Avary Holding (Shenzhen) Co.Limited(002938) (Shenzhen) Co., Ltd
Internal control evaluation report in 2021
Avary Holding (Shenzhen) Co.Limited(002938) (Shenzhen) Co., Ltd. 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 relevant internal control systems of Avary Holding (Shenzhen) Co.Limited(002938) (Shenzhen) Co., Ltd. (hereinafter referred to as the company), on the basis of daily 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).
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 goal of the company’s internal control is to reasonably ensure the legal compliance of operation and management, the advancement of assets and 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, 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.
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. In addition, 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.
3、 Internal control evaluation
(I) evaluation scope of internal control
The company determines the main units, businesses and matters included in the evaluation scope and high-risk areas in accordance with the risk-oriented principle; The main units included in the evaluation scope include Avary Holding (Shenzhen) Co.Limited(002938) (Shenzhen) Co., Ltd. and its wholly-owned subsidiaries Qingding precision electronics (Huai’an) Co., Ltd., hongqisheng precision electronics (Qinhuangdao) Co., Ltd., honghengsheng Electronic Technology (Huai’an) Co., Ltd., Pengding International Co., Ltd., Pengding Technology Co., Ltd Avary Technology (India) private limited, avary Singapore private limited and Avary Holding (Shenzhen) Co.Limited(002938) investment (Shenzhen) Co., Ltd; The total assets of the units included in the evaluation scope account for 98.95% of the total assets in the company’s consolidated financial statements, and the total operating revenue accounts for 99.45% of the total operating revenue in the company’s consolidated financial statements; The main businesses and matters included in the evaluation scope include: internal environment (organizational structure, human resources, social responsibility, corporate culture), risk assessment, control activities (capital activities, procurement business, production management, sales business, asset management, research and development, project, guarantee business, business outsourcing, comprehensive budget, contract management) Information and communication (internal information transmission, information system, financial report), internal supervision; The high-risk areas of focus mainly include: sales business, procurement business, production management and asset management. The major risks and omissions of the company’s business and management areas are included in the above-mentioned business scope.
(II) basis of internal control evaluation and identification standard of internal control defects
The company carries out internal control evaluation according to the enterprise internal control standard system and organization.
The board of directors of the company distinguishes between internal control over financial reporting and internal control over non-financial reporting according to the identification requirements for major defects, important defects and general defects of the enterprise internal control standard system, and in combination with factors such as the size of the company, industry characteristics, risk preference and risk tolerance, and makes comparison after considering the peers, The research 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
The quantitative and qualitative criteria for the evaluation of internal control defects in financial reporting determined by the company are as follows:
Quantitative and qualitative criteria
① Fraud of directors, supervisors and senior managers of the company; ② The company corrects the published financial report;
Occurred or caused by internal control defects
(3) major misstatement in the current financial report that is found by the certified public accountant but not recognized by the company’s internal control and reported ≥ 1% of the operating revenue;
④ The internal control supervision of the audit committee and the audit department is invalid.
① Invalid control environment;
② Failure to select and apply accounting policies in accordance with GAAP;
0.5% of operating revenue ≤ internal control deficiency
③ anti fraud procedures and control measures have not been established due to major defects or annual pre fraud;
Accounting (possible) misstatement ＜ business ④ accounting treatment for unconventional or special transactions does not account for 1% of business income
Corresponding control mechanism or not implemented and there is no corresponding compensatory control;
Internal control defects that have occurred or refer to other internal general defects other than the above major defects and important defects, and the wrong control defects that are expected (may) occur in the year.
Report ＜ 0.5% of operating revenue
2. Identification standard of internal control defects in non-financial reporting
The quantitative and qualitative criteria for the evaluation of internal control defects in non-financial reporting determined by the company are as follows:
Quantitative and qualitative criteria
May cause direct property losses ① serious violation of national laws and regulations;
Greater than 1% of operating revenue ② unscientific decision-making procedures lead to major mistakes;
Major defects (including), or lack of institutional control or systematic failure of important businesses under the national government;
The punishment of the government department resulted in a large loss of key management personnel or important talents of the company;
⑤ frequent negative news in the media;
May cause direct property losses ① the company has important property losses due to management errors, and the control of 0.5% of Huoda’s operating revenue fails to prevent such errors;
Important defects (including) ~ 1%, or the company that has been punished by the provincial ② government department, although the property loss has not reached or exceeded the importance level, but has a negative impact on the company, which should still be paid attention to by the board of directors and the management;
Other internal control that may cause direct property losses except the above major defects and important defects is less than 0.5% of the operating revenue.
General defects or being punished by municipal government departments
The penalty has a negative impact on the company
ring
(III) identification and rectification of internal control defects
1. Identification and rectification of internal control defects in financial reporting
According to the above identification standards of internal control defects in financial reporting, the company has no major defects or important defects in internal control of financial reporting during the reporting period.
2. Identification and rectification of internal control defects in non-financial reports
According to the above identification standards of internal control defects in non-financial reports, no major defects or important defects in the company’s internal control over non-financial reports were found during the reporting period.
4、 Description of other major matters related to internal control
Avary Holding (Shenzhen) Co.Limited(002938) (Shenzhen) Co., Ltd. board of directors March 16, 2022
