As the registration-based IPO reform deepens and capital market oversight tightens, a wave of hidden financial fraud cases has surfaced. Among them, BDO China (officially BDO China Shu Lun Pan Certified Public Accountants LLP, hereinafter "BDO"), a leading domestic audit firm, has become entangled in two egregious IPO fraud cases involving Zuijiang Technology and Jiayuan Technology. For a long time, a paradoxical phenomenon has plagued penalties for intermediaries: when listed companies are exposed for fabricating revenues on a massive scale, the outcomes for their auditors are often wildly inconsistent. In some cases, intermediaries face hefty fines, asset confiscation, joint liability for compensation, or even criminal prosecution; in others, major scandals conclude with merely a warning letter or a token fine, widely mocked by the market as a "slap on the wrist."

This excessive variability in enforcement not only erodes investor trust but also fosters deep-seated industry problems such as disproportionate penalties and distorted incentive mechanisms.

Side-by-Side Review: BDO's Alleged Misconduct in Two Typical IPO Fraud Cases

Both Zuijiang Technology (now delisted) and Jiayuan Technology (currently under ST status) were listed on the ChiNext board, and both were found to have committed financial fraud in their IPO documents and subsequent periodic reports. More strikingly, BDO served as the audit firm for both companies' IPOs and their annual reports for multiple years thereafter. The fraud methods differed, yet both exposed systemic vulnerabilities in audit verification procedures when confronted with deliberate financial misconduct.

Zuijiang Technology: Fabricated Business Chains and "Off-Balance-Sheet Fund Circulation" Fraud

Zuijiang Technology was listed on the Shenzhen Stock Exchange's ChiNext board on October 29, 2019, raising total IPO proceeds of RMB 365.16 million. Its sponsor was CITIC Securities, and BDO earned audit fees of RMB 6.6981 million during the IPO phase. The company specialized in network information security software and hardware platforms. After claiming to enter the DPU (data processing unit) chip business and positioning itself as a rival to Nvidia, its stock price was speculated up to a peak of RMB 299.80 per share, earning it the nickname "the most expensive ST stock on the A-share market." However, its actual business was riddled with false records.

According to the "Advance Notice of Administrative Penalty" issued by the Beijing Regulatory Bureau of the China Securities Regulatory Commission (CSRC), Zuijiang Technology, during customer price negotiations, submitted false materials and inflated the procurement costs of chips needed for production to raise product selling prices, recognizing revenue that did not meet the conditions for revenue recognition. Specifically, between 2017 and 2021, the company inflated revenue by RMB 47.5212 million, RMB 49.3135 million, RMB 25.7583 million, RMB 114.0959 million, RMB 106.7751 million, and RMB 32.1572 million respectively, accounting for 27% to 53% of reported revenue in each period. In some years, the inflated total profits reached as high as 1,992.51% and 121.45% of the absolute value of reported total profits. In the most typical case, the "chips involved in the case" fabricated business, Zuijiang Technology, through its controlling subsidiary Chengdu Beizhong Wangxin Technology Co., Ltd., signed a sales contract with Beijing Haotian Xuhui Technology Co., Ltd., which then resold the products to Beijing Juxian Technology Trading Company. Investigation revealed that this entire chain was orchestrated by the son-in-law of Zuijiang Technology's chairman Zhang Jun (who was also the company's investor relations specialist, Guo Tianyi). The funds used by Juxian Technology to purchase the chips were mainly arranged and provided by Guo Tianyi, and control over the chips never actually transferred. This fraud model, led by a relative of the actual controller with a closed-loop off-balance-sheet fund circulation, is a textbook case of deliberate management fraud, rendering the company's prospectus and annual reports from 2019 to 2021 materially misleading.

