Report of the Audit Committee of the Board of Directors of Lukang Pharmaceutical on the performance of supervision responsibilities by the accounting firm in 2025
The Audit Committee of the Board of Directors of Shandong Lukang Pharmaceutical Co., Ltd.
Report on the accounting firm’s performance of supervisory responsibilities in 2025
In accordance with the Company Law of the People's Republic of China, the Securities Law of the People's Republic of China, the Code of Governance of Listed Companies, the Administrative Measures for the Selection of Accounting Firms by State-owned Enterprises and Listed Companies, the Reminder on the Selection of Accounting Firms for Listed Companies, the Articles of Association, and other regulations and requirements, the Audit Committee of the Board of Directors (hereinafter referred to as the "Audit Committee") adheres to the principle of diligence and responsibility, fulfills its duties conscientiously, and performs its duties conscientiously. We have performed our supervisory duties in 2018 and the situation is reported as follows:
1. Basic situation of accounting firms in 2025
Organization name: Hexin Accounting Firm (Special General Partnership)
Date of establishment: Established in December 1987 (conversion into special general partnership on April 23, 2013) Organizational form: special general partnership
Registered address: 7th Floor, Salt Industry Building, No. 59 Wenhua East Road, Jinan City
Chief Partner: Wang Hui
Hexin Accounting Firm (Special General Partnership) (hereinafter referred to as "Hexin") has a total audited income of 254.19 million yuan in 2024, and an audit business income of 181.49 million yuan. In 2024, there were 47 audit clients of listed companies. The main industries include manufacturing, agriculture, forestry, animal husbandry and fishery, electricity, heat, gas and water production and supply, construction, wholesale and retail, information transmission software and information technology services, culture, sports and entertainment, health and social work, etc. The audit fees totaled 71.717 million yuan. Hexin Accounting Firm has audited 36 listed companies in the same industry as our company.
2. Duty performance of the accounting firm in the 2025 annual audit
Hexin audited the company's 2025 financial report and the effectiveness of internal control in 2025 in accordance with the "Audit Engagement Letter", the "Audit Standards for Chinese Certified Public Accountants" and other professional standards. At the same time, Hexin also verified and issued a special report on the status of funds occupied by the controlling shareholders, actual controllers and other related parties, deposits, loans and other financial business related transactions of the financial company.
After auditing, Hexin believes that the company's financial statements have been prepared in accordance with the provisions of the Accounting Standards for Business Enterprises in all material aspects and fairly reflect the company's financial status, operating results and cash flow; the company has maintained effective financial reporting and non-financial reporting internal control in all material aspects in accordance with the "Basic Standards for Enterprise Internal Control" and relevant regulations. Hexin issued a standard unqualified audit report.
In the process of performing audit work, Hexin fully communicated with the company's management and governance on the independence of the accounting firm and relevant auditors, the composition of the audit team, audit plans, risk judgments, risk and fraud testing and evaluation methods, annual audit priorities, audit adjustments, preliminary opinions, etc.
3. Procedures for appointing an accounting firm
In accordance with the relevant requirements of the "Administrative Measures for the Selection of Accounting Firms by State-owned Enterprises and Listed Companies" of the Ministry of Finance, the State-owned Assets Supervision and Administration Commission of the State Council, and the China Securities Regulatory Commission, the "About the Re-appointment of Hexin Accounting Firm (Special General Partnership) for 2025" was reviewed and approved by the company's second meeting of the Audit Committee of the Board of Directors in 2025, the sixth meeting of the 11th Board of Directors, the 6th meeting of the 11th Board of Supervisors and the 2024 Annual General Meeting of Shareholders. "Annual Audit Institution's Proposal", agreeing to re-appoint Hexin Accounting Firm (Special General Partnership) as the company's 2025 annual financial report audit and internal control audit institution.
4. Supervision of accounting firms by the audit committee
According to the company's "Working Rules of the Audit Committee of the Board of Directors" and other relevant regulations, the audit committee's performance of supervision responsibilities over the accounting firm is as follows:
(1) The Audit Committee reviewed Hexin’s professional qualifications, business capabilities, investor protection capabilities, integrity status, independence, past audit work and quality of practice, etc., and believed that it has the qualifications and professional capabilities to provide audit work for the company and can meet the company’s audit work requirements. The Audit Committee reviewed and approved the "Proposal on the Re-appointment of Hexin Accounting Firm (Special General Partnership) as the Audit Agency for 2025", agreed to renew the appointment of Hexin Accounting Firm (Special General Partnership) as the company's auditor for the company's 2025 financial statements and internal control, and agreed to submit it to the company's board of directors for review.
(2) The Audit Committee fully communicated with the certified public accountants and project managers responsible for the company's audit work through a combination of online and offline methods, carefully listened to and reviewed the firm's work plan and related materials for the company's annual report audit, and put forward specific opinions and requirements on the audit scope, important time nodes, personnel arrangements, audit focus and other related matters of the 2025 audit work. During the audit process, regarding the different opinions of the company's management, internal audit department and accounting firm during the audit, the Audit Committee fully listened to the opinions of all parties and actively coordinated to ensure the successful completion of the annual report audit work. After Hexin issued the preliminary audit opinions on the 2025 annual audit report, the audit committee communicated with the accounting firm on the company's financial status, operating results and major matters of concern during the audit process in 2025.
(3) The Audit Committee has verified and evaluated the 2025 financial audit work of Hexin Accounting Firm, and believes that the firm performed its duties diligently during the audit of the company, followed the professional standards, expressed opinions on the company's financial statements independently, objectively and fairly, and completed various audit tasks well.
5. Overall evaluation
The Company's Audit Committee strictly abides by the relevant regulations of the China Securities Regulatory Commission, the Shanghai Stock Exchange, the Articles of Association, the Working Rules of the Audit Committee of the Board of Directors, etc., gives full play to the role of professional committees, reviews the relevant qualifications and professional capabilities of the accounting firm, conducts full discussions and communication with the accounting firm during the annual report audit, urges the accounting firm to issue audit reports in a timely, accurate, objective and fair manner, and effectively performs its supervisory responsibilities over the accounting firm.
The Audit Committee believes that Hexin insisted on conducting independent audits in a fair and objective manner during the audit of the company's annual report, demonstrated good professional ethics and business quality, completed the audit related work of the company's 2025 annual report on time, the audit behavior was standardized and orderly, and the audit report issued was objective, complete, clear and timely.
Shandong Lukang Pharmaceutical Co., Ltd.
Board Audit Committee
April 24, 2026