The China Securities Regulatory Commission (CSRC) has issued a prior notice of administrative penalties against Suzhou Qingyue Optoelectronic Technology Co., Ltd. (Qingyue Technology, stock code: 688496.SH) for systemic financial fraud and fraudulent issuance. The company, which successfully listed on the STAR Market on December 28, 2022, now faces mandatory delisting by the Shanghai Stock Exchange for major violations within just over three years. The CSRC found that Qingyue Technology inflated profits by over 100 million yuan across its 2021, 2022, and first-half 2023 reports through methods including fictitious sales, understated impairments, and concealed tax refunds.
The profit manipulation spanned the IPO application period (2021) and key performance commitment periods post-listing (2022 to H1 2023). The methods involved traditional but prohibited tactics like "fictitious sales" and "period-shifting." The due diligence and verification procedures by lead underwriter representatives Liu Shijie and Zhao Ruimei of Gf Securities, and signing accountants Xu Peimei and Gu Xin of Lixin Certified Public Accountants, are suspected to have significant deficiencies in validating the authenticity of core revenue items.
In 2021, a critical period for its IPO, Qingyue Technology inflated total profits by 10.6549 million yuan through methods like "fictitious chip sales." As a manufacturer of display panels, its core business involves producing PMOLED, e-paper modules, and silicon-based OLED displays. In the normal supply chain, display driver chips are essential raw materials procured externally. Panel makers typically consume these chips, integrating them with substrates before selling modules. However, Qingyue's 2021 financials curiously recorded substantial profits from "chip sales." Trading core raw materials for significant profits, enough to impact IPO profitability thresholds, without a reasonable commercial basis, strongly suggests fabricated "circular trading" or inflated revenue. Lixin's accountants, Xu and Gu, listed "revenue recognition" as a key audit matter in the 2022 audit report, claiming procedures like sample checks of sales contracts and confirmations. Yet, faced with sudden, high-margin "chip sales" outside the main business, auditors allegedly relied excessively on internally generated documents without performing more substantive verification.
According to auditing standards, auditors must maintain professional skepticism for unusual, one-off transactions with significant profit impact. Had Xu and Gu conducted basic interviews on commercial substance or traced logistics, the fraud might have been uncovered. As primary due diligence leads, Gf Securities' Liu and Zhao endorsed the reasonableness of this anomalous revenue in the prospectus, a contradiction that appears to violate their duty of care and prudent verification under securities regulations.
Beyond inflating revenue, Qingyue manipulated profits by intentionally understating inventory write-downs and accounts receivable impairment losses. At the end of 2023, inventory surged 37.29% year-on-year to 407 million yuan, but the provision for inventory write-down was only 15.5362 million yuan. During the fraud period from 2021 to H1 2023, the company consistently understated impairments to inflate assets and profits.
The upstream panel industry is characterized by rapid technological iteration, short product lifecycles, and swift price declines. Amid a global consumer electronics downturn in 2022-2023, Qingyue's PMOLED prices fell irreversibly, and its e-paper business, heavily reliant on a single client, saw gross margins plummet to 2.28%. With falling end-product prices, reduced client orders, and significant returns (22.6212 million yuan, or 3.42% of annual revenue) in 2023, the net realizable value of the large year-end inventory was likely far below its book cost.
Lixin's accountants Xu and Gu, facing high inventory and shrinking demand, are suspected of failing to adequately challenge management's impairment testing models. Auditors should have verified post-period sales invoices, assessed aging stock, and adjusted estimated selling prices based on high return rates. However, Qingyue's inflated profits in 2022 amounted to 104.58% of its disclosed total profit, indicating the actual profit was a loss. Management allegedly manipulated internal calculations by inflating estimated prices and underestimating costs to avoid millions in impairment losses. During their ongoing supervision, Gf Securities' Liu and Zhao, observing the severe disconnect between industry downturn, collapsing margins, and surging inventory, seemingly failed to identify this major misstatement risk through independent spot checks, market price inquiries, or peer analysis.
Beyond direct accounting fraud, Qingyue's serious violations in tax compliance and revenue recognition for trading activities further exposed weak internal controls and intentional profit manipulation. Lixin's accountants and Gf Securities' representatives are suspected of having significant oversights in evidence gathering and professional judgment.
