Analysis of Seven Non-standard Annual Reports: Continued Operations and Internal Controls as Key Concerns

As A-share listed companies sequentially disclose their 2025 annual reports, market attention has turned to the quality of annual reports from A-share listed firms.

According to Wind data, as of 6:00 PM on April 7, 1,285 listed companies had disclosed their 2025 annual reports to the public, and 1,278 listed companies had received audit reports issued by auditing institutions with unqualified (standard unmodified) opinions, accounting for approximately 99.46%. In addition, seven listed companies were issued unqualified opinions with an emphasis-of-matter paragraph.

Insiders say that the main reasons auditors issue non-standard audit reports include: there is material uncertainty about the entity’s ability to continue as a going concern; the auditor cannot determine the extent to which the results of an investigation into the case affect the financial statements; the audit scope is restricted; and internal control has material defects. When some companies are issued non-standard audit reports, it reflects problems in those companies’ finances, operations, internal control, and other areas. After receiving non-standard audit reports, listed companies need to take proactive steps, carry out rectification in accordance with relevant requirements, and prevent non-standard audit reports from being issued again in the next fiscal year.

Seven companies issued non-standard audit opinions

A reporter from China Securities Journal reviewed and found that, to date, seven listed companies—Vanke A, ST Changming, ST EasyGo, *ST Huicheng, Tengyun Shares, ST Yinjing, and *ST Bagang—have been issued unqualified opinions with an emphasis-of-matter paragraph.

Judging by their performance, the listed companies that received the above non-standard audit opinions generally posted poor results in 2025.

For ST Changming’s 2025 annual report, the firm Grant Thornton (Special General Partnership) issued a financial statement audit report with an unqualified opinion that includes an emphasis-of-matter paragraph. Grant Thornton (Special General Partnership) believes that, as of December 31, 2025, the company has certain debts that have already come due and have not been repaid. As of December 31, 2025, the company has reached arrangements with the vast majority of financial institutions and creditors for debt extensions, interest rate reductions, restructuring, and settlements. As of December 31, 2025, the company has pending lawsuits, arbitration, and enforcement cases in which it is named as a defendant, leading to some assets being frozen or sealed. Currently, some of the cases involving litigation have reached settlements, while the remaining cases are actively being negotiated. The contents of this emphasis-of-matter paragraph do not affect the audit opinion already issued.

ST Changming’s 2025 annual report shows that, during the reporting period, the company realized operating revenue of approximately RMB 6.19B, down 72.78% year over year; it recorded a net loss attributable to shareholders of listed companies of approximately RMB -8.3B, continuing the loss on a year-over-year basis.

Regarding Tengyun Shares’ 2025 annual report, Zhongxi Certified Public Accountants (Special General Partnership) issued a financial statement audit report with an unqualified opinion that includes an emphasis-of-matter paragraph. Zhongxi Certified Public Accountants (Special General Partnership) reminds users of the financial statements to pay attention that the company provided joint-and-several liability guarantees for two loans totaling RMB 34.00 million for its associate, Shaanxi Hanyin Huanglong Gold Mine Co., Ltd., from Shaanxi Hanyin Rural Commercial Bank Co., Ltd. At the same time, the company’s indirect controlling shareholder, Yi Ke Zhengrun Investment Group Co., Ltd., unconditionally provided a counter-guarantee to the company for the above guarantee, and pledged 30% of the equity interest in Hanyin Huanglong as counter-guarantee. If Hanyin Huanglong is unable to repay the above-mentioned bank debts that have come due in a timely manner, the company may be required to assume joint-and-several liability, potentially leading to adverse impacts on the company.

In 2025, Tengyun Shares achieved operating revenue of approximately RMB 524 million, up 2.58% year over year; it recorded a net loss attributable to shareholders of listed companies of RMB 15.7349 million, worsening year over year from profit to loss.

Going-concern ability questioned

A further review by a reporter from China Securities Journal found that the going-concern ability of multiple listed companies—including *ST Bagang, ST EasyGo, and *ST Huicheng—has been called into question.

Some companies have suffered consecutive losses; in 2025 they incurred huge losses, and the accounting firms issued financial statement audit reports with unqualified opinions that include a matter related to going concern.

