XCEC(SH:600777) Zheng Quan Zhi Xing·2025-07-04 16:33Core Viewpoint - The board of Shandong Xinchao Energy Co., Ltd. expresses disagreement with the audit firm's inability to provide an opinion on the internal control audit report, asserting that they have provided sufficient documentation and cooperation during the audit process [1][2][17]. Group 1: Internal Control Audit Report - The audit firm, Lixin, issued an internal control audit report for the fiscal year 2024, stating it could not express an opinion due to insufficient evidence regarding oil and gas asset management, employee compensation, and royalty payments [1][2]. - The board claims to have provided 70 batches of documents totaling 14,553 files and facilitated 50 interviews to support the audit process [2][3]. Group 2: Oil and Gas Assets - The oil and gas assets in question are primarily held by the company's U.S. subsidiary in Texas, with accounting practices aligned with U.S. regulations and industry standards [2][3]. - The company has provided detailed asset lists and records based on the audit firm's requests, including information that deviates from typical industry practices [3][4]. Group 3: Employee Compensation - The board highlights that the employee compensation structure is market-driven, with total compensation representing only 5.03% of total revenue, and the average revenue per employee is 30.74 million RMB [11][12]. - The company has faced challenges in providing detailed employee compensation data due to privacy concerns and legal restrictions in the U.S. [10][11]. Group 4: Revenue Recognition - The revenue in question pertains to net income generated from oil and gas extraction and sales by the U.S. subsidiary, with total sales revenue reduced by royalties owed to mineral rights owners [12][13]. - The audit firm sent 17 confirmation letters to clients, covering 100% of the subsidiary's oil and gas sales revenue, with all responses received [12][13]. Group 5: Internal Control Deficiencies - The audit report identified significant deficiencies in internal controls related to the management of subsidiaries, particularly following revisions to the subsidiary management system [17][20]. - The board argues that the revisions do not weaken control over subsidiaries and comply with relevant laws and regulations [20]. Group 6: Future Measures - The company plans to enhance its internal control systems and conduct self-assessments to address the audit firm's concerns and improve compliance with regulatory requirements [20].