Company code: Meihua Holdings Group Co.Ltd(600873) company abbreviation: Meihua Holdings Group Co.Ltd(600873) Meihua Holdings Group Co.Ltd(600873)
Internal control evaluation report in 2021
Meihua Holdings Group Co.Ltd(600873) all shareholders:
According to the provisions of the basic norms of enterprise internal control and its supporting guidelines and other internal control supervision requirements (hereinafter referred to as the enterprise internal control standard system), combined with Meihua Holdings Group Co.Ltd(600873) (hereinafter referred to as the company) internal control system and evaluation methods, on the basis of daily supervision 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). I 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. II Internal control evaluation conclusion 1 On the benchmark date of the internal control evaluation report, does the company have any major defects in the internal control of financial reporting
□ yes √ No 2 Evaluation conclusion of internal control over financial reporting
√ valid □ invalid
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. 3. Whether major defects in internal control over non-financial reporting are found
□ yes √ no
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.
4. Factors affecting the evaluation conclusion of internal control effectiveness from the benchmark date of internal control evaluation report to the date of issuance of internal control evaluation report □ applicable √ not applicable
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. 5. Whether the internal control audit opinion is consistent with the company’s evaluation conclusion on the effectiveness of internal control over financial reporting
√ yes □ No 6 Whether the disclosure of major defects in internal control of non-financial reports in the internal control audit report is consistent with the disclosure of the company’s internal control evaluation report √ yes □ no III Internal control evaluation (I) Scope of internal control evaluation
With process as the link and risk as the guiding principle, the company determines the main units, businesses and matters and high-risk areas included in the evaluation scope. 1. The main units included in the evaluation scope include: group headquarters and holding subsidiaries, The headquarters of the group mainly include Meihua Holdings Group Co.Ltd(600873) , Langfang seasoning Food Co., Ltd., Langfang Meihua Holdings Group Co.Ltd(600873) Technology Development Co., Ltd. and other companies; the subsidiaries mainly include Tongliao Meihua Holdings Group Co.Ltd(600873) Technology Co., Ltd., Xinjiang Meihua amino acid Co., Ltd., Jilin Meihua amino acid Co., Ltd. and other subsidiaries. 2. Proportion of units included in the scope of evaluation:
Proportion of indicators (%)
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
The total operating income of the units included in the evaluation scope accounts for 100% of the total operating income in the company’s consolidated financial statements
3. The main operations and matters included in the scope of evaluation include:
In 2021, this year, the businesses in important fields such as capital activities, expense management, inventory management, cost management, fixed assets management, procurement management, sales management, engineering management, financial reporting and human resources were included in the evaluation scope. Not only the unified evaluation standard of internal control inspection was established, but also the internal control incentive mechanism was established, so as to realize the standardization of internal control inspection, The business risks are gradually reduced, and the high risks are mainly concentrated in the field of agent storage business. The specific related matters are as follows:
(1) Financial activities
The group and its holding subsidiaries strictly comply with the monetary fund management system, which mainly controls the daily transaction business such as loan, financing, investment, bank deposit, bank acceptance and important blank bills. According to the actual business situation, the group has established the financial management measures to further sort out and improve the revenue and expenditure processes of financial management, financial derivatives, guarantee and bank acceptance, And daily business transaction approval form to ensure the compliance, security and efficiency of the company’s funds and improve the utilization rate of funds.
(2) Cost management
The group and its holding subsidiaries implement the expense reimbursement management measures and approval procedures. They mainly conduct internal control evaluation on the expense reimbursement approval procedures, daily reimbursement standards, expense budget control, invoice compliance and other businesses. The financial department arranges special personnel to review the daily expense reimbursement. This year, they mainly focus on the control of labor insurance expenses, vehicle use expenses and others, Ensure that the cost is compliant, reasonable and accurate.