For *ST Bagang’s annual report, Tianjian Certified Public Accountants (Special General Partnership) stated that, as of December 31, 2025, the shareholders’ equity attributable to the parent company was approximately RMB -1.79 billion, and the company incurred a net loss of approximately RMB 1.88 billion in 2025, with losses continuing for four consecutive years. These matters or circumstances indicate the existence of material uncertainties that may give rise to significant doubts about the company’s ability to continue as a going concern.

Some companies, due to the magnitude of their borrowings and the presence of large litigation projects, have been issued non-standard audit opinions by accounting firms.

For ST EasyGo’s 2025 annual report, BDO China Certified Public Accountants (Special General Partnership) said that as of December 31, 2025, the company’s cash and cash equivalents balance was RMB 2.27B; the combined balance of short-term borrowings and long-term borrowings due within one year was RMB 27.81B; and accounts payable totaling RMB 8.82B were involved in litigation. These matters or circumstances, together with other matters shown in the notes to the financial statements, indicate the existence of material uncertainties that may give rise to significant doubts about the company’s ability to continue as a going concern.

Other listed companies have also suffered consecutive losses, with high asset-liability ratios; combined with issues such as facing pre-restructuring, they have been issued non-standard audit opinions.

For *ST Huicheng’s 2025 annual report, Dah Sing Certified Public Accountants (Special General Partnership) issued a financial statement audit report with an unqualified opinion that includes a matter related to going concern. Dah Sing Certified Public Accountants (Special General Partnership) stated that, as described in the notes to the financial statements regarding going concern, the company has suffered consecutive losses in recent years. As of December 31, 2025, shareholders’ equity attributable to the parent company was RMB 15.99 million, current liabilities were about RMB 239 million higher than current assets, and the asset-liability ratio was 92.71%. In August 2025, a creditor, Chongqing Lvfa Asset Management Co., Ltd., applied to the Fifth Intermediate People’s Court of Chongqing for a pre-restructuring on the grounds that the company could not repay debts due and had clearly insufficient repayment capability but had restructuring value. These matters or circumstances indicate the existence of material uncertainties that may give rise to significant doubts about the company’s ability to continue as a going concern.

Experts recommend that listed companies actively carry out rectification

Worth mentioning is that, based on prior years, after some companies received non-standard audit opinions, they had previously publicly stated that they did not agree with the non-standard audit opinions issued by the accounting firm.

For example, in the case of *ST Xinchao, on the evening of July 4, 2025, after *ST Xinchao provided ongoing materials in an attempt to reverse the outcome of the audit opinion that the audit institution could not express an opinion, and failed to do so, it delayed the disclosure of its 2024 annual report. According to the announcement of *ST Xinchao, BDO China Certified Public Accountants (Special General Partnership) issued an “audit report” expressing that it could not express an opinion on the company’s 2024 annual financial report and internal control.

In its announcement, the board of *ST Xinchao stated that it respects BDO’s work, but has different views on the contents and grounds involved in BDO’s inability to express an opinion. During the audit of the 2024 annual financial report and internal control, the company actively cooperated with BDO’s audit requirements, including but not limited to providing pre-audit materials covering 70 batches with 14,553 documents, organizing 50 interviews with management teams and relevant personnel inside and outside the country to cooperate, and providing necessary working conditions for the auditors’ on-site sampling and verification of 376 wells. In particular, after April 30, the company’s management supplemented and provided materials nine times in total, attempting to change the audit results.

Bai Wenxi, Deputy Secretary-General of the China Enterprise Capital Alliance, told a reporter from China Securities Journal that the main reasons listed companies’ annual reports receive non-standard audit opinions from audit institutions include: doubts about going-concern ability, the significant impact of an ongoing case investigation, limited audit scope, and internal control defects. Some companies are judged by audit institutions to have material uncertainties in their going-concern ability due to issues such as consecutive losses and a tight capital chain. Some companies have internal control defects or refuse to provide necessary information, leading to restricted audit scope. In addition, some companies are under investigation for alleged illegal and irregular conduct, and the audit institution cannot determine the extent to which the investigation results affect the company’s financial statements. Listed companies should comply with regulatory requirements, promptly disclose the specific contents and reasons of non-standard audit opinions, and develop detailed rectification measures.