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Chongqing Xincheng Hangrui Technology Co., Ltd.
Audit Report
Zhonghuan Shen Zi (2026) No. 1100147
To the Shareholders of Shaoyang Vik Hydraulics Co., Ltd.:
I. Audit Opinion
We have audited the financial statements of Chongqing Xincheng Hangrui Technology Co., Ltd. (hereinafter referred to as "Xincheng Hangrui"), which comprise the consolidated and company balance sheets as of December 31, 2025, and December 31, 2024, the consolidated and company income statements, the consolidated and company cash flow statements, and the consolidated and company statements of changes in shareholders' equity for the years 2025 and 2024, as well as notes to the financial statements.
In our opinion, the accompanying financial statements have been prepared in all material respects in accordance with the Accounting Standards for Business Enterprises and fairly present the consolidated and company financial position of Xincheng Hangrui as of December 31, 2025, and December 31, 2024, as well as the consolidated and company operating results and cash flows for the years 2025 and 2024.
II. Basis for Audit Opinion
We conducted our audit in accordance with the Auditing Standards for Certified Public Accountants of China. Our responsibilities under these standards are further described in the "Certified Public Accountant's Responsibilities for the Audit of the Financial Statements" section of the audit report. We are independent of Xincheng Hangrui in accordance with the Code of Ethics for Certified Public Accountants of 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.
III. 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 of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, we do not provide a separate opinion on these matters. We have determined that the following matters for the years 2025 and 2024 are key audit matters to be communicated in the audit report.
(I) Revenue Recognition
| Key Audit Matter | How the Matter Was Addressed in the Audit |
|---|---|
| Xincheng Hangrui is primarily engaged in the R&D, production, and sales of metal forgings and castings. Operating revenue for 2025 and 2024 was 386.5691 million yuan and 349.5886 million yuan, respectively, with revenue growth rates of 10.58% and -1.42%. As revenue is a key performance indicator for Xincheng Hangrui, there is an inherent risk that management may manipulate the timing of revenue recognition to achieve specific targets. Therefore, we identified revenue recognition as a key audit matter. Refer to Note IV, 26 "Revenue" and Note VI, 35 "Operating Revenue and Operating Costs" for details. | We performed the following audit procedures: 1. Understood the business model and revenue recognition policy, examined key terms of sales contracts, and evaluated the appropriateness of the revenue recognition policy and related accounting policies; 2. Evaluated and tested the design and operating effectiveness of key internal controls related to revenue recognition; 3. Sampled supporting documents for sales revenue recognition, such as sales contracts, outbound delivery orders, shipping documents, customer receipts, and acceptance notes; 4. Conducted confirmations for major customer transaction amounts and accounts receivable balances in conjunction with accounts receivable audits; 5. Performed cutoff tests for revenue recognized before and after the balance sheet date, verifying supporting documents to determine if the revenue recognition period was appropriate; 6. Performed analytical review procedures on revenue growth and gross margin fluctuations, comparing them with industry peers to assess the reasonableness of revenue recognition; 7. Conducted site visits to major customers to verify the authenticity and accuracy of sales revenue and check for any related party relationships; 8. Performed post-period collection checks and analysis for major customer accounts receivable to verify the authenticity of revenue. |