Henan Liliang Diamond Co.Ltd(301071)
Rules of procedure of the board of Auditors
Chapter I General Provisions
Article 1 in order to give full play to the decision-making function of the board of directors of Henan Liliang Diamond Co.Ltd(301071) (hereinafter referred to as “the company”), achieve prior audit and professional audit, ensure the effective supervision of the board of directors over the management, and improve the corporate governance structure, according to the company law of the people’s Republic of China (hereinafter referred to as “the company law”) and the governance standards of listed companies The company has set up an audit committee under the board of directors (hereinafter referred to as the “Audit Committee”) and formulated these Detailed Rules in accordance with the guidelines for self regulatory supervision of listed companies of Shenzhen Stock Exchange No. 2 – standardized operation of companies listed on GEM, the Henan Liliang Diamond Co.Ltd(301071) articles of Association (hereinafter referred to as the “articles of association”), the rules of procedure of Henan Liliang Diamond Co.Ltd(301071) board of directors and other relevant provisions. Article 2 the audit committee is a special working organization established by the board of directors, which is mainly responsible for the communication, supervision and verification of the company’s internal and external audit.
Chapter II personnel composition
Article 3 the members of the audit committee shall be composed of three directors, including more than two independent directors. At least one independent director of the committee is an accounting professional.
Article 4 the members of the audit committee shall be nominated by the chairman of the board, more than half of the independent directors or more than one-third of the directors, and elected by the board of directors.
Article 5 the audit committee shall have a chairman (convener), who shall be an independent director and be responsible for presiding over the work of the Committee; The chairman shall be elected from among the members and shall be elected with the approval of the board of directors. The convener shall be an accounting professional.
Article 6 The term of office of the audit committee is the same as that of the board of directors. Upon expiration of the term of office, the members can be re elected. If any member ceases to hold the position of director of the company during the period, he will automatically lose the qualification of member, and the board of directors will make up the number of members according to the provisions of Articles 3 to 5 above.
Article 7 the Secretary of the board of directors shall be responsible for the daily work liaison, meeting organization and resolution implementation of the audit committee.
Article 8 members of the audit committee shall have professional knowledge and business experience in performing the duties of the audit committee.
Chapter III responsibilities and authorities
Article 9 the company shall provide the audit committee with necessary working conditions and allocate special personnel or institutions to undertake the daily work of the audit committee, such as work liaison, meeting organization, material preparation and file management. When the audit committee performs its duties, the company’s management and relevant departments shall cooperate.
Article 10 the members of the audit committee shall be diligent and responsible, effectively supervise and evaluate the internal and external audit work of the company, promote the company to establish effective internal control and provide true, accurate and complete financial reports. Article 11 the main responsibilities and authorities of the audit committee are as follows:
(I) supervise and evaluate the work of external audit institutions;
(II) supervise and evaluate the internal audit work;
(III) review the company’s financial report and express opinions on it;
(IV) supervise and evaluate the company’s internal control;
(V) be responsible for the communication between the management, internal audit department and relevant departments and external audit;
(VI) propose to hire or replace the external audit institution;
(VII) supervise the company’s internal audit system and its implementation;
(VIII) review the company’s financial information and its disclosure;
(IX) review the company’s internal control system and audit major connected transactions;
(x) other matters authorized by the board of directors of the company and other matters involved in laws and regulations and relevant provisions of Shenzhen Stock Exchange..
Article 12 the audit committee shall be responsible to the board of directors, and the proposals of the committee shall be submitted to the board of directors for deliberation and decision. The audit committee shall cooperate with the board of supervisors in audit activities.
Article 13 the audit committee shall report to the board of directors on the measures or improvements it deems necessary and put forward suggestions.
Article 14 the audit committee shall guide and supervise the work of the internal audit department. The internal audit department is responsible to the audit committee and reports to the audit committee.
Article 15 when guiding and supervising the work of the internal audit department, the audit committee shall perform the following main duties: (I) guiding and supervising the establishment and implementation of the internal audit system; (II) review the company’s annual internal audit work plan; (III) supervise and urge the implementation of the company’s internal audit plan; (IV) guide the effective operation of the internal audit department. The internal audit department of the company shall report to the audit committee. All kinds of audit reports, rectification plans and rectification conditions of audit problems submitted by the internal audit department to the management shall be submitted to the audit committee at the same time; (V) report to the board of directors on the progress and quality of internal audit and major problems found; (VI) coordinate the relationship between the internal audit department and external audit units such as accounting firms and national audit institutions.
Article 16 the audit committee shall supervise the internal audit department to inspect the following matters at least once every six months, issue inspection reports and submit them to the audit committee. If it is found that the company has violations of laws and regulations and non-standard operation, it shall timely report to Shenzhen Stock Exchange and urge the company to disclose: (I) the implementation of high-risk investments such as the use of raised funds, provision of guarantees, related party transactions, securities investment and derivatives transactions, provision of financial assistance, purchase or sale of assets, foreign investment and other major events; (II) the company’s large amount of capital transactions and capital transactions with directors, supervisors, senior managers, controlling shareholders, actual controllers and their affiliates. The audit committee shall issue a written evaluation opinion on the effectiveness of the company’s internal control according to the internal audit report and relevant materials submitted by the internal audit department, and report to the board of directors.
