Wuxi Dk Electronic Materials Co.Ltd(300842) : self evaluation report on internal control in 2021

Wuxi Dk Electronic Materials Co.Ltd(300842)

Self evaluation report on internal control in 2021

Wuxi Dk Electronic Materials Co.Ltd(300842) 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 Wuxi Dk Electronic Materials Co.Ltd(300842) (hereinafter referred to as the “company”) internal control system and evaluation methods, on the basis of daily and special supervision of internal control, We evaluated the effectiveness of the company’s internal control in 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, the company has 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.

The company has no internal impact from the benchmark date of the internal control evaluation report to the date of issuance of the internal control evaluation report

3、 Internal control evaluation

(I) overall situation of internal control evaluation

On the basis of establishing a relatively sound internal control system, in order to further strengthen the internal control mechanism, improve the level of risk management, enhance the authenticity, integrity and timeliness of business, financial and management information, and promote the company to strictly comply with national laws and regulations, the board of directors of the company authorizes the audit department to comply with the requirements of the enterprise’s internal control standard system, Combined with the actual situation of the company, the self-evaluation of the internal control involved in various business matters of the company and its affiliated companies is carried out comprehensively from the three aspects of soundness, rationality and effectiveness, covering all activities within the scope of the company’s internal control system, including control environment, risk identification and evaluation, control activities, information and communication and supervision. (II) evaluation scope of internal control

According to the risk oriented principle, the company has determined the main units, businesses and matters included in the evaluation scope and high-risk areas.

The specific units included in the internal evaluation of Shanghai Baike Electronic Materials Co., Ltd. and Changdi Electronic Materials Co., Ltd. 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 businesses and matters included in the evaluation scope include the company’s organizational structure, human resource management, internal audit, risk identification and evaluation, procurement management, production management, sales management, R & D management, payment and inventory control, monetary capital control, fixed assets control, cost and expense management, use and management of raised funds, related party transactions, information and communication Supervision and other contents.

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 main businesses and matters included in the scope of evaluation include:

1. Control environment

(1) Organizational structure

In accordance with the basic norms of enterprise internal control, the company law, the securities law and other relevant laws and regulations, the company has established a standardized corporate governance structure and rules of procedure, clarified the responsibilities and authorities in decision-making, implementation and supervision, and formed a scientific and effective division of responsibilities and check and balance mechanism. The general meeting of shareholders, the board of directors and the board of supervisors exercise decision-making power, executive power and supervision power respectively according to their duties.

(2) Human resource management

The company has established a complete human resource management system, covering employee recruitment, employment, training, salary, assessment and employee relationship management, providing a sound system guarantee for the company to establish a high-quality team. The company provides employees with various labor and social security measures according to law, takes professional ethics and professional competence as important standards for selecting and employing employees, practically strengthens employee training and continuing education, and continuously improves the quality of employees.

(3) Internal audit

The company sets up an audit committee under the board of directors to be responsible for the communication, supervision and verification of internal and external audit of the company, and sets up an internal audit department for organizational guarantee to inspect and supervise the authenticity and integrity of the company’s financial information and the establishment and implementation of internal control system. The internal audit department is responsible to the audit committee and reports to the audit committee. Independent of the management, the internal audit department of the company conducts internal audit on the operation and management, financial status and internal control implementation of the company and its subsidiaries, makes reasonable evaluation on the authenticity, rationality and legitimacy of its economic benefits, carries out internal audit on the key businesses of the company’s headquarters and subsidiaries, finds problems and puts forward management suggestions, Submit to the management for rectification.

2. Risk identification and assessment

Combined with the characteristics of the industry, the company has gradually established a risk assessment system covering the whole business chain according to the strategic objectives and development plans. By setting up strategic committee, salary and assessment committee, audit committee, nomination committee and internal audit department and making them play their role effectively, the board of directors can timely identify and respond to the risk factors that the company may encounter, including industry risk, policy risk, business risk, financial risk, management risk and so on, And enable the company to timely give early warning, analyze and formulate different measures in daily business activities, so as to control the risk within the minimum acceptable range as far as possible.

3. Control activities

The company has necessary control policies and procedures for procurement, production, sales, R & D, payment and inventory, monetary funds, fixed assets, costs and expenses, use and management of raised funds, related party transactions and other business and financial management activities, as follows:

(1) Procurement management

The company has formulated rules and regulations related to procurement and supplier management, and established a stable supply guarantee system for main raw materials. In addition to maintaining a stable cooperative relationship with main suppliers throughout the year, the company develops and reserves new suppliers every year, from requisition demand, requisition approval, supplier selection, inquiry and price comparison, procurement execution, financial payment, post arrival acceptance, warehousing Distribution and requisition, clear responsibilities, form a closed-loop whole process control, and be able to take effective control measures to ensure that material procurement meets the production and operation needs of the company.

(2) Production management

The company has formulated and effectively implemented detailed regulations on production plan management, production preparation, production organization management, production statistics management, production process control and management, product identification, etc., so as to ensure that all production links and aspects coordinate with each other, make effective use of the enterprise’s manufacturing resources and complete the production plan, Continuously improve the economic benefits and competitiveness of enterprises.

(3) Sales management

The company’s product sales are divided into China sales and export sales, which are composed of marketing department, sales department and marketing operation Department. They are respectively responsible for market research, market forecast, development and maintenance of sales customers, formulation of sales strategies, order maintenance, account collection, etc. The contract review system is implemented for the sales contracts signed by the company. At the same time, the company has formulated a detailed sales delivery, revenue and payment collection process and sales business assessment system to ensure the effective implementation of sales internal control management.

