cash flow statement for the business year from January 1 until December 31, 2017 as well as the Group’s annex, including a summary of significant accounting principles. In addition, we audited the combined Status Report of the Singulus Technologies Group and the Singulus Technologies AG, Kahl am Main, (hereafter the “Status Report”) for the business year from January 1 until December 31, 2017.
According to our assessment due to the insights gained from the audit
the included consolidated financial statements are pursuant to all material requirements of the IFRS, as applicable in the EU, and are pursuant to the supplementary applicable German legal requirements pursuant to Art. 315e Para. 1 HGB and with regards to these regulations represent a true and fair picture of the actual conditions of the asset and financial situation of the Group as of December 31, 2017 as well as of the earnings situation for the business year from January 1 until December 31, 2017 and
the included Status Report represents a true and fair picture of the situation of the Group. In all material aspects the Status Report conforms with the consolidated financial statements, conforms with German legal provisions and accurately describes the opportunities and risks of future developments.
Pursuant to Art. 322 Para. 3 Sent. 1 HGB we declare that our audit has not resulted in any objections with respect to the
compliance of the consolidated financial accounts and the Status Report.
Basis for the auditor’s opinion
We performed our audit of the consolidated financial statements and of the Status Report in accordance with Art. 317 HGB and the EU Audit Reform (No. 537/2014) taking into account the stated German principles of proper auditing approved by the Institut der Wirtschaftsprüfer (Institute of Auditors, IDW). Our responsibilities according to these provisions and principles are described in details in the section “Responsibility of the auditor for the audit of the consolidated financial statements and the Status Report” included in our auditor’s opinion. We are independent of the Group’s companies in accordance with the legal European and German commercial law and professional regulations and we fulfilled our other German professional duties in accordance with these requirements. In addition, we declare pursuant to Art. 10 Para. 2 Letter f) EU Audit Reform, that we have not provided any prohibited non-audit services pursuant to Art. 5 Para. EU Audit Reform. We are convinced that the obtained audit evidence is sufficient and adequate to serve as the basis for our audit opinion with regards to the consolidated financial statements and the Status Report.
Key auditing matters with respect to the audit of the consolidated financial accounts
Key auditing matters are such matters, which according to our best judgment are most relevant for our auditing of the consolidated financial statements for the business year from January 1 to December 31, 2017. These matters were taken into consideration in connection with our audit of the consolidated financial statements as a whole and upon forming our auditor’s opinion; we are not providing an individual auditor’s opinion with regards to these matters.
Please refer to the Group’s annex No. 4.5 and 4.16 for the applied accounting and valuation principles as well as the applied assumptions. For statements regarding the amount of goodwill please refer to the Group’s annex under No. 12.
RISK TO THE FINANCIAL STATEMENTS
As of December 31, 2017, the goodwill amounted to EUR 6.7 million and thus corresponds to 33.2 % of the consolidated shareholders’ value. The goodwill exclusively concerns the business division “Solar” and is reviewed annually as well as event-relatedly, if applicable, for an impairment at this level. For this, the book value is compared with the achievable amount of the business division Solar. If the book value is higher than the achievable value, a write-off is required. For the impairment review, the company primarily determines the use value and compares this with the respective book value. The use value is determined on the basis of a valuation model on the basis of a discounted cash flow procedure. Valuation date for the impairment review is December 31, 2017. The impairment review is complex and based on several subjective assumptions. Amongst others, this includes the expected development of sales and earnings including the assumption of increasing market share of the global new machine business for selected production machines in the business segment Solar in the next five years, the assumed long-term growth rates and the discount rate used.
As a result of the impairment review, the company did not find any requirements to write-off any goodwill. However, the sensitivity calculations of the company with respect to the use value yielded that a shortfall of the planned sales by more than 21.4 % or a shortfall of the assumed EBIT margin by more than 5.7 %-points would result in a write-off of goodwill on the achievable amount. There is a risk for the financial statements that an existing impairment of goodwill at the balance sheet date was not identified.
There is also a risk that the statements in the annex regarding the goodwill are not appropriate.
OUR PROCEEDINGS OF THE AUDIT
Together with our valuation experts, amongst others, we have assessed the appropriateness of material assumptions as well as the calculation method of the company with respect to the use value. For this, we have discussed with managers responsible for the budget the expected trends in sales and earnings including the assumption of increasing market share for the global new machine business for selected production machines of the business division Solar as well as the assumed long-term growth rates. Furthermore, we reconciled other internally available forecasts, e.g. for tax purposes, with the three-year budgets drawn up by the Executive Board and approved by the Supervisory Board as well as with an externally drawn up draft of a report pursuant to IDW S 6. Moreover, we have assessed the consistency of assumptions with external market assessments and the market capitalization of the Singulus Technologies AG.
