Xinjiang Zhongtai Chenical Co.Ltd(002092)
Self evaluation report on internal control in 2021
According to the provisions of the basic norms of enterprise internal control and its supporting guidelines and other internal control supervision requirements, combined with the internal control system and evaluation methods of Xinjiang Zhongtai Chenical Co.Ltd(002092) (hereinafter referred to as “the company”), on the basis of daily and special supervision of internal control, we have self evaluated the effectiveness of the company’s internal control as of December 31, 2021.
1、 Important statement
It is the responsibility of the board of directors of the company to establish, improve and effectively implement internal control, evaluate its effectiveness and truthfully disclose the internal control evaluation report in accordance with the provisions of the enterprise’s internal control standard system. The board of supervisors shall supervise the establishment and implementation of internal control by the board of directors. The management is responsible for organizing and leading the daily operation of the enterprise’s internal control. The board of directors, the board of supervisors and the directors, supervisors and senior managers of the company guarantee that there are no false records, misleading statements or major omissions in the contents of this report, and bear individual and joint legal liabilities for the authenticity, accuracy and completeness of the contents of the report. The objective of the company’s internal control is to reasonably ensure the legal compliance of operation and management, asset safety, authenticity and integrity of financial reports and relevant information, improve operation efficiency and effect, and promote the realization of development strategy. Due to the inherent limitations of internal control, it can only provide reasonable assurance for the realization of the above objectives. Objectives and principles of the establishment of the company’s internal control system: (I) objectives of the establishment of the company’s internal control system
Reasonably ensure the legal compliance of the company’s operation and management, asset safety, financial reports and relevant information are true, accurate and complete, improve the operation efficiency and effect, and promote the company to realize the development strategy.
(II) principles for the establishment of the company’s internal control system
1. Principle of comprehensiveness: internal control should run through the whole process of decision-making, implementation and supervision, covering various businesses and matters of the company and its branches.
2. Principle of importance: internal control should pay attention to important business matters and high-risk areas on the basis of comprehensive control.
3. Principle of checks and balances: internal control should form mutual restriction and supervision in the aspects of governance structure, institutional setting, distribution of rights and responsibilities, business process, etc., while taking into account the operation efficiency.
4. Principle of adaptability: the internal control shall adapt to the company’s business scale, business scope, competition and risk level, and shall be adjusted in time with the changes of the situation.
5. Cost benefit principle: internal control should weigh the implementation cost and expected benefits to achieve effective control at an appropriate cost.
2、 Internal control evaluation conclusion
According to the identification of major defects in the company’s internal control over financial reporting, there are no major defects in the internal control over financial reporting on the benchmark date of the internal control evaluation report. The board of Directors believes that the company has maintained effective internal control over financial reporting in all major aspects in accordance with the requirements of the enterprise’s internal control standard system and relevant regulations.
According to the identification of major defects in the company’s internal control over non-financial reports, the company found no major defects in the company’s internal control over non-financial reports on the benchmark date of the internal control evaluation report.
There are no factors affecting the evaluation conclusion of the effectiveness of internal control from the base date of the internal control evaluation report to the date of issuance of the internal control evaluation report.
3、 Overall situation of internal control evaluation
During the reporting period, the company further improved and optimized the company’s internal control system in accordance with the basic norms of enterprise internal control, guidelines for the application of enterprise internal control and guidelines for the standardized operation of listed companies of Shenzhen Stock Exchange (revised in 2020), so as to adapt to the changing external environment and internal management requirements. Under the leadership of the audit committee of the board of directors of the company, the audit department and auditors exercise their functions and powers independently and objectively, and are responsible to the audit committee of the board of directors without interference from other departments or individuals. The audit department carried out normal work during the year, inspected and supervised the establishment and implementation of the company’s internal control system in accordance with national laws and regulations and relevant provisions of the company, and ensured the effective implementation of relevant internal control systems.
(I) evaluation scope of internal control
According to the risk oriented principle, the company determines the main units, businesses and matters included in the evaluation scope and high-risk areas. In view of the impact of key indicators such as total assets, operating income and net profit on the financial report, the company determines that the units included in the evaluation scope of internal control include the company and important wholly-owned subsidiaries and holding subsidiaries within the consolidation scope, mainly including: Xinjiang Zhongtai Chenical Co.Ltd(002092) , Xinjiang Xinjiang Zhongtai Chenical Co.Ltd(002092) Fukang Energy Co., Ltd., Xinjiang Huatai Heavy Chemical Co., Ltd., Xinjiang Zhongtai mining and Metallurgy Co., Ltd Xinjiang Xinjiang Zhongtai Chenical Co.Ltd(002092) tuokesun energy and Chemical Co., Ltd., Xinjiang Lantian petrochemical logistics Co., Ltd., Xinjiang Zhongtai Textile Group Co., Ltd., Xinjiang Zhongtai import and export trade Co., Ltd., etc.
