Decision on taking warning letter measures against Zhongshen Zhonghuan Certified Public Accountants (Special General Partnership) and Certified Public Accountants Hu Yongbo and Pan Jiayong

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Regarding the decision to issue warning letters to Zhongshen Zhonghuan Certified Public Accountants (Special General Partnership) and certified public accountants Hu Yongbo and Pan Jiayong

Zhongshen Zhonghuan Certified Public Accountants (Special General Partnership), Hu Yongbo, Pan Jiayong:

After investigation, you had the following issues in the audit of the financial statements and the internal control audit projects for Luxi Technology Co., Ltd. (Document No.: Zhonghuan Audit [2025] 0300257; Zhonghuan Audit [2025] 0300258):

I. Inadequate execution of control testing procedures

First, you did not perform walkthrough tests and control tests on important key controls such as inventory counts and fixed-asset counts. Second, you failed to notice situations where the results of certain walkthrough tests were abnormal.

The above circumstances do not comply with the provisions of the 《Chinese Certified Public Accountant Auditing Standards No. 1211—Identification and Assessment of Risks of Material Misstatement》（2022）Article 31, the 《Chinese Certified Public Accountant Auditing Standards No. 1131—Audit Working Papers》（2022）Article 10, and the 《Chinese Certified Public Accountant Auditing Standards No. 1301—Audit Evidence》（2022）Article 10.

II. Inadequate execution of confirmation (letter-sending) procedures

First, no sampling process for confirmations was observed; second, you did not verify the addresses for some returned letters against the addresses used for the letter dispatch; third, you did not pay attention to certain matters that did not match in some returned letters; fourth, you did not perform alternative testing for certain matters that were not returned.

The above circumstances do not comply with the provisions of the 《Chinese Certified Public Accountant Auditing Standards No. 1131—Audit Working Papers》（2022）Article 10 and the 《Chinese Certified Public Accountant Auditing Standards No. 1312—Confirmations》（2010）Articles 14, 19, and 21.

III. Inadequate execution of external investment audit procedures

First, you did not analyze the reasonableness of certain overvalued investments; second, you did not analyze the sufficiency of the basis for revenue recognition of certain investment projects; third, you failed to notice abnormal situations of certain investment projects.

The above circumstances do not comply with the provisions of the 《Chinese Certified Public Accountant Auditing Standards No. 1301—Audit Evidence》（2022）Article 10.

IV. Inadequate audit procedures for fixed assets and construction in progress

First, you did not analyze the overall contract costs and unit costs for certain engineering projects, nor did you perform a comparative analysis of unit costs with those of companies in the same industry; second, when inspecting fixed assets of certain subsidiaries, the sample selection ratio was low, and you did not record the sampling process; third, you did not conduct related analysis and explanations for the return of large amounts of funds between certain subsidiaries and the suppliers of engineering and equipment.

The above circumstances do not comply with the provisions of the 《Chinese Certified Public Accountant Auditing Standards No. 1131—Audit Working Papers》（2022）Article 10, the 《Chinese Certified Public Accountant Auditing Standards No. 1301—Audit Evidence》（2022）Article 10, and the 《Chinese Certified Public Accountant Auditing Standards No. 1314—Audit Sampling》（2010）Article 16.

V. Inadequate audit procedures for prepaid accounts and accounts payable

First, you did not see purchase contracts with certain related parties, and you did not analyze the fairness of the purchase prices; second, you failed to notice that the actual payers of certain advance payments were inconsistent with the records in the ledger.

The above circumstances do not comply with the provisions of the 《Chinese Certified Public Accountant Auditing Standards No. 1301—Audit Evidence》（2022）Article 10 and the 《Chinese Certified Public Accountant Auditing Standards No. 1323—Related Parties》（2022）Articles 24 and 25.

VI. Inadequate execution of revenue audit procedures

First, you did not provide explanations of the business models for certain businesses, nor did you analyze them in conjunction with the business models of companies in the same industry; second, you did not see the original source documents related to the revenue cutoff testing of certain subsidiaries.

The above circumstances do not comply with the provisions of the 《Chinese Certified Public Accountant Auditing Standards No. 1131—Audit Working Papers》（2022）Article 10 and the 《Chinese Certified Public Accountant Auditing Standards No. 1301—Audit Evidence》（2022）Article 10.

VII. Inadequate execution of cost audit procedures

The costs of certain subsidiaries were not subjected to category-based analysis, and you did not perform review analysis of the cost calculation and the cost carryover process.

The above circumstances do not comply with the provisions of the 《Chinese Certified Public Accountant Auditing Standards No. 1301—Audit Evidence》（2022）Article 10.

VIII. Inadequate execution of the work of using experts

You did not perform review and analysis of the reasonableness of key assumptions and parameters used in the experts’ work.

The above circumstances do not comply with the provisions of the 《Chinese Certified Public Accountant Auditing Standards No. 1301—Audit Evidence》（2022）Articles 11 and 12.

IX. Errors and omissions in audit working papers

The preparation of some audit working papers lacks logic, and there are record errors and omissions.

The above circumstances do not comply with the provisions of the 《Chinese Certified Public Accountant Auditing Standards No. 1131—Audit Working Papers》（2022）Article 10.

The above conduct violates requirements related to the Chinese Certified Public Accountant practice standards and other relevant requirements, and violates the provisions of Articles 45 and 46 of the 《Measures for the Administration of Information Disclosure by Listed Companies》（CSRC Order No. 182）. Hu Yongbo and Pan Jiayong, as the signing certified public accountants, should bear the primary responsibility for the above related conduct. Pursuant to Article 55 of the 《Measures for the Administration of Information Disclosure by Listed Companies》（CSRC Order No. 182）, the bureau has decided to take supervisory and regulatory measures against you to issue a warning letter, and to record the matter in the integrity file for the securities and futures market. You shall strictly comply with the relevant laws and regulations and the provisions of the Chinese Certified Public Accountant practice standards, promptly strengthen quality control, and ensure audit practice quality. You shall submit a rectification report to this bureau within 15 working days from the date of receipt of this decision.

If you do not agree with these supervisory and regulatory measures, you may, within 60 days from the date of receipt of this decision, submit an application for administrative reconsideration to the China Securities Regulatory Commission, or you may, within 6 months from the date of receipt of this decision, file a lawsuit in a people’s court with jurisdiction. During the period of reconsideration and litigation, the above supervisory and regulatory measures shall not stop being enforced.

Zhejiang CSRC

March 16, 2026

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