Internal control evaluation report in 2021
Gui Zhou Tyre Co.Ltd(000589) 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 the company (hereinafter referred to as the "company"), on the basis of daily and special supervision of internal control, We conducted a self-evaluation on the effectiveness of the company's internal control on December 31, 2021 (the benchmark date of the internal control evaluation report).
1、 Important statement
The responsibility of the board of directors of the company is 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 company'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 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, 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、 Overall situation of internal control evaluation
The enterprise management department of the company is responsible for the construction of internal control system and the implementation of the basic norms of enterprise internal control in the company, and organizes the inspection and evaluation of internal control.
3、 Scope of internal control evaluation
1. The scope of the company's internal control evaluation covers various businesses and matters of the company, focusing on the following risk areas: market competition and business ability risk, capital safety risk, governance and control risk, safety and environmental protection risk, human resources risk, project management risk, enterprise relocation risk, etc.
2. Units included in the scope of evaluation:
The units included in the scope of evaluation include the company and its subsidiaries within the scope of consolidation. The total assets of the units included in the scope of evaluation 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.
3. The operations and matters included in the scope of evaluation include:
Organizational structure, development strategy, human resources, social responsibility, corporate culture, capital activities, procurement business, asset management, sales business, research and development, engineering projects, guarantee business, business outsourcing, financial reporting, 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.
4、 Procedures and methods of internal control evaluation
The internal control evaluation shall be carried out in strict accordance with the procedures specified in the basic norms, evaluation guidelines and the company's internal control evaluation measures. During the evaluation process, we adopted appropriate methods such as individual interviews, survey questions, special discussion, walk through test, field inspection, sampling and comparative analysis to widely collect evidence on the effectiveness of the company's internal control design and operation, truthfully fill in the evaluation working paper, and analyze and identify internal control defects.
5、 Defects and identification of internal control
(I) identification criteria for defects in internal control over financial reporting
1. Qualitative criteria
Defects with the following characteristics shall be identified as major defects:
The combination of one or more control defects may cause the enterprise to seriously deviate from the control objectives and affect the risk at the company level.
Defects with the following characteristics shall be identified as important defects:
Defects that pose risks to the business unit or framework process level.
Defects with lower risk than important defects are regarded as general defects.
2. Quantitative standard
From the quantitative standard, the company is an enterprise with stable profit growth, and the pre tax profit is taken as the quantitative index. If the amount of misstatement in the financial report caused by this defect alone or together with other defects is less than 3% of the pre tax profit, it is deemed to be unimportant; If more than 3%, less than 5% is considered important; If it exceeds 5%, it is deemed as significant.
If the defects found comply with any of the following, they shall be recognized as important defects in the internal control of financial reporting:
(1) There are important misstatements in the current financial report based on the above identification, and the control activities fail to identify the misstatements.
(2) Although the importance level is not reached or exceeded, the nature of the misstatement should still attract the attention of the board of directors and management.
Other internal control defects in financial reporting other than major defects and important defects shall be recognized as general defects. (II) identification criteria of internal control defects in non-financial reports
1. Qualitative criteria
Defects with the following characteristics shall be identified as major defects:
(1) Lack of democratic decision-making procedures, such as decision-making on major issues, appointment and dismissal of personnel at important posts, investment decision-making on major projects and decision-making procedures for the use of large amounts of funds (three important and one large);
(2) Unscientific decision-making procedures, such as major decision-making mistakes, causing major property losses to the company;
(3) Serious violation of national laws and regulations;
(4) Massive loss of key management personnel or important talents;
(5) Frequent negative news in the media;
(6) Major defects in internal control evaluation have not been rectified;
(7) The lack of system control or systematic failure of important business has caused significant losses to the company identified according to the following quantitative standards.
If any of the following defects are found, it shall be recognized as an important defect of non-financial reporting internal control: (1) the company has important property losses recognized according to the above quantitative standards due to management errors, and the control activities fail to prevent such errors;
(2) Although the property loss does not reach or exceed the importance level, from the nature, it should still attract the attention of the board of directors and management.
2. Quantitative standard
From the quantitative standard, if the defect alone or together with other defects may cause the amount of property loss of the company to be less than 1% of the pre tax profit, it is deemed to be unimportant; If more than 1%, less than 3% is recognized as important property loss; If it exceeds 3%, it is recognized as major property loss.
Other internal control defects in non-financial reporting other than major defects and important defects shall be recognized as general defects. According to the above identification standards, combined with daily supervision and special supervision, we found no major defects and important defects during the reporting period.
6、 Rectification of internal control defects
For the general defects of internal control found during the reporting period, the company has formulated rectification plans and plans, and timely followed up and supervised the implementation of rectification.
7、 Conclusion on the effectiveness of internal control
The company has conducted self-evaluation on the effectiveness of the company's internal control design and operation as of December 31, 2021 in accordance with the requirements of basic specifications, evaluation guidelines and other relevant laws and regulations.
During the reporting period, the company has established and effectively implemented internal control over the businesses and matters included in the evaluation scope, and achieved the goal of the company's internal control without major defects.
There is no significant change in internal control that has a substantial impact on the evaluation conclusion between the benchmark date of the internal control evaluation report and the date of issuance of the internal control evaluation report.
We note that internal control should adapt to the company's business scale, business scope, competition and risk level, and be adjusted in time as the situation changes.
March 8, 2022
