Zhejiang Century Huatong Group Co.Ltd(002602)
Internal audit system
Chapter I General Provisions
Article 1 in order to standardize the internal audit function of Zhejiang Century Huatong Group Co.Ltd(002602) and its branches, subsidiaries and affiliated companies (hereinafter referred to as “the company”) and strengthen the corporate governance ability of the company, In accordance with the Audit Law of the people’s Republic of China, the provisions of the National Audit Office on internal audit, the stock listing rules of Shenzhen Stock Exchange, the self regulatory guidelines for listed companies of Shenzhen Stock Exchange No. 1 – standardized operation of listed companies on the main board and other relevant laws and regulations, as well as the provisions of Zhejiang Century Huatong Group Co.Ltd(002602) articles of Association (hereinafter referred to as the “articles of association”), and in combination with the actual situation of the company, Formulate this system.
Article 2 the term “internal audit” as mentioned in this system refers to an evaluation activity carried out by the company’s internal institutions or personnel on the effectiveness of the company’s internal control system and risk management, the authenticity and integrity of financial information, as well as the efficiency and effect of business activities.
Article 3 the term “internal control” as mentioned in this system refers to the process in which the board of directors, the board of supervisors, senior managers and other relevant personnel of the company provide reasonable assurance to achieve the following objectives:
(I) comply with national laws, regulations, rules and other relevant provisions;
(II) improve the efficiency and effect of the company’s operation;
(III) ensure the safety of the company’s assets;
(IV) ensure that the company’s information disclosure is true, accurate, complete and fair.
Article 4 the company shall establish and improve the internal audit system, prevent and control the company’s risks and enhance the reliability of the company’s information disclosure in accordance with relevant national laws, regulations, rules and the provisions of this system and in combination with the industry and production and operation characteristics of the company. The internal audit system shall be examined and approved by the board of directors.
Article 5 the board of directors of the company shall be responsible for the establishment, improvement and effective implementation of the internal control system. Important internal control systems shall be reviewed and approved by the board of directors.
The board of directors and all its members shall ensure the authenticity, accuracy and completeness of information disclosure related to internal control.
Chapter II Organization and personnel
Article 6 the company shall establish an audit committee under the board of directors and formulate the rules of procedure of the audit committee. The members of the audit committee are all composed of directors, of which independent directors shall account for more than half and act as the convener, and at least one independent director shall be an accounting professional.
Article 7 the company sets up an internal audit center to inspect and supervise the establishment and implementation of the company’s internal control system and the authenticity and integrity of the company’s financial information.
The internal audit center is responsible to the audit committee and reports to the audit committee.
Article 8 the company shall allocate full-time personnel to engage in internal audit according to the company’s scale, production and operation characteristics and relevant regulations.
Article 9 the internal audit center shall maintain its independence and shall not be under the leadership of the financial department or work together with the financial department.
Article 10 all internal institutions or functional departments of the company, holding subsidiaries and joint-stock companies with significant influence shall cooperate with the internal audit center to perform their duties according to law and shall not hinder the work of the internal audit center.
Chapter III responsibilities and requirements
Article 11 when guiding and supervising the work of the internal audit center, the audit committee shall perform the following main duties:
(I) guide and supervise the establishment and implementation of internal audit system;
(II) hold a meeting at least once a quarter to review the work plan and report submitted by the internal audit center;
(III) report to the board of directors at least once a quarter, including the progress, quality and major problems found in the internal audit;
(IV) coordinate the relationship between the internal audit center and external audit units such as accounting firms and national audit institutions;
(V) propose to hire or replace the external audit institution;
(VI) put forward opinions on the due diligence and work assessment of internal auditors;
(VII) review major related party transactions as required.
