"70 Million Hong Kong Dollar Prepayment Cannot Be Explained," Will This Company Replace Its Auditor?

Less than a year since its listing and just before the release of its first annual report after going public, Hong Kong-listed company Ying Tong Holdings is changing auditors over an unexplained prepayment of HKD 70 million.

On the evening of March 16, Ying Tong Holdings announced that its auditor, PricewaterhouseCoopers (PwC), had resigned at the board’s request, and RSM Hong Kong has been appointed as the new auditor, both effective from March 16.

Ying Tong Holdings suspended trading from 9 a.m. on March 17 pending further announcement.

Questions arise over the HKD 70 million prepayment and the audit fee dispute

The sudden change of auditor is linked to a HKD 70 million prepayment.

According to PwC’s resignation letter, Ying Tong Holdings completed its IPO on June 26, 2025, and was listed on the Hong Kong Stock Exchange. Shortly after the IPO, Ying Tong entered into several agreements with three service providers to obtain multi-year public relations, data analysis and consulting, and social media promotion services, with prepayments totaling HKD 70 million.

Ying Tong Holdings is a perfume distributor. According to its prospectus, nearly all revenue comes from sales of perfumes, skincare, cosmetics, personal care products, eyewear, and home fragrances from external brands. As of the prospectus date, Ying Tong distributed products for 72 external brands, including Hermès and Chopard.

The offering results showed that the total funds raised from the Hong Kong listing were about HKD 960 million, with net proceeds of approximately HKD 883 million. The company plans to use the net proceeds to further develop its own brands, acquire or invest in external brands, expand its direct sales channels, accelerate digital transformation, enhance its reputation, and provide working capital.

So, is this HKD 70 million prepayment considered a listing expense? Does it qualify as an IPO fundraising project?

What is the background of the three service providers? Were they involved during the IPO? What roles did they play?

Did Ying Tong obtain approval before engaging these service providers?

Are the service fees, contract terms, and payment conditions comparable to market rates?

PwC has requested Ying Tong’s management to provide explanations, data, and documents regarding these issues.

Ying Tong stated that the company has appointed independent professional advisors to investigate the matters raised by PwC, under the supervision of the audit committee.

PwC indicated that the investigation results will form the basis for its audit of the consolidated financial statements for the year ending March 31, 2026 (the “2025/2026 fiscal year audit”), and will significantly impact the nature, timing, and scope of the audit procedures required. Therefore, PwC needs to fully understand the progress of the investigation.

However, as of March 16, PwC has not received detailed updates, explanations, documents, or data related to the investigation. As a result, PwC stated it cannot establish a definitive timetable for the additional procedures needed, and handling these matters will incur extra costs, which will need to be negotiated with the company.

The Ying Tong board said that, given PwC’s inability to assess the nature, timing, and scope of any additional audit procedures, and the inability to set a clear timetable for their completion, the company cannot accept the additional audit fees that may arise. Consequently, PwC resigned at the board’s request.

Will this issue delay Ying Tong’s first annual report after listing?

Ying Tong stated that, as of March 16, the board confirmed that PwC had not undertaken any work on the 2025/2026 annual audit. The board believes that changing auditors will not significantly impact the audit or the publication of the annual results.

After PwC’s resignation, Ying Tong appointed RSM Hong Kong as the new auditor to fill the vacancy, serving until the next annual general meeting. The board promised to provide RSM with all necessary information to complete the 2025/2026 audit.

Frequent cases like this in the Hong Kong market

It is noted that cases of auditor changes due to disagreements over audit fees are not uncommon in Hong Kong stocks.

On March 3, this year, high-end maternal and infant food company Newman’s announced it was changing auditors. The board stated that Grant Thornton had resigned because the company and Grant Thornton could not agree on the proposed audit fee for the 2025 financial year. The fee adjustment issue was due to difficulties in providing audit information and handling audit matters, which increased the scope of work required.

On December 8, 2025, Ouhua announced that, due to disagreements with Ernst & Young over proposed audit fees for the fiscal year ending March 31, 2026, EY agreed to resign as auditor at the board’s request, effective immediately. Ouhua believed the proposed fee level might not align with the company’s current financial capacity, and considering the need for cost control measures, decided to change auditors.

On October 24, 2025, three Hong Kong-listed companies announced auditor changes for similar reasons. Among them, Maoye International announced that PwC had resigned because the company and PwC could not agree on the audit fees for the fiscal year ending December 31, 2025.

On the same day, Hong Kong Credit announced that, due to a failure to reach an agreement on proposed audit fees for the fiscal year ending March 31, 2026, it requested PwC’s resignation. K. Wah International also announced that BDO had resigned because the company and BDO could not agree on the audit fees for the fiscal year ending March 31, 2026.