Luoyang Jalon Micro-Nano New Materials Co.Ltd(688357)
Internal control management system
Chapter I General Provisions
Article 1 in order to promote the internal control evaluation of Luoyang Jalon Micro-Nano New Materials Co.Ltd(688357) (hereinafter referred to as "the company"), comprehensively evaluate the design and operation of internal control, standardize the internal control evaluation procedures and evaluation reports of the company, reveal and prevent risks, according to the company law of the people's Republic of China (hereinafter referred to as "the company law") and the basic norms of enterprise internal control This system is formulated in combination with the actual situation of the company, such as the guidelines for the evaluation of enterprise internal control, the guidelines for the internal control of listed companies of Shanghai Stock Exchange and other laws, administrative regulations and normative documents, as well as the Luoyang Jalon Micro-Nano New Materials Co.Ltd(688357) articles of Association (hereinafter referred to as the "articles of association").
Article 2 this system is applicable to the headquarters of the company, its wholly-owned subsidiaries and holding subsidiaries.
Chapter II identification of internal control defects
Article 3 internal control defects can be divided into design defects and operation defects according to their causes or sources. Design defect means that the company lacks the control necessary to achieve the control objectives, or the existing control design is inappropriate, and it is difficult to achieve the control objectives even in normal operation. Operation defect refers to the failure of properly designed control to operate according to the design intent, or the lack of necessary authorization or professional competence of the executive personnel to effectively implement the control.
Article 4 the company shall give full play to the role of the internal control evaluation working group in daily supervision, special supervision and annual evaluation. The internal control evaluation working group shall preliminarily judge the defects of internal control according to the evidence obtained from the on-site test, divide them into major defects, important defects and general defects according to their impact degree, and timely report the defects of internal control to the audit department.
（1） Major defect refers to the combination of one or more control defects that may cause the company to seriously deviate from the control objectives.
（2） Important defect refers to the combination of one or more control defects, whose severity and economic consequences are lower than those of major defects, but it may still lead to the deviation of the company from the control objectives.
（3） General defects refer to other defects except major defects and important defects.
Article 5 the company's identification of internal control defects shall be based on daily supervision and special supervision, combined with the annual internal control evaluation, and the audit department shall put forward the identification opinions after comprehensive analysis, and make the final identification after audit according to the specified authority and procedures.
Article 6 standards for identifying defects in internal control over financial reporting. The recognition criteria adopted for major defects, important defects and general defects in the internal control of financial reports directly depend on the importance of the misstatement of financial reports due to the existence of such internal control defects. The importance mainly depends on whether the defect has a reasonable possibility that the company's internal control cannot prevent or detect and correct the misstatement of financial reports in time, And the amount of potential misstatement that may be caused by the defect alone or in combination with other defects.
Article 7 the following circumstances indicate that there may be major defects in the internal control of financial reporting:
(I) quantitative standard
1. Potential misstatement of total profits: the amount of misstatement of financial statements that may be caused by a defect alone or together with other defects is ≥ 10% of total profits;
2. Potential misstatement of total assets: the amount of financial reporting misstatement that may be caused by a defect alone or in combination with other defects is ≥ 1% of total assets.
(II) qualitative criteria
The material misstatement in the financial report cannot be prevented, found and corrected in time due to individual defects or other defects. In case of the following circumstances, it shall be deemed as a major defect:
1. Fraud of directors, supervisors and senior managers of the company;
2. The company substantially corrects the published financial report;
3. Material misstatement in the current financial report found by the certified public accountant but not identified by the company's internal control;
4. The supervision of the audit committee and the audit department on the company's external financial report and internal control of financial report is invalid.
Article 8 the following circumstances indicate that there may be important defects in the internal control of financial reporting:
(I) quantitative standard
1. Potential misstatement of total profit: 5% of total profit ≤ the amount of misstatement of financial report that may be caused by a defect alone or in combination with other defects 10% of total profit;
2. Potential misstatement of total assets: 0.5% of total assets ≤ the amount of financial reporting misstatement that may be caused by a defect alone or together with other defects 1% of total assets.