(3) Inventory management
The company shall allocate inventories and semi-finished products on a regular basis, ensure the company’s inventory and effective disposal of qualified products, and avoid the loss of raw and semi-finished products caused by the company’s inventory, standardize the allocation of responsibilities, and ensure the accurate allocation of raw and semi-finished products, so as to prevent the company’s inventory and effective disposal of qualified products, The storage of inventory shall comply with relevant national regulations on safety, fire protection and environmental protection, and the inventory transaction contract shall comply with the contract law and the company’s inventory rules and regulations. The finance department shall carry out daily supervision and control over the warehousing, delivery and storage of inventory to ensure that the inventory accounts are true, accurate and complete, and the financial account table is consistent with the physical object, so as to ensure the accuracy of inventory cost valuation.
(4) Cost management
Clarify the responsible subject of cost and expense business, ensure that the cost and expense are implemented according to the budget, comply with relevant national laws, regulations and company rules and regulations, further clarify the responsibilities and authorities of relevant internal departments and posts, ensure that incompatible Posts handling cost and expense business are separated from each other, standardize the cost and expense reimbursement procedures, and prevent fraud, fraud At the same time, further standardize the control process of cost prediction, decision-making, budget, control, accounting, analysis and assessment, reasonably collect, allocate and amortize the cost, carry forward the cost in time, increase the inspection frequency of production in process, and ensure that the financial statements truly reflect the production cost.
(5) Fixed assets management
The fixed assets business objective refers to that in the process of implementing the internal control of fixed assets, the whole life cycle and other links of fixed assets should meet the company’s standards. Comply with national and company regulations on safety, fire protection, environmental protection and disposal, ensure the safety and integrity of fixed assets and improve operation efficiency. Truthfully reflect the value of fixed assets, ensure that the book value is true, accurate and complete, strengthen daily control over the use, maintenance and custody of fixed assets, and focus on the management of idle assets to ensure the use efficiency and safety of assets.
(6) Procurement and payment cycle management
Complete the procurement tasks on time according to the quality and quantity, meet the material needs of the company’s operation and development economically and efficiently, ensure the stable supply, the material procurement process is open, standardized, orderly and legal, the material procurement contract or agreement complies with national laws and regulations and the company’s procurement rules and regulations, determine the procurement method according to different categories of procurement, and improve the efficiency of material supply, Obtain favorable payment terms and payment methods, ensure to fulfill the capital payment responsibility in accordance with the contract settlement terms, timely organize funds, strictly review payment procedures, reduce payment risks, strengthen the control of material supply process, enhance the initiative of material supply, further standardize the payment methods and procedures, as well as the working procedures of reconciliation with suppliers, and focus on the management and control of agent storage business, The finance department carries out end-to-end and closed-loop control over the purchase contract, payment, warehousing, invoice and other businesses, so as to reduce capital loss, reduce the occupation of capital, ensure correct payment and ensure the safety of capital payment.
In 2021, in order to further standardize the procurement management, BCG, an external management consulting organization, was specially invited to do the procurement change management project, so as to improve the procurement management and standardize the procurement management.
(7) Sales and collection cycle management
The sales process complies with relevant national laws, regulations and company rules and regulations, standardizes sales policies and credit management, strengthens closed-loop business control such as sales customer development and access, contracts, orders, payment collection, delivery and sales revenue confirmation, reduces the risk of payment collection, ensures capital safety, prevents errors in the sales process, reduces sales expenses and improves sales efficiency, Ensure that the business accounting of sales revenue and sales expenses is standardized, and the recognition, measurement and reporting of sales revenue and sales expenses comply with the unified provisions of national accounting standards, so as to ensure the authenticity, accuracy and integrity of sales revenue and accounts receivable.
In 2021, we will optimize and improve sales management and employ external management consulting agency BCG to do sales management projects, mainly from the aspects of sales organization, sales process management, price control, ability training and tracking, so as to promote the implementation of sales standardization.