Furthermore, we have reviewed the previous quality of forecasts of the company by comparing the forecasts of previous business years with the actually realized results and analyzed any deviations. Since a change in the discount rate can have a significant impact on the result of the impairment review, we have compared the underlying assumptions for the discount rate and the parameters, in particular the risk-free interest rate, the market risk premium and the beta factor, with our own assumptions and publicly available data.
To safeguard the arithmetic correctness of the implemented valuation model, we reconstructed the calculations of the company on the basis of selected risk-oriented elements.
To take into account the existing forecast uncertainty of the impairment test, we analyzed the realizable amount in the course of our own sensitivity analysis with respect to potential changes in the earnings trends (in particular sales and EBIT margin), the discount rate and the long-term growth rate and by calculating alternative scenarios and comparing these values with the company’s results.
Finally, we have made an assessment whether the value of the goodwill stated in the annex is appropriate. This also included the assessment of the appropriateness of the information in the annex with regards to sensitivities in case of changes in essential assumptions used for the valuation.
The calculation method, which has been used for the impairment test of the goodwill within the Solar segment, is appropriate and is in compliance with the applicable valuation principles. The assumptions and parameters of the company, on which the valuation is based, are balanced overall. The information in the annex regarding the valuation of the goodwill is appropriate.
Accounting principles of production orders
For the applied accounting and valuation principles, please refer to the Group’s annex No. 4.4. Information about the amount of reported sales from production orders and accounts receivable and payable for production orders can be found in the Group’s annex under No. 9.
RISKS TO THE FINANCIAL STATEMENTS
The revenue from production orders for the business year 2017 amount to EUR 65.7 million. As of December 31, 2017, the receivables from production orders including prepayments received amount to EUR 9.5 million and the liabilities from production orders to EUR 12.1 million.
The Singulus AG recognizes long-term production orders according to the percentage-of-completion method. Under the percentage-of-completion method revenues and the partial earnings are realized according to the percentage of completion of the order. Pursuant to IAS 11 it is a requirement that the results from the order can be estimated reliably. In case overall a loss is expected for the order, this loss has to be recognized to the full extent. The accounting of production orders is complex and subject to assumptions. In particular, there is uncertainty of the estimates with regards to the overall estimated order expenses as well as the determination of the degree of completion, which are based on continuously updated budgets (cost-to-cost method).
There is a risk for the financial statements that the revenue and earnings from the production orders and the respective accounts receivable and payable are incorrectly assigned to the business years and that pending losses from production orders are not recognized in a timely manner.
OUR PROCEEDINGS FOR THE AUDIT
On the basis of our understanding of the processes we have assessed the design, implementation and effectiveness of identified internal controls in particular with respect to the correct assignment of costs to the individual orders.
In addition, in the course of our audit we reviewed the accounting of production orders selected under risk-oriented aspects. This included the assessment of significant subjective decisions, such as the estimation of still pending and lagging expenses, with respect to their appropriateness. For this, we discussed the selected production orders including existing risks (e.g. legal risks or warrantee risks) with the Executive Board, the management of Marketing & Sales as well as with responsible staff, we analyzed their ongoing order budgeting and the respective degree of completion as well as related documents (e.g. contracts, acceptance protocols). Moreover, for the already completed and for still pending orders, we compared the incurred actual costs with the original budgets in order to review the general quality of planning. On the basis of the previously gained insights, we assessed the appropriate determination of the respective degree of completion as well as the balance sheet and income statement recognition.
The proceedings of the Singulus AG for the accounting of production orders is appropriate. The assumptions, on which the accounting of production orders is based, are appropriate.
Information in the annex regarding matters in connection with the company’s going concern
For this information please refer to the Group’s annex under annotation 1 General Information and in the Combined Status Report under the annotations in the chapter Economic Report, The Position of Singulus Technologies in the Solar Market, in the chapter Course of Business of the Singulus Technologies Group, Liquidity Management, in the chapter Forecast Report, the Outlook for the Business Years 2018 and 2019 and in the chapter Risk Report, Financial Risks, Sales markets and Project Risks as well as the Summary of the Risks and Opportunities.
THE RISK FOR THE FINANCIAL STATEMENTS
At the time of the balance sheet report, the Singulus AG had negative equity pursuant to the commercial-law financial statements. According to the current, from the company’s budgets derived, liquidity plans, the company has sufficient liquid funds for the business years 2018 and 2019 to safeguard the business activities in orders to prevent a bankruptcy law insolvency. Consequently, the Executive Board has drawn up the consolidated financial statements pursuant to the going-concern assumption.
