Audit Report
RSM China Audit No. [2026]518Z0570
To all shareholders of Shenzhen Xingyuan Material Technology Co., Ltd.:
1. Audit Opinion
We have audited the financial statements of Shenzhen Xingyuan Material Technology Co., Ltd. (hereinafter referred to as "Xingyuan Material"), 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. We believe that the attached financial statements are prepared in accordance with the provisions of enterprise accounting standards in all material respects and fairly reflect the financial position of Xingyuan Material as of December 31, 2025, as well as the operating results and cash flows for the year 2025.
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 the audit report further elaborates on our responsibilities under these standards. In accordance with the Code of Ethics for Certified Public Accountants in China and the independence standards applicable to the audit of financial statements of public interest entities, we are independent of Xingyuan Material and have complied with the independence standards. We believe that the audit evidence we 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 period. These matters were addressed in the context of our audit of the financial statements as a whole and in forming our audit opinion, and we do not express a separate opinion on these matters.
(1) Revenue Recognition
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Description of the Matter For detailed information disclosure, please refer to the financial statements "Note 3, 26" and "Note 5, 40". In 2025, Xingyuan Material's operating revenue was 4.125 billion RMB. The revenue recognition method for domestic sales requires that the following conditions be met: the product has been dispatched and accepted/signed by the customer, at which point control of the product is transferred, and revenue is recognized. For export sales, revenue recognition requires that the company has completed customs procedures as per the contract, has received payment or obtained payment vouchers, and that the major risks and rewards of ownership have been transferred, along with the legal ownership of the product. The accuracy of the revenue recognition timing directly affects Xingyuan Material's operating revenue and profit for 2025, and since operating revenue is one of the company's key performance indicators, there is an inherent risk of management manipulating the timing of revenue recognition to achieve specific objectives or expectations. Therefore, we identified revenue recognition as a key audit matter.
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Audit Response Our procedures related to revenue recognition included:
- (1) Understanding, evaluating, and testing the design and operational effectiveness of key internal controls related to revenue recognition.
- (2) Selecting samples of sales contracts, identifying clauses related to the transfer of control of goods, and evaluating whether the timing of revenue recognition complies with enterprise accounting standards.
- (3) Performing analytical procedures on revenue and gross profit based on product types and customer situations, and comparing with industry gross profit margins to assess the reasonableness of changes in revenue and gross profit margin for the period.
- (4) Selecting samples from operating revenue to verify sales contracts or orders, sales delivery notes, and delivery business vouchers.
- (5) For export sales, reconciling sales records with export customs declarations, sales invoices, and other export sales documents to verify the authenticity of export revenue.
- (6) Sampling customer confirmations regarding current sales and year-end balances in conjunction with accounts receivable audits.
- (7) Checking for significant returns or refunds after the period and performing cutoff tests on revenue to confirm whether revenue is recognized in the correct accounting period.