The scope of internal control evaluation covers the relevant businesses and matters of the company and its affiliated units. The businesses and matters included in the scope of evaluation include: governance structure, development strategy, organizational structure, social responsibility, human resources, corporate culture, capital activities, procurement business, asset management, sales business, research and development, engineering projects, guarantee and financing, fund-raising Related party transaction, financial report, comprehensive budget, contract management, internal information transmission and information system. The internal control of the above businesses and matters covers the main aspects of the company’s operation and management, and there is no major omission. The board of directors of the company authorized the audit department to be responsible for the specific organization and implementation of the internal control evaluation, evaluate the high-risk fields and units included in the evaluation scope, and the company hired ShineWing certified public accountants to verify the effectiveness of the company’s internal control. The scope of the company’s internal control self-assessment in 2021 mainly includes:
1. Governance structure. In accordance with the provisions of the company law, the securities law and the articles of association, the company has established a relatively perfect corporate governance structure. The general meeting of shareholders is the highest authority of the company, which manages and supervises the company through the board of directors. The board of directors is the company’s permanent decision-making body and is responsible to the general meeting of shareholders. The board of directors deliberates and makes decisions on major decision-making issues in the company’s business activities, or submits them to the general meeting of shareholders for deliberation. The board of supervisors is the supervisory body of the company, which is responsible for supervising the behavior of directors and managers and the company’s finance. The general manager of the company is appointed by the board of directors. Under the leadership of the board of directors, he is fully responsible for the daily operation and management activities of the company and organizes the implementation of the resolutions of the board of directors.
The board of directors of the company has four special committees: strategy, audit, nomination, remuneration and assessment. The members of the special committee are all composed of directors. According to the articles of association, the company sets up a board of supervisors to supervise the management of the enterprise by the board of directors and the management on behalf of all shareholders; The company is equipped with full-time auditors to conduct internal audit supervision on the company’s financial revenue and expenditure and economic activities.
2. Internal control organization of the company. According to the division of responsibilities and in combination with the actual situation of the company, the internal organization of the company has set up 11 management departments: Party committee office, human resources department, financial assets department, Financial Sharing Center, fund management center, securities investment department, audit department, Ministry of Commerce, production management department, safety and environmental protection department and industrial research department; Four operating companies (unincorporated units and non branches): chlor alkali Sales Corporation, Railway Transportation Corporation, supply chain operation corporation and textile sales corporation. The company’s organizational structure has clear division of labor, sound and clear functions, mutual restraint, supported by relevant systems, fully implements the principle of mutual separation of incompatible positions, scientifically divides the responsibilities and authorities of each department, and forms a mutual check and balance mechanism.
All departments shall exchange information at any time to ensure the effectiveness of control measures.
3. System. In combination with the current management situation and development needs of the company, adhere to the principle of combining legitimacy, standardization, feasibility and operability, continuously sort out and improve the system, continuously promote the standardization, institutionalization, procedure and standardization of various work, and build a standardized and effective system with coordinated content, strict procedures, complete supporting facilities.
The company has formulated a series of systems, including the measures for the administration of raised funds, the measures for the administration of internal control, the measures for the administration of external guarantees, the measures for the administration of financial assistance, the internal reporting system of major information, the decision-making system of related party transactions, the measures for the administration of legal affairs, the measures for the administration of contracts and the internal audit system, Build a standardized and perfect rules and regulations system of the company to promote the specialization, standardization and standardization of various management work.
4. Corporate culture. The company attaches great importance to the publicity, promotion and implementation of corporate culture, cultivates positive values and sense of social responsibility, enriches the enterprise and condenses the people. We will continue to carry out the activity of “national unity and one family”, carry out a variety of activities to enrich the cultural life of employees, strengthen publicity, tell Sino Thai stories and display the corporate image. The infiltration of culture makes the cadre and staff team more cohesive and energetic.
5. Social responsibility. Adhering to the corporate social responsibility concept of scientific development, harmony and win-win results, the company divides corporate responsibility into five parts: shareholder responsibility, customer responsibility, employee responsibility, environmental and social responsibility and partner responsibility. While committed to enterprise development and creating value for shareholders, the company adheres to the goal of building a harmonious development enterprise and consciously integrates social responsibility into the enterprise’s strategy The whole process of culture, production and business activities. While pursuing economic benefits, we should fulfill our responsibilities to the government, stakeholders, customers, and society, resources, environment and safety.
6. Risk assessment. In the development process of the company, it is necessary to effectively control and prevent internal and external risks such as environmental risk, business risk and financial risk. The company has established an effective risk assessment process and established internal audit department, board of supervisors and other departments to identify and respond to major and generally influential changes that the company may encounter, including business risks, environmental risks, financial risks and so on.
According to the strategic objectives and development ideas, the company comprehensively and systematically collects relevant information in combination with the characteristics of the industry, timely carries out risk assessment, organizes the risk analysis team to carry out work in accordance with strict and standardized procedures, accurately identifies internal and external risks, weighs risks and benefits and determines risk response strategies according to the results of risk analysis and risk tolerance, Make the risk controllable.