The economic development of the Singulus AG and thus of the Singulus Group is mainly impacted by the fact, that the already contracted and expected major projects with a large Chinese customer as well as other major project orders will be commissioned and progressed as scheduled. This also includes the timely receipt of payments of planned prepayments.
In addition, the financing commitments from banks and insurance companies for the required guarantee lines have to be expanded significantly in the next business year, so that the additional new orders, on which the planned course of business is based, can be financed accordingly. For the existing guarantee lines the collateral is intended to be reduced or swapped. Furthermore, the company is negotiating new guarantees with substantially reduced collateral.
The assessment of the legal representatives regarding the going-concern activities and the provided information in the Group’s annex and the combined Status Report are based on several essential assumptions for the drawing up of the liquidity plans for the business years 2018 and 2019. For example, these assumptions include the planned progression of already contracted or still expected major orders and the point in time of the related cash in- and outflows, in particular the receipt of prepayments and the extent of cash deposits as well as the consideration of available financing opportunities.
We have reviewed the company’s planning and the resulting liquidity planning for the years 2018 and 2019 as well as the process of drawing up these plans. Amongst others, for this we have inspected the relevant internally analysis and documents provided by external experts as well as interviewed the legal representatives. We have analyzed the proceedings of the budgeting process and the appropriateness of the essential assumptions, which were made by the legal representatives and stated in external documents. In this context, we have also assessed the competence, capabilities and objectivity of the external consultants. In addition, we have inspected the protocols of the Executive Board meetings and the documents circulated to the Supervisory Board.
Furthermore, we have reviewed the plausibility of the planning’s key assumptions and compared the planning with the already contracted agreements including their essential contractual conditions as well as with the financing agreements. We have recalculated the liquidity planning including the scenario analysis and reviewed the consistency of the company’s planning. In addition, we have reviewed whether the current development in 2018 is within the planned course of business.
Furthermore, we have assessed whether the information in the Group’s annex and in the combined Status Report regarding the circumstances in connection with the going-concern assumption is provided in detail to a sufficient extent and if it is appropriate.
Overall, the assumptions used for the company’s planning and the liquidity planning and thus the legal representatives’ assumption of the company’s going-concern are justifiable. The information provided in the Group’s annex and the Status Report with respect to the circumstances in connection with the going-concern assumption of the company are provided in detail to a sufficient extent and appropriately.
The legal representatives are responsible for the other information provided. The other information includes the Annual Report except for the audited consolidated financial statements and the Status Report as well as our auditor’s opinion.
Our auditor’s opinion for the consolidated financial statements and the Status Report do not include the other information and accordingly we are neither providing any opinion nor any other form of an auditor’s opinion on this matter.
In connection with our audit, we are obligated to read the other information and to assess whether the other information
represent any discrepancies to the Group’s financial statements, the Status Report or any information obtained by us in the course of the audit or
appears to be materially incorrect representation.
Responsibilities of the legal representatives and of the Supervisory Board for the Group’s financial statements and the Status Report
The legal representatives are responsible for drawing up the consolidated financial statements, which in all essential aspects are compliant to the IFRS, as applicable in the EU and the supplementary legal German provisions pursuant to Art 315e Para. 1 HGB and that the consolidated financial statements subject to these regulations provide a fair and true picture of the asset, financial and earnings situation of the Group. Furthermore, the legal representatives are responsible for the internal controlling they have deemed necessary, in order to ensure drawing up the consolidated financial accounts are absent of any – intentional or unintentional – misrepresentations.
Upon drawing up the consolidated financial statement the legal representatives are responsible for the assessment of the capability of the Group to continue as a going concern. In addition, they are responsible for providing any information in connection with the going-concern assumption, if applicable. Furthermore, they have the responsibility to draw up the financial accounts on the basis of the accounting principles as a going concern, unless it is intended to liquidate the Group or to stop operations or if there is no realistic alternative.
In addition, the legal representatives are responsible for drawing up the Status Report, which overall provides a true and fair view of situation of the Group and is in compliance with all essential aspects of the Group’s financial statements, which complies with the German legal provisions and which correctly describes the opportunities and risks of the future course of business. Furthermore, the legal representatives are responsible for the provisions and measures (systems), which they have deemed necessary, to enable drawing up a Status Report in compliance with the applicable German legal regulations and to provide sufficiently suitable audit evidence for the statements made in the Status Report.
The Supervisory Board is responsible for the monitoring of the accounting processes of the Group for drawing up the consolidated financial statements and the Status Report.
Responsibility of the auditor for the audit of the consolidated financial statements and the Status Report
It is our goal to gain reasonable assurance whether the consolidated financial statements as a whole are devoid of any – intended or unintended - essential misrepresentations and whether the Status Report provides an overall true and fair view of the situation of the Group as well as being in compliance with all essential aspects of the consolidated financial statements as well as the insights obtained in the course of the audit, is compliant with German legal regulations and accurately depicts the opportunities and risks of the future course of business as well as to issue an auditor’s opinion, which includes our audit opinion on the consolidated financial statements and the Status Report.
