As A-share companies wind down their responses to 2025 annual report inquiry letters, exchanges continue to intensify their penetrating oversight. According to preliminary statistics, as of August 16, the Shanghai, Shenzhen, and Beijing stock exchanges had issued inquiry letters regarding 2025 annual reports to 438 listed companies. From revenue authenticity and going-concern capabilities to fund occupation and internal control deficiencies, the scope of exchange inquiries continues to expand, pushing listed companies to accelerate the shift from formal compliance to substantive effectiveness in information disclosure.
Tech Board and Risk-Warning Firms Draw Extra Attention
Standardized information disclosure serves as the core foundation of listed companies' market value management and a vital pillar for high-quality capital market development. Under the Administrative Measures for Information Disclosure of Listed Companies, periodic reports must be truthful, accurate, complete, timely, and fair, with strict prohibitions on false records, misleading statements, and material omissions. While inquiry letters represent a key self-regulatory tool for exchanges and do not in themselves constitute findings of violations, the sharpness and depth of the questions directly reveal regulatory priorities.
According to preliminary statistics, as of August 16, the three exchanges had dispatched inquiry letters for 2025 annual reports to 438 companies. Data from iFinD shows that the first batch of response announcements appeared in April, with the pace accelerating noticeably in May, while June and July marked the peak response period. As of August 16, 25 companies have disclosed their response announcements in August. By board distribution, Shanghai-listed companies have been the primary recipients, with 201 on the SSE main board, 138 on the Science and Technology Innovation Board (STAR Market), 39 on the SZSE main board, 9 on ChiNext, and 51 on the BSE. Notably, STAR Market companies account for roughly 30% of the total, reflecting the board's distinct characteristics, where issues such as capitalization of R&D expenditures, revenue recognition for customized business, and earnings volatility draw particular scrutiny from exchanges.
Risk-warning companies remain a top priority. Among the 438 companies, 46 are classified as ST or *ST. Most face delisting risk warnings, going-concern uncertainties, or adverse audit opinions on internal controls. Exchanges have systematically questioned the compliance of their performance data, the authenticity of net assets, and the commercial substance of related transactions, consistently reinforcing risk disclosure responsibilities. By industry, pharmaceuticals and biotech, electronic equipment, machinery, and information technology are the most frequently queried sectors. Photovoltaic, new energy, textile and apparel, and consumer retail companies have also received inquiries, with issues like declining performance, asset impairment, and liquidity strain stemming from industry downturns clearly reflected in the inquiry letters.
Zeroing in on Financial Authenticity
A review of hundreds of inquiry letters reveals that while each company faces specific questions, regulatory focus is highly concentrated, with financial compliance being the foremost priority. Meanwhile, financial data is now closely linked with business substance, as inquiries extend into industry logic, business models, and transactional reality, demonstrating a marked increase in professionalism and precision. Revenue recognition authenticity and compliance is the most frequently raised issue. Exchanges routinely require quantitative explanations for changes in core financial metrics, detailed disclosure of top-five customers and suppliers, including names, related-party relationships, transaction amounts, and payment status, as well as clarifications on whether revenue is recognized under the gross or net method and whether there are any instances of cross-period or year-end revenue acceleration.
The "gross method versus net method" debate has surfaced repeatedly. Some companies with weak core businesses have added trading or custom computing card operations, using low-margin, high-volume revenue to boost scale. For example, ST Xintong reported 2025 revenue of 311 million yuan, of which 164 million yuan, or 52.90% of total annual revenue, came from its newly launched custom computing card business. However, the gross margin for this segment was only 1.50%, and in the first quarter of 2026, it further declined to -1.12%, even as total revenue surged 1003.79% to 459 million yuan. The SSE has demanded explanations on whether the gross method inappropriately replaced the net method and whether related-party relationships exist between customers and suppliers.
Going-concern capability remains a recurring area of intense questioning, particularly for companies with negative net profits, barely adequate revenue, or net assets approaching delisting thresholds. For instance, BSE-listed Ningxin New Materials reported current liabilities exceeding current assets by 392 million yuan as of end-2025, a full-year net loss of 500 million yuan, a weighted average return on net assets of -136.29%, and net assets per share attributable to shareholders of just 1.67 yuan. The auditor issued an unqualified opinion with a material uncertainty section related to going concern. The BSE has asked the company to quantitatively analyze its solvency and going-concern capability over the next 12 months and to clearly state whether it triggers any mandatory financial delisting indicators.
Beyond core financial and operational issues, internal control deficiencies and fund occupation have also become focal points. ST Zhonglu, for example, saw its 2025 financial report receive a qualified opinion and its internal controls receive an adverse opinion after its controlling shareholder occupied 12.48 million yuan in non-operating funds, with some fund flows unable to be traced. The SSE has requested itemized disclosure of each occupation, including timing, reasons, fund flows and purposes, related accounting treatments, and whether any accounting error corrections are involved. Clearly, internal control compliance has become a critical benchmark for regulators in assessing the credibility of listed companies' financial reporting. Furthermore, the "gatekeeper" responsibilities of intermediaries have been further reinforced, with exchanges generally requiring annual audit accountants, sponsor institutions, or independent directors to issue clear opinions with detailed explanations of verification procedures and audit evidence obtained.
From Formal Compliance to Substantive Penetration
A defining feature of this year's inquiry process is the regulatory focus on deeply verifying whether annual report disclosures are truthful, accurate, and complete, with a distinctly stronger "penetrating supervision" approach. This heightened rigor is underpinned by institutional support. The revised Administrative Measures for Information Disclosure of Listed Companies took effect in July 2025, making the 2025 annual report the first subject to the new rules. The revised measures strengthen risk disclosure requirements, establish mechanisms for deferred and exempted disclosures, clarify the audit committee's supervisory role in periodic report preparation, and add requirements on information disclosure "outsourcing" practices. Revisions to annual and semi-annual report formats and compilation rules have also enhanced the disclosure of key financial indicators and significant new non-core business information while reducing redundancy, thereby improving transparency and readability to help investors make more comprehensive assessments.
On August 14, the China Securities Regulatory Commission (CSRC) released its 2025 Annual Financial Report Accounting Supervision Report. According to the report, as of April 30, 2026, among 5,517 companies that disclosed annual reports, 214 received modified audit opinions, including 109 unqualified opinions with emphasis of matter or going-concern paragraphs, 87 qualified opinions, and 18 disclaimers of opinion. The CSRC's sample review of 2025 annual reports identified accounting treatment or disclosure errors in areas such as revenue, financial instruments, long-term equity investments and business combinations, asset impairment, and R&D expenditures.
From formal review to substantive penetration, the hundreds of inquiry letters represent both a concentrated diagnostic of listed companies' 2025 operational performance and a vivid illustration of improving capital market regulatory effectiveness. Overall, this year's annual report inquiries reflect three clear orientations: a problem-oriented approach focusing on financial authenticity and disclosure quality, with key examinations of revenue recognition and asset impairment; a risk-oriented approach intensifying scrutiny of ST companies, loss-making firms, and those with modified opinions to prevent risk; and a responsibility-oriented approach strengthening the gatekeeping duties of intermediaries. Industry experts generally believe that as regulators maintain a high-pressure stance on disclosure supervision, continuously optimize inquiry mechanisms, and reinforce intermediary responsibilities, the quality and credibility of listed company disclosures will continue to improve, further solidifying the information foundation for high-quality capital market development.
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