The China Securities Regulatory Commission has legally punished the audit firm Zhongxing Caiguanghua in the Dongxu Group.

Recently, the Hebei Securities Regulatory Bureau imposed administrative penalties on Zhongxing Cai Guanghua for negligence in reviewing Dongxu Group, Dongxu Optoelectronics, and Dongxu Blue Skys annual reports, as well as stock and bond issuances. According to the Securities Law of the People's Republic of China, a total of 24.27723 million yuan was confiscated, with 3,258.49 million yuan of business income from Zhongxing Cai Guanghua during the period involved, and a fine of 21,018.74 million yuan was imposed. Additionally, 6 responsible individuals were fined between 10,000 and 430,000 yuan, and two of them were also banned from the securities market for 10 and 5 years, respectively. In June 2025, the Hebei and Shenzhen Securities Regulatory Bureaus imposed administrative penalties on Dongxu Group's bond issuer, listed company Dongxu Optoelectronics, and Dongxu Blue Sky for financial fraud, fraudulent issuance, and illegal use of funds. Zhongxing Cai Guanghua has been providing audit services to Dongxu Group, Dongxu Optoelectronics, and Dongxu Blue Sky for several years, and the Hebei Securities Regulatory Bureau led an investigation into the illegal issues related to the audit services provided by Zhongxing Cai Guanghua to the three companies. The investigation found that Zhongxing Cai Guanghua did not fulfill its duties diligently while providing audit services to Dongxu Group, Dongxu Optoelectronics, and Dongxu Blue Sky. There were major deficiencies in key audit procedures such as cash funds, sales and receivables cycles, procurement and payment cycles, and significant clues such as unusually large prepayments and the use of internal approval forms for paying suppliers were not investigated further with professional suspicion and examination. Zhongxing Cai Guanghua issued unqualified audit reports for Dongxu Group, Dongxu Optoelectronics, and Dongxu Blue Sky's annual reports from 2015 to 2018. However, qualified audit reports were issued for Dongxu Groups 2019 annual report, Dongxu Optoelectronics' annual reports from 2019 to 2020, and Dongxu Blue Skys 2019 and 2020 annual reports with emphasis sections. Statements affirming the authenticity, accuracy, and completeness of financial data were issued for Dongxu Group's "18 Dongxu 01" and "18 Dongxu 02" bond issuances, as well as Dongxu Optoelectronics' non-public stock issuance in 2017. However, the documents produced and issued by Zhongxing Cai Guanghua contained false information. The actions of Zhongxing Cai Guanghua violated Articles 173 and 163 of the Securities Law of 2005, constituting the circumstances described in Articles 223 and 213(3) of the Securities Law of 2005, regarding negligence and the issuance of documents with false information. The Hebei Securities Regulatory Bureau confiscated all the illegal business income of 32.5849 million yuan from Zhongxing Cai Guanghua and imposed a fine of 21018.74 million yuan. During the investigation and handling of the case, the China Securities Regulatory Commission and the Ministry of Finance enhanced communication, collaborated closely, shared information, and strengthened their efforts. In determining the punishment, the Hebei Securities Regulatory Bureau confiscated all the business income of Zhongxing Cai Guanghua and fined them accordingly. Considering that the Ministry of Finance had already imposed an administrative penalty on Zhongxing Cai Guanghua to temporarily suspend their business operations, which included the securities field, the Hebei Securities Regulatory Bureau did not impose any additional administrative penalties on them to suspend their securities service business. Next, I will continue to resolutely implement the regulatory requirements with sharp teeth, emphasizing strict supervision and management, and further increase efforts to investigate and crack down on financial fraud in the capital market and negligence of audit institutions. This will ensure the stable operation of the capital market, protect the legitimate rights and interests of investors, and provide strong support for the high-quality development of the capital market. This article is excerpted from the "CSRC Releases" WeChat public account; edited by GMTEight: Li Fo.