Reasonable assurance is a high degree of certainty, but no guarantee, that an audit in accordance with Art. 317 HGB and the EU Audit Reform in consideration of the German principles of proper auditing stipulated by the Institut of Wirtschaftsprüfer (IDW) will always uncover essential misrepresentations. Misrepresentations can result from violations or incorrectness and are deemed material, if it could be reasonably expected that individually or in total they could have an impact on addressees’ economic decisions based on these consolidated financial statements and the Status Report.
During the course of the audit we are using our best judgment and maintain a critical approach. In addition
we identify and review the risks of essential – intended or unintended – misrepresentations in the consolidated financial statements and in the Status Report, plan and implement audit tasks as a response to these risks and receive audit evidence, which is sufficient and suitable, to form the basis for our auditor’s report. The risk that essential misrepresentations are not identified, is higher for violations than for incorrectness, since violations can include fraudulent collusion, forgeries, intended incompleteness, misleading representations and the circumvention of internal controls.
we gain insights about the internal control systems relevant for the auditing of the consolidated financial statements and the provisions and measures relevant for the audit of the Status Report, in order to plan auditing tasks, which are appropriate subject to the prevalent circumstances, but not with the goal to provide an auditing opinion on the efficacy of these systems.
we assess the appropriateness of the accounting principles applies by the legal representatives as well as the appropriateness of the estimated values and with this resulting information provided by the legal representatives.
we draw conclusions about the appropriateness of the accounting principles of the going-concern assumptions applied by the legal representatives as well as, on the basis of the audit evidence provided, whether a material uncertainty exists in connection with the events or circumstances, which could raise reasonable doubt about the Group’s capacity to continue as a going concern. If we come to the conclusion that there is material uncertainty, we are obligated to draw attention to the resulting information in the consolidated financial statements and in the Status Report in the auditor’s report or, if these statements are not appropriate, to modify our respective auditor’s opinion accordingly. We draw our conclusions on the basis of the audit evidence provided up to the date of the auditor’s report. However, future events and circumstances can result in the Group’s inability to continue as a going concern.
we assess the overall representation, the structure and the content of the consolidated financial statements including the information as well as whether the consolidated financial statements depict the underlying course of business and events in a way that the consolidated financial statements provide a true and fair picture of the asset, financial and earnings situation of the Group pursuant to IFRS, as applicable in the EU, and supplemented by the applicable German legal provisions pursuant to Art. 315e Para. 1 HGB.
we gather sufficiently suitable audit evidence for the accounting information of the company or the business activities within the Group, in order to provide an auditing opinion on the consolidated financial statements and the Status Report. We are responsible for the guidance, monitoring and implementation of the Group’s auditing. We are solely responsible for our auditor’s opinions.
we assess the conformity of the Status Report to the consolidated financial statements, its conformity to the law and its depicted view regarding the situation of the company.
we perform auditing tasks on the forward-looking information provided in the Status Report by the legal representatives. In this context, on the basis of sufficiently suitable audit evidence we reconstruct the material assumptions, on which the forward-looking information made by the legal representatives, are based and assess the appropriate deduction of the forward-looking information from these assumptions. We do not provide an independent auditing opinion on the forwardlooking information and the underlying assumptions. There is a material inevitable risk, that the future events deviate significantly from the forward-looking information.
Amongst others, we discuss with the responsible staff the planned extent and schedule of the audit as well as important results of the audit including potential shortcomings of the internal monitoring system identified by us in the course of our audit.
We issue a statement to the persons responsible for the monitoring, that we have complied with the relevant requirements of independence and discuss with them all relationships and other aspects, which can be reasonably assumed, that they have an impact on our independence and provide the precautionary measures taken.
From the matters we discussed with the persons responsible for the monitoring, we determine those, which were most relevant for the auditing of the consolidated financial statements during the current period under review, and which are thus particularly important auditing aspects. We describe these subjects in the auditor’s report unless laws or other legal provisions preclude the public disclosure of the matter.
Other legal and other regulatory requirements
Other information pursuant to Art. 10 EU Audit Reform
We were appointed as auditors by the Annual General Meeting on June 20, 2017. We were commissioned by the Supervisory of the Singulus AG on July 6, 2017. We have continuously been acting as auditors of the Singulus AG since the business year 2012.
We assert that the opinions included in this auditor’s report are consistent with the additional report to the audit committee pursuant to Art. 11 EU Audit Reform (Audit Report).
The auditor responsible for this audit is Yaman Pürsün.
Frankfurt am Main, March 19, 2018