(4) R & D management

The company attaches great importance to R & D work. In combination with industrial technology development and the company’s future development plan, relevant departments put forward project initiation suggestions, scientifically formulate annual project R & D plan through feasibility demonstration and meeting decision-making, continue to carry out market-oriented development of new products and technologies, strengthen the whole process management of R & D and standardize R & D behavior, Continuously review and monitor the progress of R & D projects.

(5) Payment and inventory control

Raw materials, equipment, administrative department items and other materials required by the company form a closed-loop whole process control within the company from material demand, purchase requisition approval, supplier selection, inquiry and price comparison, purchase execution, financial payment, post arrival acceptance, warehousing, distribution and requisition, etc. For the purchased and arrived materials, the company shall set up a receiving post to verify the arrived goods with the contents of the purchase order, which shall be inspected by the quality department. After passing the inspection, the storage department shall be notified to receive the goods, and the audit shall be carried out in strict accordance with the quality standards to avoid the purchase quality affecting the needs of R & D and production. In addition, the material requisition shall be subject to the material requisition instruction, which shall be approved by the department head according to the demand and project progress.

(6) Monetary capital control

The company has set up an accounting organization according to law, equipped with accounting practitioners, established a post responsibility system for accounting work, and carried out scientific and reasonable division of labor for accountants. The finance department is in charge of money and accounts and seals. The cashier, voucher preparation, review and archives are set up respectively, and a special person is responsible and managed according to the division of labor. At the same time, the company has formulated a strict payment authorization approval system, defined the fund approval authority and the collection and payment business process, ensured the safety of monetary funds and improved the use efficiency and effect of monetary funds.

(7) Fixed assets control

In order to reasonably allocate and effectively use fixed assets, implement management responsibilities, ensure the safety and integrity of fixed assets and prevent asset losses. The company implements the management method of centralized management of fixed assets and individual responsibility, and establishes a strict review and approval system for the procurement, acceptance, production, disposal and internal transfer of fixed assets. The increase or decrease of fixed assets are recorded in the account in time. In addition, relevant regulations on the inventory of fixed assets have been formulated to organize the inventory in time.

(8) Cost and expense management

The company implements the general manager responsibility system for cost accounting. The general manager authorizes the financial director to formulate cost management measures and organize management work. Under the direct leadership of the manager of the finance department, the finance department is responsible for the specific accounting treatment and related matters of cost accounting. According to the consumption standard, expenditure standard and expenditure scope related to the company’s products, the R & D department and production department are responsible for registering and sorting out the relevant original materials, filling in the relevant original vouchers, and conducting preliminary review, sorting and summary. Improve the original records, be fully responsible for the cost accounting data submitted to the finance department, and cooperate with the finance department to carry out various financial accounting management. The company improves cost management through the supervision and management of the whole production process, adheres to the principle of budget management in the management of period expenses, controls the scope, time and standard of expenses, and strictly performs the examination and approval procedures. (9) Use and management of raised funds

In accordance with the relevant provisions of the CSRC on strengthening the management of raised funds, the company has formulated the measures for the management of raised funds, defined the principles of special account storage and special use of raised funds, and made relevant provisions on the management, use, change, approval procedures, disclosure and supervision of raised funds. The deposit and use of the company’s raised funds in 2021 comply with the provisions of relevant laws and regulations, and there is no violation of the management of raised funds.

(10) Related party transactions

The company strictly implements the provisions on connected transactions in the articles of association, the rules of procedure of the general meeting of shareholders, the board of directors and the board of supervisors, and the decision-making system of connected transactions, so as to minimize the occurrence of connected transactions. For unavoidable related party transactions, the company will strictly implement the decision-making procedures, avoidance system and information disclosure system of related party transactions formulated in the articles of association, strengthen the supervision of independent directors on related party transactions, further improve the corporate governance structure, ensure the fairness, impartiality and fairness of related party transactions, and avoid related party transactions from damaging the interests of the company and shareholders.

4. Information and communication

The company attaches importance to the role of information system in information communication and has established a relatively perfect information system. The personnel at each post of the information system are scrupulous and diligent, and can effectively perform their post responsibilities. At the same time, the company has strengthened the control of information system development and maintenance, access and change, data input and output, document storage and custody, network security and other aspects to ensure the safe and stable operation of the information system. The company has specially formulated information disclosure management system, internal reporting system of major information and other systems to clarify the collection, processing and transmission procedures and transmission scope of information related to internal control, and properly screen, check, analyze and integrate the information to ensure that the company performs its information disclosure obligations in accordance with the requirements of relevant laws and regulations, Strengthen the management of information disclosure and clarify the process of information disclosure.

5. Supervise

The board of supervisors of the company shall be responsible for the general meeting of shareholders and entrust the internal audit department and social intermediary institutions to conduct irregular audit and inspection on relevant financial issues when necessary. The company has set up an audit committee, which conscientiously performs its duties in accordance with the articles of association, detailed rules for the work of the audit committee of the board of directors and other rules and regulations, plays an active role in improving the governance structure and scientific decision-making, and effectively protects the legitimate rights and interests of the company and investors. The internal audit department of the company is a permanent institution of internal audit, which carries out independent audit and supervision on the business activities and internal control of the company and its subsidiaries, and regularly and irregularly carries out audit and routine inspection on the finance, internal control and other businesses of functional departments and subsidiaries, so as to control and prevent risks.

(III) internal control evaluation basis and internal control defect identification standard

The company organizes and carries out internal control evaluation according to the enterprise internal control standard system and in combination with the provisions of relevant systems, processes, guidelines and other documents of the company. 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 factors such as the company’s scale, industry characteristics, risk preference and risk tolerance, 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

According to the importance of financial report misstatement that may be caused by defects, the company uses a combination of qualitative and quantitative methods to divide defects and determine major defects, important defects and general defects.

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

Major defects of the project