Jiayuan Technology: "Financial Breathing Method" and Cross-Period Adjustments

Unlike Zuijiang Technology's approach of fabricating high-tech products to secure a lofty valuation, Jiayuan Technology's fraud centered on cross-period adjustments. Jiayuan Technology was listed on the ChiNext board in January 2022, with CITIC Securities again serving as the sponsor. The company raised net proceeds of RMB 995 million, exceeding its original plan. In August 2026, the company received an "Advance Notice of Administrative Penalty" from the CSRC, exposing its information disclosure violations from 2019 to 2022. The investigation found that starting in 2019, Jiayuan Technology recognized revenue before meeting the conditions for revenue recognition in its dealings with core customer A, while also participating in business chains lacking commercial substance. Its fraud data exhibited a highly unusual pattern: in 2019, it inflated revenue by RMB 20.156 million; in 2020, it reduced revenue by RMB 6.8765 million (reversing the RMB 20.156 million from the related business); in 2021, it again inflated revenue by RMB 28.0338 million; and in 2022, it reduced revenue by RMB 25.6247 million. This cyclical "inhale-exhale" pattern—an inflation year followed by a reversal year—was dubbed the "financial breathing method" by the market, essentially designed to beautify performance in specific reporting periods, particularly during the critical IPO process.

From 2018 to 2026, BDO served as Jiayuan Technology's annual report auditor throughout. Over an eight-year service period, facing such a regular anomaly in cross-period revenue recognition, the audit firm failed to maintain the required professional skepticism, resulting in false statements in the company's prospectus and post-listing annual reports. The CSRC has proposed ordering Jiayuan Technology to rectify, issuing a warning, and imposing a fine of RMB 6 million; four responsible individuals, including Chairman Wang Jin, face combined fines of RMB 8.5 million (with total proposed penalties for the case reaching RMB 14.5 million). The company's stock has also been subjected to other risk warnings (ST).

Audit Quality Control Under Scrutiny in Two Cases

To more clearly illustrate the challenges and deficiencies auditors faced in these two cases, a multi-dimensional comparison is presented below: The comparison vividly reveals the quality control blind spots in BDO's acceptance and execution of audit engagements for proposed listed companies. Both Zuijiang Technology's fabricated business and Jiayuan Technology's cross-period adjustments fall squarely within the "fraud risk factors" that the Chinese Standards on Auditing explicitly requires auditors to treat with heightened vigilance. BDO, serving as the long-term auditor for both companies, failed to identify material misstatements during the IPO phases, inevitably raising profound doubts about whether intermediaries can effectively fulfill their "gatekeeper" duties.

Reinforcing the "Gatekeeper" Role: Coordinated Administrative, Civil, and Criminal Accountability

For audit failures like those alleged against BDO in the Zuijiang and Jiayuan cases, administrative penalties serve as the first line of defense. Currently, the CSRC's administrative oversight of intermediaries demonstrates a comprehensive, chain-wide crackdown.

Confiscation with Multiples and Financial Blows

Regulators are determined to strip intermediaries of their ill-gotten gains. For instance, in Zuijiang Technology's IPO, BDO earned audit fees of RMB 6.6981 million. If the firm is ultimately found to have failed in its due diligence, this revenue would not only be fully confiscated but could also be subject to multiple times in fines.

Dual Penalty System and Targeted Industry Bans

Administrative penalties target not only the accounting firm as a legal entity but also the directly responsible individuals. In cases involving Yongtuo Institute (related to Hengjiu Technology and Kelin Environmental Protection), multiple signing certified public accountants (CPAs), project partners, and quality control reviewers were each given warnings and fines. For firms that are repeat offenders or whose misconduct is particularly egregious, regulators have resorted to suspending securities business for six months (i.e., a six-month "industry ban"). For implicated individuals, market entry bans of varying durations, including lifetime bans, have been imposed. Such administrative measures, which directly sever the professional lifelines of both firms and individuals, carry immense deterrent power.