Article 17 the board of directors or its audit committee shall issue an annual self-evaluation report on internal control according to the evaluation report and relevant materials issued by the internal audit department. The internal control self-evaluation report shall at least include the following contents: (I) the statement of the board of directors on the authenticity of the internal control report; (II) overall situation of internal control evaluation; (III) basis, scope, procedures and methods of internal control evaluation; (IV) defects in internal control and their identification; (V) rectification of internal control defects of the previous year; (VI) proposed rectification measures for internal control defects this year; (VII) conclusion on the effectiveness of internal control. Chapter IV decision making procedures
Relevant information:
(I) relevant financial reports of the company;
(II) work reports of internal and external audit institutions;
(III) external audit contract and related work report;
(IV) information disclosed by the company;
(V) audit report on major related party transactions of the company;
(VI) other relevant matters.
Article 19 the audit committee meeting shall evaluate the report provided by the Secretary of the board of directors in accordance with the preceding article, and submit relevant written resolution materials to the board of directors for discussion:
(I) work evaluation of external audit institutions, employment and replacement of external audit institutions;
(II) whether the company’s internal audit system has been implemented comprehensively and effectively; (III) whether the financial reports and other information disclosed by the company are objective and true, and whether the company’s major connected transactions comply with relevant laws and regulations;
(IV) work evaluation of the company’s financial department and audit department, including their principals;
(V) other relevant matters.
Article 20 when the company hires or replaces an external audit institution, the board of directors can consider relevant proposals only after the audit committee forms deliberation opinions and puts forward suggestions to the board of directors.
Article 21 the audit committee shall propose to the board of directors to hire or replace the external audit institution, and review the audit fees and employment contracts of the external audit institution, which shall not be unduly influenced by the company’s major shareholders, actual controllers or directors, supervisors and senior managers. The audit committee shall urge the external audit institutions to be honest, trustworthy, diligent and responsible, strictly abide by the business rules and industry self-discipline norms, strictly implement the internal control system, verify and verify the company’s financial and accounting reports, perform the obligation of special care, and prudently express professional opinions. Article 22 the audit committee of the board of directors shall review the company’s financial and accounting reports, put forward opinions on the authenticity, accuracy and integrity of the financial and accounting reports, focus on the major accounting and audit problems of the company’s financial and accounting reports, and pay special attention to whether there are fraud, fraud and the possibility of major misstatement related to the financial and accounting reports, Supervise the rectification of problems in financial and accounting reports.
Article 23 Where the directors, supervisors and senior managers of the company find that there are false records, misleading statements or major omissions in the financial and accounting reports issued by the company and report to the board of directors and the board of supervisors, or the recommendation institution and external audit institution point out to the board of directors and the board of supervisors that there are false records, misleading statements or major omissions in the financial and accounting reports of the company, The board of directors shall timely report to the Shenzhen Stock Exchange and disclose it. Where the company discloses relevant information in accordance with the provisions of the preceding paragraph, it shall disclose in the announcement the major problems existing in the financial and accounting report, the consequences that have been or may be caused, and the measures that have been taken or are to be taken. The audit committee of the company shall urge the relevant responsible departments of the company to formulate rectification measures and rectification time, conduct follow-up review, supervise the implementation of rectification measures, and disclose the completion of rectification in a timely manner.
Chapter V rules of procedure
Article 24 all members of the audit committee shall be notified three days before the meeting. The meeting shall be presided over by the chairman. If the chairman is unable to attend, he may entrust another member (independent director) to preside over the meeting.
If the situation is urgent and it is necessary to convene the audit committee meeting as soon as possible, the meeting notice can be sent by telephone or other oral means at any time, but the convener shall make an explanation at the meeting.
After the notice of the audit committee meeting is issued, if it is necessary to change the time and place of the meeting or add, change or cancel the proposal of the meeting, it shall obtain the approval of all the members of the audit committee attending the meeting in advance and make corresponding records.
Article 25 the meeting of the audit committee shall be held only when more than two-thirds of the members are present; Each member has one vote, which must be approved by more than half of all members.
Article 26 the audit committee meeting can be held on site or by means of communication, and the voting method is a show of hands or a written vote.
Article 27 members of the audit office may attend the meeting of the audit committee as nonvoting delegates, and may invite directors, supervisors and other senior managers of the company to attend the meeting as nonvoting delegates when necessary.
Article 28 if necessary, the audit committee may employ an intermediary institution to provide professional advice for its decision-making, and the expenses shall be paid by the company.
Article 29 Article 17 the convening procedures, voting methods and proposals adopted at the meeting of the audit committee must comply with the provisions of relevant laws, regulations, the articles of association and these measures.
Article 30 the meeting of the audit committee shall have minutes, which shall be signed by the members attending the meeting, and the minutes shall be kept by the Secretary of the board of directors of the company.
Article 31 the proposals and voting results adopted at the meeting of the audit committee shall be reported to the board of directors of the company in writing.
Article 32 all members present at the meeting shall have the obligation to keep confidential the matters discussed at the meeting and shall not disclose relevant information without authorization.
Chapter VI supplementary provisions
Article 33 these working rules shall come into force from the date of adoption of the resolution of the board of directors.
Article 34 matters not covered in these Rules shall be implemented in accordance with relevant national laws, regulations and the articles of Association; In case of any conflict between these detailed rules and the laws and regulations promulgated by the state in the future or the articles of association modified by legal procedures, the provisions of relevant national laws and regulations and the modified articles of association shall be implemented, and shall be revised immediately and reported to the board of directors for deliberation and approval.
Article 35 the right to interpret these rules belongs to the board of directors of the company.
Henan Liliang Diamond Co.Ltd(301071) February 25, 2022