(II) qualitative criteria
Individual defects or together with other defects lead to the failure to prevent, find and correct the misstatement in the financial report that does not constitute a material misstatement but should still attract the attention of the management. In case of any of the following circumstances, it shall be deemed as an important defect:
1. Failure to select and apply accounting policies in accordance with GAAP;
2. Failure to establish anti fraud procedures and control measures;
3. No corresponding control mechanism has been established or implemented for the accounting treatment of unconventional or special transactions, 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 it can not reasonably ensure that the prepared financial statements achieve the true and complete goal.
Article 9 the following circumstances indicate that there may be general defects in the internal control of financial reporting:
(I) quantitative standard
1. Potential misstatement of total profits: the amount of misstatement of financial statements that may be caused by a defect alone or together with other defects is less than 5% of total profits;
2. Potential misstatement of total assets: the amount of financial report misstatement that may be caused by a defect alone or in combination with other defects is less than 0.5% of total assets.
(II) qualitative criteria
Other control defects except major defects and important defects.
Article 10 identification standards for internal control defects in non-financial reports. For the identification of internal control defects in non-financial reports, the audit department shall reasonably determine the qualitative and quantitative identification standards with reference to the identification standards of internal control defects in financial reports, and identify them as general defects, important defects and major defects according to their impact on the realization of internal control objectives.
Article 11 the quantitative and qualitative criteria for the evaluation of internal control defects in non-financial reports. The quantitative standard can be determined not only according to the absolute amount of direct property loss, but also according to the ratio of direct loss to the total assets, sales revenue and profits of the company; The qualitative standard can be determined according to the nature, scope and other factors of its direct or potential negative impact.
(I) quantitative standard
1. Major defect: the amount of direct property loss that may be caused by a defect alone or together with other defects is ≥ 10% of the total profit.
2. Important defects: 5% of the total profit ≤ the amount of direct property loss that may be caused by a defect alone or together with other defects ＜ 10% of the total profit.
3. General defect: the amount of direct property loss that may be caused by a defect alone or together with other defects is less than 5% of the total profit.
(II) qualitative criteria
Major defect: if the possibility of defect occurrence is high, it will seriously reduce the work efficiency or effect, or seriously increase the uncertainty of the effect, or make it seriously deviate from the expected goal.
Important defect: if the possibility of defect occurrence is high, it will significantly reduce the work efficiency or effect, or significantly increase the uncertainty of the effect, or significantly deviate from the expected goal.
General defects: if the possibility of defects is small, it will reduce the work efficiency or effect, increase the uncertainty of the effect, or make it deviate from the expected goal.
Chapter III Reporting and rectification of internal control defects
Article 12 the audit department shall prepare a summary table for the identification of internal control defects, comprehensively analyze and review the internal control defects and their causes, manifestations and impact degree in combination with the internal control defects found in daily supervision and special supervision and their continuous improvement, put forward identification opinions, and focus on the internal control defects of financial reports, It shall also reflect the specific impact of the defect on the financial report, and report to the president in writing. After being approved by the president, it shall be reported to the audit committee and the board of supervisors. The board of directors shall finally determine the major defects.
Article 13 the audit department shall follow the following principles in reporting internal control defects:
（1） General defects and important defects shall be reported regularly (at least annually), and major defects shall be reported immediately.
（2） Major defects, important defects and rectification plans shall be reported to the audit committee of the board of directors, the board of supervisors and the president. If there are internal control defects related to management fraud or the management is superior to internal control, it shall be reported directly to the audit committee of the board of directors and the board of supervisors.
（3） General defects can be reported to the president, and whether it is necessary to report to the board of directors, the audit committee and the board of supervisors can be considered as appropriate.
Article 14 the internal control evaluation working group of the company shall establish a cross review system of evaluation quality. The person in charge of the evaluation working group shall strictly review the evaluation working paper, sign and confirm the identified evaluation results, and submit them to the audit committee of the company for deliberation. After being deliberated by the Audit Committee of the company, they can be submitted to the board of directors of the company for deliberation.