7. Internal audit management. The company sets up an internal audit department with full-time auditors. The internal audit department shall carry out the work of relevant units according to its authority and shall not be interfered by other departments and individuals. The internal audit department conducts audit and routine inspection on the establishment and implementation of internal control system, major projects, and supervises the daily operation and management and matters related to major decisions.
8. Legal affairs and contract management. The company sets up full-time legal personnel and employs legal advisers to provide legal advice to the company in time, and draft, review and modify agreements, contracts and other documents. At the same time, according to the development of contract business, the company has continuously updated and improved relevant systems and processes, continuously increased the supervision of the company’s contract business and improved the level of risk control. 9. Control activities. The company has necessary control policies and procedures for its main business activities. The management of the company has clear objectives in terms of budget, production, income, expenses, investment, profit and other financial and operating performance. The company has clear records of these objectives and monitors them. And focus on the following aspects:
(1) Management of holding subsidiaries. The company has established and improved the corporate governance structure of its holding subsidiaries in accordance with the guidelines for the standardized operation of listed companies of Shenzhen Stock Exchange (revised in 2020) and other relevant provisions, formulated the measures for the management of subsidiaries, maintained a comprehensive and effective supervision and management of the business activities of its holding subsidiaries, and supervised and inspected the corporate governance of its holding subsidiaries and the operation of the three sessions, Supervise and urge the holding subsidiaries to report major matters in time to ensure the company’s effective control and management of the holding subsidiaries.
(2) Related party transactions. The company standardizes the internal control of related party transactions in accordance with the guidelines for the standardized operation of listed companies of Shenzhen Stock Exchange (revised in 2020) and other relevant provisions; In accordance with relevant laws, administrative regulations, departmental rules and the stock listing rules of Shenzhen Stock Exchange, the approval authority of the company’s general meeting of shareholders and the board of directors on related party transactions shall be clearly divided, and the deliberation procedures and voting avoidance requirements for related party transactions shall be stipulated. Refer to the Listing Rules of Shenzhen Stock Exchange and other relevant provisions to determine the list of related parties of the company and update it in time to ensure that the list of related parties is true, accurate and complete.
The company has formulated the decision-making system for related party transactions, which has made clear provisions on related party transactions; A written agreement shall be signed between the company and related parties for related party transactions. The signing of the agreement shall follow the principles of equality, voluntariness, equivalence and compensation, and the content of the agreement shall be clear and specific. Related party transactions shall follow the pricing principles of fair, fair and open market. The price or charge of related party transactions shall adopt the market price and shall not deviate from the standards of independent third parties in the market in principle. For related party transactions that are difficult to compare the market price or whose pricing is limited, the pricing method shall be determined according to the specific conditions of related party transactions and the standards related to costs and profits shall be clarified, It shall be specified in the relevant related party transaction agreement.
(3) External guarantee. The company formulates the external guarantee system in accordance with the guidelines for the standardized operation of listed companies of Shenzhen Stock Exchange (revised in 2020) and other relevant provisions to maintain the effectiveness of the internal control of external guarantee; In accordance with relevant laws, administrative regulations, departmental rules, the Listing Rules of Shenzhen Stock Exchange and other relevant provisions, the approval authority of the general meeting of shareholders and the board of directors on external guarantees, as well as the accountability mechanism for violation of the approval authority and review procedures, shall be clarified in the articles of association.
The external guarantee system of the company has detailed provisions on the guarantee object, approval authority, decision-making procedures and safety measures of the company in case of external guarantee; Strict review and decision-making procedures shall be established for external guarantees. All external guarantees shall be uniformly managed by the company. The company and its subsidiaries shall not provide external guarantees without the approval of the board of directors (or the general meeting of shareholders); When providing external guarantee, the company shall take counter guarantee, mutual guarantee or other effective risk prevention measures, which must correspond to the amount of guarantee. If the guaranteed cannot perform the contract and the secured creditor claims against the company, the company shall immediately start the counter guarantee recovery procedure and report to the board of directors at the same time.
(4) Raise funds. The company formulated the measures for the management of raised funds in accordance with the guidelines for the standardized operation of listed companies of Shenzhen Stock Exchange (revised in 2020) and other relevant provisions, and maintained the effectiveness of the internal control of raised funds.
The company’s measures for the administration of raised funds clearly stipulates the procedures for the storage, use and approval of the special account for raised funds, the adjustment and change of purpose, internal audit and supervision, etc., so as to ensure the special use of the raised funds.
(5) Significant investment. In accordance with the guidelines for the standardized operation of listed companies of Shenzhen Stock Exchange (revised in 2020) and other relevant provisions, the company has established systems such as “three important and one major system” and “investment management measures”, and maintained the effectiveness of internal control over major investments; The approval authority and deliberation procedures of the general meeting of shareholders and the board of directors for major investments shall be clarified in the articles of association.
According to the principle of conforming to the company’s development strategy, reasonably allocating enterprise resources, promoting the optimal combination of factors and creating good economic benefits, the company’s investment management measures