Civil Recourse: Representative Actions and Cracking Down on External Accomplices

New judicial interpretations provide powerful institutional weapons for civil compensation claims. First, the removal of the administrative penalty as a precondition for civil lawsuits significantly lowers the threshold for investors to sue intermediaries. Combined with the "Provisions of the Supreme People's Court on Several Issues Concerning Representative Actions in Securities Disputes," the special representative action (China-style class action) mechanism allows damaged investors to seek low-cost redress through "opt-out" participation, forcing intermediaries to bear substantial compensation costs. Second, Article 22 of the new judicial interpretation marks a milestone breakthrough: it explicitly stipulates that if evidence shows that a listed company's suppliers, customers, or financial institutions, knowing of the issuer's financial fraud, facilitated it by providing false transaction contracts, invoices, deposit certificates, etc., plaintiffs can sue them to bear joint and several liability with the issuer. This clause holds significant remedial value for audit firms. In the Zuijiang case, external companies like Juxian Technology that facilitated the fabricated chip sales, and in the Jiayuan case, "Customer A" that cooperated in prematurely recognizing revenue, could all become co-defendants in future civil compensation claims. This not only helps distribute the compensation burden on audit firms through the internal recourse mechanism under Article 178 of the Civil Code but also serves to deter external "accomplices" who assist listed companies in fabricating audit evidence at the source.

Criminal Accountability: Strict Standards for Administrative-Criminal Coordination and Conviction

When the scale of financial fraud is enormous, its social impact is extremely adverse, and intermediaries are negligent or complicit, criminal prosecution looms as the ultimate sword of Damocles. The guiding opinions jointly issued by the Supreme People's Court and the Supreme People's Procuratorate clarify the principles for coordinating administrative and criminal handling of financial fraud, forming a three-dimensional accountability framework of "administrative, criminal, and civil" measures. Under Article 229 of the Criminal Law, personnel of intermediary organizations responsible for asset valuation, capital verification, validation, accounting, or auditing who intentionally provide false certification documents under serious circumstances are subject to up to five years in prison or criminal detention, along with fines. In a typical case published by the Supreme People's Court, the actual controller of a Xiamen accounting firm, a person named Chen Mouliang, was sentenced to two years and six months in prison and fined for issuing false audit reports to fraudulently obtain loans, with the involved entity also fined RMB 400,000. In another asset valuation fraud case, appraiser Ding Moulu was similarly criminally penalized for issuing false reports that led to massive losses of state-owned assets.

Furthermore, under the theory of joint crime, if a CPA knows that an issuer (such as Zuijiang Technology) is committing financial fraud and, instead of exposing it, actively advises on how to circumvent audit procedures, they may no longer merely constitute the crime of providing false certification documents. Instead, they could be directly deemed co-conspirators in the crime of fraudulent issuance or the crime of illegal disclosure or non-disclosure of material information, facing even harsher penalties. This criminal perspective serves as a powerful deterrent, preventing intermediaries from harboring the mindset that "the worst that can happen is paying compensation."

The juxtaposition of the Zuijiang Technology and Jiayuan Technology fraud cases is not only an indictment of the actual controllers of both companies for flouting the law and trampling on integrity but also a stern test of the professional diligence of gatekeepers like BDO. While the issuers' deliberate fraud is the primary offense, the auditors' years-long failure to detect it and their disregard for obvious red flags of fraud are equally indefensible. Solving the problem of "uneven" and "excessively variable" penalties for intermediaries is not a simple binary choice between a "slap on the wrist" and "financial ruin." Achieving true proportionality between fault and punishment depends on a clearly reasoned and rigorously enforced three-dimensional accountability system. In administrative regulation, there must be precise strikes against negligent individual CPAs and firms, supplemented by confiscation of illegal gains, substantial fines, and targeted industry bans. In civil adjudication, the "proportionate joint liability" system, centered on "degree of fault, causal contribution, and the boundary of duty of care," should be upheld and refined. While incorporating special representative actions and targeting external accomplices, this approach should ensure reasonable compensation for damaged investors without turning intermediaries into "unlimited joint guarantors" for issuer fraud. In criminal accountability, those intermediaries who lose their moral compass and conspire with companies to commit fraud must be strictly prosecuted under the crime of providing false certification documents or as accomplices. Only by breaking the vicious cycle of "bad money driving out good," rebuilding the trust contract of the capital market, and prompting intermediaries to truly return to their professional "gatekeeper" role can we safeguard the capital market's steady and regulated development on the track of rule of law.