Zhejiang Windey Co.Ltd(300772) : internal control evaluation report in 2021

Zhejiang Windey Co.Ltd(300772)

Internal control evaluation report in 2021

Zhejiang Windey Co.Ltd(300772) all shareholders:

In accordance with the provisions of the basic norms of enterprise internal control and its supporting guidelines and other internal control regulatory requirements (hereinafter referred to as the “enterprise internal control normative system”), combined with the internal control system and evaluation methods of Zhejiang Windey Co.Ltd(300772) (hereinafter referred to as the “company”), on the basis of daily and special supervision of internal control, We evaluated the effectiveness of the company’s internal control on December 31, 2021 (the benchmark date of the internal control evaluation report).

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. In addition, as changes in circumstances may lead to inappropriate internal control or reduced compliance with control policies and procedures, there is a certain risk to speculate the effectiveness of internal control in the future according to the internal control evaluation results.

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、 Internal control evaluation

(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. The units included in the scope of this evaluation include the company, its holding subsidiaries and branches. The total assets of the units included in the evaluation scope account for 100% of the total assets in the company’s consolidated financial statements, and the total operating revenue accounts for 100% of the total operating revenue in the company’s consolidated financial statements. The main businesses and matters included in the evaluation scope include: corporate governance, organizational structure, human resources, corporate culture, raised funds management, investment management, asset management, related party transactions, external guarantee, information disclosure, subsidiary management, internal audit, etc. The high-risk areas of focus mainly include: sales revenue recognition, procurement business, guarantee business, foreign investment, estimated liabilities, control links related to the provision for impairment, etc.

The above units, businesses and matters included in the evaluation scope and high-risk areas cover the main aspects of the company’s operation and management, and there are no major omissions.

(II) basis of internal control evaluation and identification standard of internal control defects

The company organizes and carries out internal control evaluation according to the requirements of the enterprise internal control standard system, company law, securities law and other relevant laws, regulations and normative documents.

According to the identification requirements of the enterprise internal control standard system for major defects, important defects and general defects, and in combination with the company’s scale, industry characteristics, risk preference, risk tolerance and other factors, the board of directors of the company distinguished the internal control of financial reports from the internal control of non-financial reports, and studied and determined the specific identification standards of internal control defects applicable to the company. The identification standards of internal control defects determined by the company are as follows:

1. Identification standard of internal control defects in financial reporting

(1) The quantitative criteria for the evaluation of internal control defects in financial reporting determined by the company are as follows:

If one of the following items is met, it shall be recognized as major defect, important defect or general defect according to the standard:

Evaluation grade and evaluation standard

The amount of material defect misstatement ≥ 10% of the total profit

5% of total profits from major defects ≤ amount of misstatement ＜ 10% of total profits

General defect misstatement amount ＜ 5% of total profit

(2) The qualitative criteria for the evaluation of internal control defects in financial reporting determined by the company are as follows:

Evaluation grade and evaluation standard

1) Fraud of directors, supervisors and senior managers of the company;

2) Correcting major errors in the published financial report;

Major defects 3) the certified public accountant finds that there is a major misstatement in the current financial report, but the internal control fails to find the major misstatement in the operation process;

4) The company’s internal control supervision is invalid.

1) Failure to select and apply accounting policies in accordance with GAAP;

2) Failure to establish anti fraud procedures and control measures;

3) For the accounting treatment of unconventional or special transactions, there is no important defect of establishing corresponding control machine

System or not implemented and there is no corresponding compensatory control;

4) There are one or more defects in the control of the financial reporting process at the end of the period, and there is no reasonable guarantee that the prepared financial report can achieve the true and complete goal.

General defects are other control defects other than the above major defects and important defects.

2. Identification criteria for internal control defects in non-financial reports (1) the quantitative criteria for the evaluation of internal control defects in non-financial reports determined by the company are as follows:

Evaluation grade and evaluation standard

Amount of direct economic loss of major defects ≥ 5 ‰ of net assets

2 ‰ of net assets of major defects ≤ amount of direct economic loss ＜ 5 ‰ of net assets

Direct economic loss amount of general defects ＜ 2 ‰ of net assets

(2) The qualitative criteria for the evaluation of internal control defects in non-financial reporting determined by the company are as follows:

Evaluation grade and evaluation standard

1) Serious violation of national laws, regulations or normative documents;

2) Unscientific decision-making procedure leads to major decision-making mistakes;

Major defects

3) Lack or systematic failure of important business systems related to the company’s production and operation;

4) The results of internal control evaluation, especially major defects, have not been rectified.

The severity of single defect or combination of other defects is lower than that of major defects, but it is still an important defect

It may cause the company to deviate from the control objectives.

General defects are other control defects other than the above major defects and important defects. 3. Identification and rectification of internal control defects

(1) Identification and rectification of internal control defects in financial reports:

According to the above identification standards of internal control defects in financial reporting, the company did not have major defects and important defects in internal control of financial reporting during the reporting period.

(2) Identification and rectification of internal control defects in non-financial reports:

According to the above identification standards of internal control defects in non-financial reports, no major defects and important defects in the company’s internal control over non-financial reports were found during the reporting period.

4、 Description of other major matters related to internal control

(I) rectification of internal control defects in the previous year

Not applicable.

(II) internal control improvement and improvement measures

Internal control is an important part of company management, an important way to improve business efficiency and reduce business risks, and a reliable guarantee to achieve strategic objectives. In order to ensure that the later construction of internal control system can better meet the needs of the company’s business development and operation management, the company will further revise and improve the internal control system according to the actual changes, standardize the implementation of internal control, improve the level of internal control management, effectively protect the rights and interests of shareholders, and promote the company’s sustainable, steady operation and high-quality development.

(III) description of other major events

During the reporting period, the company has no other internal control information that may have a significant impact on investors’ understanding of the internal control evaluation report, evaluation of internal control or investment decisions.

Chairman (authorized by the board of directors): Gao Ling Zhejiang Windey Co.Ltd(300772) March 7, 2022