*ST Yushun's third change of auditing firm: Proposed appointment of an accounting firm's professional liability insurance raises compliance concerns

With less than 40 days before the annual report is disclosed, *ST Yushun (002289) is once again at a crossroads regarding changes to its audit firm. On March 24, 2026, *ST Yushun announced that it plans to appoint Shenzhen Xuanda Certified Public Accountants (General Partnership) (hereinafter referred to as “Xuanda”) as the audit institution for its 2025 annual financial report and its internal control audit institution. This is the company’s third arrangement for an audit firm change since October 2025. In October 2025, it planned to reappoint Shenzhen Zhengyi Certified Public Accountants; in January 2026, it planned to replace it with Huaxing Certified Public Accountants; however, the latter was rejected at the extraordinary shareholders’ meeting on February 12.

Compensation limits or failure to meet statutory standards

*ST Yushun’s announcement shows that Xuanda “has purchased professional liability insurance and accrued professional risk funds. As of the end of 2024, it has cumulatively accrued a professional risk fund of RMB 1.4916 million and has purchased professional liability insurance with a cumulative compensation limit of RMB 10 million and above. The accrual of the professional risk fund and the purchase of professional liability insurance comply with relevant regulations.”

However, this disclosure is clearly at odds with current regulatory requirements.

According to Article 9 of the Provisional Measures on Professional Liability Insurance for Accounting Firms jointly issued by the Ministry of Finance and the former China Insurance Regulatory Commission in 2015—namely the “Provisional Measures on Professional Liability Insurance for Accounting Firms” (Cai Kuai〔2015〕No. 13): accounting firms engaging in high-risk audit services such as those for listed companies and financial enterprises must have a cumulative compensation limit no lower than the higher amount calculated by either of the following two methods: (1) the product of RMB 1 million and the number of partners; (2) RMB 50 million.

Xuanda currently has 3 partners. Under formula (1), this equals RMB 3 million; under formula (2), it is RMB 50 million. Taking the higher value, the statutory minimum should be RMB 50 million. But the announcement disclosed that the “compensation limit is over RMB 10 million,” which differs significantly from the statutory standard of RMB 50 million.

It is worth noting that this rule has been in effect for more than ten years since 2015. In October 2025, the Ministry of Finance issued the “Provisional Measures on Professional Liability Insurance for Accounting Firms (Draft for Comments on Amendments),” proposing to further raise the lower limit of the cumulative compensation limit for accounting firms providing securities services from RMB 50 million to RMB 100 million. The solicitation of comments closed on November 27, 2025. This indicates that the rulemaking work for the new requirements has essentially been completed, and formal release is only a matter of time.

If Xuanda’s professional liability insurance compensation limit is at the RMB 10 million level, the compliance of its engagement in auditing businesses of listed companies will face major doubts. According to regulations, an accounting firm that does not meet the requirements for professional liability insurance may be determined as not having the statutory conditions to undertake audit business for listed companies.

Audit personnel previously worked at

a punished accounting firm

Apart from doubts about Xuanda’s compliance with professional liability insurance, core members of the audit team have also become a focus of market attention.

According to the announcement, the core team for this audit includes project partner Li Wenqiang, the signed registered CPA Fan Yu, and the project quality control reviewer Wu Yun. *ST Yushun did not disclose detailed resumes of its core personnel in this announcement, but public information shows that Li Wenqiang and Fan Yu previously worked at multiple accounting firms.

In the “Announcement on Proposed Change of Accounting Firm” disclosed by the NEEQ-listed company Boyi Co., Ltd. (873231, which has since been delisted) on November 12, 2021, it was disclosed that Li Wenqiang began engaging in audit work at Shenzhen Zhixin Certified Public Accountants in 2001, became a practicing registered accountant on December 31, 2014, began engaging in securities-related business in July 2015, and previously worked at Zhongzhun Certified Public Accountants (Special General Partnership) (hereinafter referred to as “Zhongzhun”), which has qualifications for securities and futures-related business. He held positions including project manager and partner. Fan Yu began engaging in securities-related business in November 2015 and previously worked at Zhongzhun, Zhongshen Zhonghuan Certified Public Accountants (Special General Partnership), and Lixin Zhonglian Certified Public Accountants (Special General Partnership), all of which have qualifications for securities and futures-related business. He held positions including project manager, senior manager, and so on.

What draws attention is that in January 2025, the CSRC issued an administrative penalty decision. Zhongzhun was ordered to make corrections, had business income of RMB 5.5660 million confiscated, was fined RMB 22.2642 million, and was suspended from engaging in securities services for 3 months, because the audit project for Zijin Pharmaceutical’s annual reports from 2013 to 2020 involved multiple illegal facts.

Since 2024, regulatory authorities’ penalties against intermediary institutions have expanded from “economic penalties” to “qualification penalties.” Under Article 213, Paragraph 3 of the Securities Law, if a securities service institution fails to perform its duties diligently and conscientiously and the circumstances are serious, it may be ordered to suspend or prohibit it from engaging in securities services. This also means that the core audit team personnel whom *ST Yushun intends to hire this time previously worked at a punished accounting firm.

Industry insiders point out that professional liability insurance compliance by audit institutions is a regulatory red line. If it does not meet the requirements, even if the shareholders’ meeting approves it, regulators may intervene. For *ST companies, the stability of the audit institution and audit quality are directly related to whether the annual report can be disclosed on time and whether there is a delisting risk.

Does Xuanda have the statutory conditions to take on audit business for listed companies? When the company hired Xuanda, did it consider the relevant risks? Why did the March 24 announcement not disclose detailed resumes of Xuanda’s core personnel? With the above questions, the reporter contacted *ST Yushun in writing, but as of the time this article was published, the company had not responded.

Reporter Liu Yang