Article 12 the internal audit center shall perform the following main duties:
(I) inspect and evaluate the integrity, rationality and effectiveness of the internal control system of the company’s internal institutions, holding subsidiaries and joint-stock companies with significant influence;
(II) audit the accounting data and other relevant economic data of the company’s internal institutions, holding subsidiaries and joint-stock companies with significant influence, as well as the legality, compliance, authenticity and integrity of the reflected financial revenue and expenditure and relevant economic activities, including financial reports, performance letters, voluntary disclosure of predictive financial information, etc;
(III) assist in establishing and improving the anti fraud mechanism, determine the key areas, key links and main contents of anti fraud, and reasonably pay attention to and inspect possible fraud in the process of internal audit;
(IV) report to the audit committee at least once a quarter, including the implementation of the internal audit plan and the problems found in the internal audit work.
Article 13 in order to effectively perform internal audit duties, the board of directors and the audit committee grant the internal audit center the following authorities:
(I) according to the approved annual audit plan, the internal audit center can independently determine the audit items and audit objects, as well as the human, material and financial resources invested;
(II) auditors have the right to unrestricted access to information, records, personnel and property related to the conduct of business when executing approved audit projects;
(III) the person in charge of the internal audit center has the right to attend the company’s major meetings related to internal control (including the company’s strategic decision-making meeting, the company’s quarterly / annual business analysis meeting, major marketing meeting, business system, investment and financing system, functional support system, mid year / annual report meeting of strategic system, etc.);
(IV) the person in charge of internal audit shall issue the internal audit documents completed through appropriate procedures in accordance with professional standards without interference from any party of internal and external interested parties;
(V) in order to better supervise the audit process and improve the ability to obtain information, the internal audit center shall appoint full-time personnel to obtain the system query authority related to the work of the company’s information system, data warehouse, financial system, personnel system and other systems for a long time or periodically. The internal Audit Center shall make appropriate authorization to ensure the prudent use of the obtained information, Ensure that the scope of personnel obtaining information is controllable and the information is confidential.
Article 14 the internal audit center shall submit the internal audit work plan for the next year to the audit committee six months before the end of each fiscal year, and submit the annual internal audit work report to the audit committee four months after the end of each fiscal year.
The internal audit center shall take the audit of important external investment, purchase and sale of assets, external guarantee, related party transactions, use of raised funds and information disclosure as the necessary contents of the annual work plan. Article 15 the internal audit center shall carry out audit work on the basis of business links, and evaluate the rationality of the design and effectiveness of the implementation of internal control related to financial reports and information disclosure according to the actual situation.
Article 16 internal audit shall cover all business links related to financial reports and information disclosure in the company’s business activities, including sales and collection, procurement and payment, inventory management, fixed assets management, capital management, investment and financing management, human resources management, information system management and information disclosure management. The internal audit center can adjust the above business links according to the industry and production and operation characteristics of the company.
Article 17 the audit evidence obtained by internal auditors shall be sufficient, relevant and reliable. The internal auditors shall clearly and completely record the name, source, content, time and other information of the audit evidence in the working paper.
Article 18 during the audit work, the internal auditors shall prepare and review the audit working papers in accordance with the relevant provisions, and timely sort out and file the audit working papers after the completion of the audit project.
The internal audit center shall establish a confidentiality system for working papers, establish a corresponding file management system in accordance with the provisions of relevant laws and regulations, and specify the storage time of internal audit work reports, working papers and relevant materials.
Article 19 internal audit activities shall comply with the professional standards and professional ethics of the Ministry of audit of the people’s Republic of China.
Internal auditors shall abide by the code of professional ethics, conduct audit with professional proficiency and due professional prudence, maintain a relatively independent position, make objective and fair evaluation of the audit object, be free from interference and influence of other institutions and individuals, and participate in the actual operation and management activities of the audited entity as any decision-maker.
Article 20 internal auditors shall have no economic interest with the auditee and its main responsible persons; When handling audit matters, those who have a direct interest in the auditee or the audited matters shall withdraw.
Article 21 internal auditors shall strictly abide by the principle of confidentiality, carefully use the materials obtained in the performance of audit tasks, strictly abide by the regulations on the management of confidential documents of the company’s departments, have the obligation to keep confidential the business secrets of the auditee they know, and shall not disclose the materials, data and documents obtained; The information shall be used only when necessary for the audit, and shall not be used to seek benefits for themselves or others.