Article 15 the audit department shall prepare a summary table for the identification of internal control defects, make a comprehensive analysis and comprehensive review of the internal control defects and their causes, manifestations and impact in combination with the internal control defects found in daily supervision and special supervision and their continuous improvement, put forward identification opinions, and report to the board of directors, the board of supervisors or the management in an appropriate form. Major defects shall be finally confirmed by the board of directors. For the identified major defects, the company shall take countermeasures in time, effectively control the risk within an acceptable range, and investigate the responsibilities of relevant departments or relevant personnel.
Article 16 the audit department shall put forward rectification suggestions on the internal control defects found, and the responsible department and its personnel shall formulate practical rectification plans, including rectification objectives, contents, steps, measures, methods and time limit. If the rectification period exceeds one year, the short-term and long-term objectives of the rectification and the corresponding rectification work contents shall be clarified. The rectification plan for general defects shall be approved by the president, and the rectification plan for major defects and important defects shall be proposed by the president's office meeting and reported to the Audit Committee for approval.
Article 17 the rectification work of the evaluated unit shall be completed within the specified time limit, and the rectification situation shall be fed back to the audit department on time. The rectification feedback shall describe the implementation and effect of the rectification measures item by item according to the internal control defects, and provide necessary supporting materials.
Article 18 the audit department shall track and supervise the rectification of the evaluated unit and issue verification opinions on its rectification effect. The verification method can be written verification or on-site verification according to the specific situation. The audit department shall report the defect rectification of the evaluated unit to the president, the board of directors and the audit committee in time.
Chapter IV internal control evaluation report
Article 19 the types of internal control evaluation reports of the company include annual internal control evaluation report and quarterly internal control evaluation report.
Article 20 the company shall design the type, format and content of the internal control evaluation report in accordance with the basic norms of enterprise internal control and the application guidelines and evaluation guidelines, clarify the preparation procedures and requirements of the internal control evaluation report, and disclose the internal control evaluation report after being reviewed and approved by the board of directors.
Article 21 the internal control evaluation report of the company shall be designed separately for the internal environment, risk assessment, control activities, information and communication, internal supervision and other elements, and disclose the internal control evaluation process, the identification and rectification of internal control defects, the conclusion of the effectiveness of internal control and other relevant contents.
Article 22 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.
Article 23 the annual internal control evaluation report shall at least include the following contents:
（1） Conclusion of internal control evaluation. Make an overall summary of the conclusions of the annual control evaluation, focusing on whether there are major defects. If there are no major defects, issue an effective conclusion of internal control at the end of the evaluation period; In case of major defects, it is not allowed to draw a conclusion that the internal control is effective.
（2） Overall situation of internal control evaluation.
1. Scope of internal control evaluation. Describe the evaluated units covered by the internal control evaluation, the business matters included in the evaluation scope, and the high-risk areas of focus. If there is any omission in the scope of internal control evaluation, the reason and its significant impact on the authenticity and integrity of the internal control evaluation report shall be explained. 2. Basis and identification standard of internal control evaluation. Explain the laws, regulations, rules and regulations on which the company carries out internal control evaluation. Describe the specific identification standards applicable to the company's internal control defects, and explain the adjustments consistent with or made in previous years and the corresponding reasons.
3. Identification and rectification of internal control defects. According to the identification standard of internal control defects, determine the major defects, important defects and general defects existing at the end of the evaluation period, and disclose the internal control defects found item by item, including the nature and impact of defects, defect rectification, rectification plan, etc.
4. Conclusion on the effectiveness of internal control.
5. Other information, including descriptions of relevant major matters. Including other internal control information that may have a significant impact on investors' understanding of the internal control evaluation report.
（3） Description of other major matters related to internal control.
Article 24 the audit department shall timely prepare the annual internal control evaluation report according to the results of the annual internal control evaluation, combined with the working paper of the internal control evaluation and the summary table of internal control defects, and in accordance with the specified procedures and requirements.
Article 25 the annual internal control evaluation report shall be disclosed after being approved by the board of directors.
Article 26 the audit department shall pay attention to whether there are factors affecting the effectiveness of internal control between the benchmark date of the internal control evaluation report and the date of issuance of the internal control evaluation report, and adjust the evaluation conclusion accordingly according to its nature and degree of influence.
Article 27 the company's annual internal control evaluation report and the accountant's internal control audit report shall be disclosed or submitted to the public at the same time.
Article 28 the company shall
