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against the backdrop of a significant reduction in scale and a sharp drop in management fees, some small and medium-sized fund companies may be planning to hire new auditing agencies in order to save money.

on the evening of september 9, donghai fund issued an announcement that 16 fund products under its umbrella, including donghai xianglong hybrid fund, had changed their accounting firms from the previous baker tilly international accounting firm to rongcheng accounting firm. it is reported that with the company's net profit loss and shrinking product scale, donghai fund has changed four auditing agencies in the past seven years, and each change can save audit fees.

re-employment of auditing agency

on september 10, donghai fund announced that it had changed the auditing firm for 16 fund products, including donghai xianglong hybrid fund, from baker tilly international to rongcheng certified public accountants. some industry insiders believe that the change in the auditing firm may be related to the substantial reduction in product scale and management fees.

taking the donghai xianglong mixed fund as an example, according to the just released 2024 semi-annual report, the current scale of this product has dropped sharply from 863 million yuan eight years ago to only about 10 million yuan at present. the audit fee paid in the audit of the semi-annual report is 7,957 yuan. the auditing agency of this disclosed fund semi-annual report is tianzhi international accounting firm.

industry insiders stated that considering the total size of assets under donghai fund and the size of individual fund products, the core reason for changing the auditing agency is expected to be the cost issue. for many small and medium-sized fund companies that are unable to make ends meet, saving money wherever possible has become an important starting point for changing the auditing agency.

china securities journal reporters noted that the 2024 semi-annual report of donghai xianglong hybrid fund disclosed that the management fee remuneration in the first half of this year was 29,200 yuan, a decrease of 76% from 121,500 yuan in the same period last year. considering that the fund company only has 29,200 yuan left in management fees for a product, and paid 7,957 yuan to the auditing agency, this fee is almost equivalent to 30% of the management fee collected by the fund.

at the same time, the net profit of donghai fund company turned from profit to loss in the first half of 2024, which may also be a factor in the company saving money on audit fees. according to the 2024 semi-annual report released by donghai securities, donghai fund lost about 5.4478 million yuan in the first half of 2024, while donghai fund achieved a net profit of 1.13 million yuan in the first half of last year.

4 replacements in 7 years

with the fierce competition in the fund industry and problems with product scale, donghai fund has changed its auditing agencies several times.

an announcement released by donghai fund shows that before april 20, 2017, the auditing agency for the fund company's products was ernst & young huaming accounting firm, and then it was changed to kpmg huazhen accounting firm after april 20, 2017. however, after october 26, 2022, kpmg huazhen accounting firm was replaced by donghai fund, and the new auditing agency was changed to tianzhi international accounting firm. until this time, donghai fund issued another re-employment announcement, tianzhi international accounting firm was replaced by rongcheng accounting firm.

every change of appointment saves donghai fund a sum of money. taking the change of kpmg huazhen to tianzhi international in the semi-annual report of donghai xianglong mixed fund as an example, securities china reporters noticed that kpmg huazhen, which was responsible for auditing the semi-annual report of donghai xianglong mixed fund in 2022, charged an audit fee of 14,900 yuan that year, while the audit fee of the semi-annual report of the fund that was changed to tianzhi international was 7,957 yuan, and the audit fee of a single product dropped by nearly 50%.

in addition, a small and medium-sized public offering fund in south china once specially noted in the "other important information that affects investors' decisions" in the fund annual report that "due to the needs of the company's business development, the board of directors passed a resolution to hire a domestic auditing agency to audit the company and its funds. the famous domestic firm that was originally responsible for the company and fund audit business is no longer responsible for the audit business of our company."

it is worth mentioning that the auditing agency "abandoned" by the above-mentioned fund companies is a well-known player among domestic auditing agencies. although its fees are more competitive than those of foreign companies, they are much higher than those of other domestic auditing agencies. before this re-hire, the domestic auditing agency charged an audit fee of 56,000 yuan for a product with a scale of 500 million yuan. however, the scale fell below 400 million yuan that year. this small public fund announced the re-hire of its auditing agency and subsequently disclosed in the fund's annual report that the fees charged by the new auditing agency had been significantly reduced.

business stability faces challenges

it is worth mentioning that stable fund companies are cautious about frequently changing their auditing agencies based on the principle of continuity, and donghai fund’s frequent changes in auditing agencies are also related to the company’s own stability.

not long ago, the second public auction of 22.6027% of donghai fund held by shenzhen pengbo industrial group co., ltd. failed. the target of this auction was originally 27.3053% of donghai fund held by shenzhen pengbo. in order to conduct the auction more efficiently, this part of the equity was split into 22.6027% and 4.7026% for separate auctions.

according to the information on jd.com's judicial auction platform, the starting price of donghai fund's 22.6027% equity is 30.1882 million yuan, and the appraisal price is 37.7352 million yuan. from the results displayed on the platform as of july 19, this auction attracted 2,920 people to watch, but it ended in failure due to no bids. in fact, donghai fund's 22.6027% equity was auctioned on jd.com's judicial auction platform at the end of may. the starting price at that time was 37.7352 million yuan (the same as the appraisal price), and it eventually attracted 1,642 people to watch, but it failed due to no bids.

the above-mentioned equity auction of donghai fund is related to the second largest shareholder shenzhen pengbo industrial group co., ltd. public information shows that in january, the shenzhen intermediate people's court issued an execution ruling involving the notarization of debt documents between the applicant shanghai dongxing investment holding development co., ltd. and the respondents yang xueping, pengbo industrial, and beijing pengyun century capital management co., ltd. since the respondents did not fulfill the obligations determined by the effective legal documents, the shenzhen intermediate people's court froze the 27.3053% equity of donghai fund held by pengbo industrial in accordance with the law. this part of the equity was subsequently divided into 22.6027% and 4.7026% for auction respectively, and the latter was successfully auctioned in may.

donghai fund said that the above matters will not have a significant impact on the daily operations of donghai fund. the company will continue to pay attention to the progress of equity matters and will protect the legitimate rights and interests of fund unit holders through sound corporate governance, stable business operations and timely information disclosure. if there are matters that need to be disclosed, the company will disclose information in a timely manner.