Article 22 internal auditors shall have the following professional knowledge, professional skills and practical experience required for the performance of their duties:
(I) professional knowledge of audit, accounting, finance, taxation, economy, finance, statistics, management, internal control, risk management, law, information technology, database and other professional knowledge related to organizational business activities;
(II) professional skills such as language expression, problem analysis, application of audit technology, interpersonal communication, organization and management;
(III) necessary practical experience and relevant professional experience.
Article 23 internal auditors shall understand, study and master the development and changes of relevant laws and regulations, professional knowledge, technical methods and audit practice through follow-up education and professional practice, so as to maintain and improve their professional competence.
Article 24 when conducting internal audit business, internal auditors shall maintain professional prudence and make rational use of professional judgment.
Chapter IV specific implementation
Article 25 the internal audit center shall implement appropriate review procedures in accordance with relevant regulations, evaluate the effectiveness of the company’s internal control, and submit an internal control evaluation report to the audit committee at least once a year.
The evaluation report shall state the purpose, scope, conclusions and suggestions for improving internal control of the review and evaluation.
Article 26 the scope of internal control review and evaluation shall include the establishment and implementation of internal control systems related to financial reports and information disclosure.
The internal audit center shall focus on the integrity, rationality and effectiveness of the internal control system related to foreign investment, purchase and sale of assets, external guarantee, related party transactions, use of raised funds, information disclosure and other matters.
Article 27 the internal audit center shall urge the relevant responsible departments to formulate rectification measures and rectification time for the internal control defects found in the review process, conduct follow-up review of internal control, and supervise the implementation of rectification measures.
The head of the internal audit center shall timely arrange the follow-up review of internal control and incorporate it into the annual internal audit work plan.
Article 28 when preparing the annual audit plan, the internal audit center shall focus on investigating and understanding the following situations in order to evaluate the risks of specific audit projects:
(I) strategic objectives, annual objectives and business activities of the organization;
(II) laws, regulations, policies, plans and contracts that have a significant impact on relevant business activities;
(III) effectiveness of relevant internal control and risk management level;
(IV) the complexity of relevant business activities and their recent changes;
(V) the ability of relevant personnel and recent changes in their positions;
(VI) other important information related to the project.
Article 29 the internal audit center shall appoint internal auditors to carry out audit work according to the audit items and schedule determined in the annual audit plan. Risk based audit plan, including objective, time, nature, scope, work arrangement, staffing plan, financial budget and action report.
Article 30 when carrying out project audit, the internal audit center shall fully investigate the auditee, determine the risk level, formulate the audit plan, clarify the audit assignment, audit scope, audit content, audit method and audit time, etc.
Article 31 the internal audit center shall issue a written audit notice to the auditee two weeks before the implementation of routine audit. If the audit project for special purposes is implemented, the audit notice may not be issued or the audit notice may be served at the same time when the auditors arrive at the audit site.
Article 32 internal auditors can flexibly choose on-site audit, online remote audit, information reporting audit and other methods according to needs
Article 33 auditors shall conduct compliance tests and substantive tests on the basis of understanding the status of internal control as needed, and shall flexibly use inspection, observation, inquiry, inventory, inventory supervision, calculation, analytical review and other methods to carry out audit, so as to obtain reliable, sufficient and relevant audit evidence and obtain accurate, objective, fair Reasonable audit conclusion. The auditee shall actively cooperate with the work of the internal audit center, provide real and complete audit materials in time, and have the obligation to cooperate with the audit interview and sign the interview records.
Article 34 the internal auditors shall fully communicate with the auditee and relevant personnel, fully listen to the explanations, explanations and opinions of the auditee and relevant personnel, and may require the other party to provide relevant supporting evidence. Article 35 The Internal Audit Center shall prepare the first draft of the audit report and solicit the opinions of the auditee within 15 days after the completion of field work. The auditee shall give written feedback within seven days from the date of receiving the audit opinions; If no reply is made within the time limit, it will be regarded as no comment. The internal audit center may indicate or make necessary supplements and modifications to the written opinions fed back by the auditee in the audit report.
Article 36