(8) Engineering Management
Mainly control the project initiation, clarify the investment analysis, prepare and review the division of responsibilities of the project proposal, fully understand the relevant policies and regulations of the industry and region, objectively analyze the investment and clarify the project investment intention based on the laws, regulations and policies, combined with the actual construction conditions and economic change trend. Specify the main content and format of the project proposal, clarify the preparation requirements, analyze and demonstrate the project quality standards, investment specifications and schedule, so as to achieve coordination and balance. The feasibility study is prepared and carried out according to the feasibility study proposal approved by the company. After the feasibility study report is formed, organize relevant departments or entrust professional institutions with corresponding qualifications to review and evaluate the feasibility study report and put forward review opinions as an important basis for project decision-making. Apply to the construction administrative department for construction permit before commencement. In the process of engineering design, the risks such as preliminary design and construction drawing design are strictly controlled. Focus on the risk control of project bidding, project construction and project acceptance to ensure the smooth production and efficiency of the project.
(9) Financial Report
Strictly comply with the requirements of the financial report management system. The company’s accounting policies comply with relevant national accounting laws and regulations. Changes in important accounting policies and accounting estimates are implemented in accordance with the approval procedures, focusing on risk control such as accounting treatment of major events, asset inventory and debt verification. Daily control settlement, prepare individual and consolidated financial reports, and ensure the authenticity, completeness, accuracy and appropriate disclosure of consolidated accounting statements.
(10) Human resource management
Human resources business is mainly about job responsibilities, human resources planning, recruitment, training, resignation, assessment, salary and other procedures, meeting the requirements of the company’s rules, allocating human resources in a timely and reasonable manner, and ensuring that the structure and quality of the staff team are compatible with the company’s development goals. Establish an efficient incentive and restraint mechanism, effectively develop and utilize human resources, and establish a scientific and reasonable human resources assessment system to ensure that employees can be guided to achieve enterprise objectives. It is necessary to establish a competitive salary system and maintain and attract the echelon of excellent talents. Standardize recruitment and resignation procedures, introduce personnel recruitment competition mechanism, strengthen training, improve employees’ moral quality and professional competence, truly, accurately and completely calculate human capital and ensure correct labor cost. Reasonably and effectively control labor costs and improve the use efficiency of human capital. 4. High risk areas of focus mainly include:
The company’s internal control focuses on high-risk areas, mainly including capital risk, expense risk, cost risk, inventory risk, supply chain risk, sales risk, financial risk, quality risk, safety production risk, compliance risk and other related businesses. 5. 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. Is there any major omission
□ yes √ No 6 Is there a statutory exemption
□ yes √ No 7 Other explanatory matters
None (II) Basis of internal control evaluation and identification standard of internal control defects
The company organizes and carries out internal control evaluation in accordance with the enterprise’s internal control standard system, various rules and regulations of the company, as well as the company’s internal control management manual and other relevant requirements. 1. Whether the specific identification standard of internal control defects is adjusted with that of previous years
□ yes √ no
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 internal control over financial reports from internal control over non-financial reports, and studied and determined the specific identification standards of internal control defects applicable to the company, And consistent with previous years. 2. Identification standard of internal control defects in financial reporting
The qualitative criteria for the evaluation of internal control defects in financial reporting determined by the company are as follows:
Qualitative standard of defect nature
(1) Fraud by directors, supervisors and senior managers; (2) The enterprise corrects the published financial report; (3) Paying attention to major defects, the accountant found that there was a major misstatement in the current financial report, but the internal control failed to find the misstatement in the operation process; (the misstatement with the specified amount of more than 1000000 yuan shall be recognized as a major misstatement) (4) the supervision of the enterprise audit committee and the internal audit institution on internal control is invalid.
(1) Whether the defect is reasonably likely to lead to the failure of the enterprise’s internal control to prevent or find out and correct important defects in time, and the misstatement of financial reports. Reasonable possibility refers to the possibility that is greater than the small possibility (almost impossible). Determining whether there is a reasonable possibility involves the evaluator