According to the CSRC notice, in 2023, Qingyue failed to timely disclose a requirement to repay 44.4199 million yuan in export tax refunds, an amount equivalent to 79.74% of its 2022 audited net profit. The company later downplayed this, citing "non-standard documentation" at a subsidiary, but the scale of the repayment suggests serious issues with approximately 340 million yuan in export sales. Customs and tax authorities typically pursue such recoveries for severe compliance failures, such as false export declarations or misclassification to fraudulently claim refunds. This fundamentally undermines the authenticity of Qingyue's previously reported overseas revenue.
Lixin's accountants, Xu and Gu, stated in the 2022 audit report that export revenue was recognized upon customs declaration or delivery, checking supporting documents. However, for such a large portion of overseas business with critical tax flaws, they seemingly failed to effectively cross-verify data with customs and tax systems. When the tax authority demanded repayment in 2023, it constituted a contingent liability and a subsequent event requiring adjustment and disclosure, which both auditors and sponsors failed to ensure.
Additionally, a regulatory warning revealed that in Q3 2023, Qingyue improperly recognized revenue for new CTP+OLED trading activities using the gross method instead of the net method, requiring a correction in July 2024 that reduced both revenue and cost by 13.6676 million yuan. Under accounting standards, the distinction hinges on whether the company controls the goods before transfer. Qingyue's new trading business essentially acted as an intermediary. Under pressure from a 52.98% year-on-year decline in core PMOLED revenue in 2023, management had a strong motive to use the gross method to inflate revenue and mask core business deterioration. Liu and Zhao, reviewing quarterly reports, seemingly lacked the necessary financial sensitivity to correct this obvious misstatement despite suddenly surging, low-margin trading revenue.
Accurate identification and disclosure of related parties and transactions are crucial for preventing tunneling and off-balance-sheet financing. Qingyue not only concealed a complex related-party network in its prospectus but later engaged in undisclosed related-party transactions and was deeply involved in a major contract fraud case affecting another listed company.
According to a 2025 investigation, between May and June 2023, Qingyue signed a construction contract and paid 3.63 million yuan to Zaozhuang Hongyuan Construction Engineering Company, a firm controlled by close relatives of Qingyue's actual controller and chairman, Gao Yudi. This clear related-party transaction was deliberately omitted from the 2023 interim report. Lixin's accountants, in auditing internal controls or reviewing the interim report, are suspected of failing to rigorously execute background checks on new major suppliers or contractors.
More alarming is the involvement of Qingyue's key equity investment, Zaozhuang Ruinuo Electronic Technology Co., Ltd., in a 186 million yuan contract fraud case. In March 2024, listed company Feikai Materials disclosed that its subsidiary was defrauded in a triangular trade scheme involving Ruinuo. By tracing the equity structure, Qingyue's hidden role is exposed. Qingyue and Yadu (International Holdings) are the largest shareholders of Ruinuo, each holding 33.33%. Crucially, Qingyue's actual controller, Gao Yudi, served as a director of Ruinuo. After the fraud case erupted and regulators inquired, Qingyue issued a clarification distancing itself, claiming no involvement in decision-making or implementation.
This defense appears inconsistent. Cumulative transactions worth hundreds of millions and over 202 million yuan in overdue payables at Ruinuo constitute a major operational and financial event. Gao Yudi, as a appointed director, claiming ignorance of such critical matters potentially violates directors' fiduciary duties. Furthermore, on December 30, 2023, just as Feikai Materials discovered the fund occupation and prepared to report the case, Qingyue's board approved an 8.48 million yuan capital increase in the insolvent Ruinuo, raising its stake from 20% to 33.33%. Injecting funds on the eve of a major fraud explosion raises suspicions of using IPO proceeds to cover losses, tunneling benefits to related parties, or providing disguised financial support.
For Gf Securities' Liu and Zhao, conducting thorough due diligence on the issuer's major investments and equity-accounted entities was an absolute duty during the IPO and ongoing supervision. Ruinuo, a core long-term equity investment holding 33.33%, directly impacts Qingyue's investment returns and balance sheet health. The sponsor team is suspected of failing to conduct on-site visits to Ruinuo or to penetrate and verify the authenticity of its massive purchase and sales contracts. Basic checks on supply chain logistics and fund flows could have revealed the likely lack of commercial substance in the triangular trade. Lixin's accountants Xu and Gu, auditing Qingyue's "long-term equity investments," seemingly overlooked the requirement to test for impairment regarding Ruinuo, which carried 202 million yuan in unpaid debt. The intermediaries' failure in substantive review allowed this potential "financial landmine" to remain hidden.
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