Audit Report
Zandar Certified Public Accountants LLP
Audit Report No. ZDCPA Audit No. 260000165
To all shareholders of Shenzhen Walden Materials Co., Ltd.:
1. Audit Opinion
We have audited the financial statements of Shenzhen Walden Materials Co., Ltd. (hereinafter referred to as "Walden Materials"), including the consolidated and parent company balance sheets as of December 31, 2025, the consolidated and parent company income statements, consolidated and parent company cash flow statements, consolidated and parent company statements of changes in equity, and related notes to the financial statements. In our opinion, the attached financial statements present fairly, in all material respects, the financial position of Walden Materials as of December 31, 2025, and its financial performance and cash flows for the year then ended in accordance with the accounting standards for enterprises.
2. Basis for Audit Opinion
We conducted our audit in accordance with the auditing standards for certified public accountants in China. The section "Responsibilities of Certified Public Accountants for the Audit of Financial Statements" in this report further explains our responsibilities under these standards. We are independent of Walden Materials in accordance with the independence standards for certified public accountants in China and have fulfilled our other ethical responsibilities. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
3. Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and we do not express a separate opinion on these matters.
We determined the following matters to be key audit matters to communicate in our audit report:
- Revenue Recognition
- Goodwill Impairment
(1) Revenue Recognition
Description of the Matter
For detailed information disclosure, please refer to Note 3, (34), and Note 5, Note 42. Walden Materials focuses on the electronic communication and new energy power industries, specifically divided into five business categories: electronic materials, communication cables, power, new energy vehicles, and wind power generation. The consolidated operating revenue for 2025 was RMB 8,450.66 million, an increase of 22.00% year-on-year. Revenue is recognized when control of the goods is transferred to the customer, making it one of Walden Materials' key performance indicators. Therefore, we identified whether revenue was recognized in the appropriate accounting period and whether there were any material misstatements as a key audit matter.
Audit Response
Our significant audit procedures regarding revenue recognition included:
- Understanding and evaluating the design and operating effectiveness of key internal controls related to revenue recognition by management;
- Performing analytical procedures on revenue and gross profit by product type to assess whether there were any unusual fluctuations in the current period's revenue;
- Selecting samples from sales revenue accounting records and shipping records, and verifying them against related contracts, logistics information, and delivery receipts, while paying attention to post-period collections to review the completeness, authenticity, and accuracy of revenue recognition;
- Selecting samples to perform confirmation procedures to verify the current period's sales amount and the ending accounts receivable balance;
- Selecting samples of sales records before and after the balance sheet date to perform cutoff testing, verifying customer delivery records, logistics information, and other supporting documents to check whether they were recorded in the correct accounting period.