Profit Cultural & Creative Group Co.Ltd(300640) : self evaluation report on internal control of the company in 2021

Profit Cultural & Creative Group Co.Ltd(300640)

Self evaluation report on internal control in 2021

Profit Cultural & Creative Group Co.Ltd(300640) all shareholders:

In accordance with the provisions and requirements of self regulatory guidelines for listed companies of Shenzhen Stock Exchange No. 2 - standardized operation of companies listed on GEM, basic norms of enterprise internal control and its supporting guidelines, combined with Profit Cultural & Creative Group Co.Ltd(300640) (hereinafter referred to as "the company" or "the company") internal control system and relevant management methods, on the basis of daily supervision and special supervision of internal control, We evaluated the effectiveness of the company's internal control as of December 31, 2021.

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, 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 legality of operation and management, compliance, 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 the situation 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. There are no factors affecting the evaluation conclusion of the effectiveness of internal control between the benchmark date of the internal control evaluation report and the issuance date of the internal control evaluation report.

3、 Internal control evaluation

In accordance with the company law of the people's Republic of China, the securities law of the people's Republic of China, the basic norms of enterprise internal control, the supporting guidelines for internal control, the rules for the preparation of information disclosure of companies offering securities to the public No. 21 - General Provisions on annual internal control evaluation report and other laws and regulations, and in accordance with the provisions of the articles of association, the company is responsible to all shareholders, Conducted a comprehensive and in-depth inspection on the company's internal control in 2021, and evaluated the company's internal control on the basis of understanding and mastering the company's internal control management system and its implementation. Now the internal control evaluation of the company in 2021 is reported as follows:

(I) evaluation scope of internal control

According to the risk oriented principle, the company determines the units, businesses and matters included in the evaluation scope and high-risk areas. Those included in the evaluation scope include the company, subsidiaries and departments of the company. The main businesses and matters included in the evaluation scope include: organizational structure, system establishment, development strategy, human resource management, procurement business, asset management, sales business, guarantee business, financial report, information disclosure and communication, internal audit, etc. The high-risk areas of focus mainly include: fund management, procurement, sales and information disclosure business.

(II) objectives and principles of the company's internal control system

The company designs and establishes the company's internal control system and control system in accordance with the requirements of the basic norms of enterprise internal control and other relevant laws and regulations.

1. Basic objectives of internal control

(1) Establish and improve the internal organizational structure that meets the requirements of modern company management, and form a scientific decision-making mechanism, execution mechanism and supervision mechanism to ensure the realization of the company's operation and management objectives;

(2) Establish an effective risk control system, strengthen risk management and ensure the normal and orderly operation of the company's business activities;

(3) Establish a good internal control environment of the company, plug loopholes and eliminate hidden dangers, prevent and timely detect and correct errors and fraud, and protect the safety and integrity of the company's assets; (4) Standardize the accounting behavior of the company, ensure the authenticity and integrity of accounting materials, and improve the quality of accounting information;

(5) Ensure the implementation of relevant national laws and regulations and the company's internal rules and regulations. 2. Basic principles followed by the company's internal control system

(1) Principle of legality: internal control shall comply with the provisions of relevant national laws and regulations and the regulatory requirements of relevant government supervision departments;

(2) Principle of comprehensiveness: internal control should run through the whole process of decision-making, implementation and supervision, covering various businesses and matters of the enterprise and its subordinate units;

(3) Principle of importance: internal control should pay attention to important business matters and high-risk areas on the basis of comprehensive control;

(4) Principle of effectiveness: internal control should be able to provide a reasonable guarantee for the realization of internal control objectives, all employees of the enterprise should consciously maintain the effective implementation of internal control, and the problems existing in the establishment and implementation of internal control should be corrected and handled in time;

(5) Principle of checks and balances: internal control should form mutual restriction and supervision in terms of governance structure, institutional setting, distribution of rights and responsibilities, business process, etc., while taking into account operational efficiency; (6) Adaptability principle: the internal control shall be adapted to the business scale, business scope, competition status and risk level of the enterprise, and shall be adjusted in time with the changes of the situation.

(III) internal control elements of the company

1. Control environment

The control environment of the company reflects the attitude of the management and management towards the importance of control. The quality of the control environment directly determines the smooth implementation and effect of the internal control system. Based on the basic concept of standardized operation, the company is actively trying to create a good control environment, which is mainly reflected in the following aspects:

(1) Organizational structure

In strict accordance with the requirements of the company law, the securities law, the guidelines for the standardized operation of companies listed on the gem of Shenzhen Stock Exchange and other laws and regulations and the provisions of the articles of association, the company has established the general meeting of shareholders, the board of directors, the board of supervisors and the operation and management organization under the leadership of the board of directors, and elected four independent directors in accordance with the spirit of the rules for independent directors of listed companies.

The general meeting of shareholders is the highest authority of the company, which is responsible for formulating the development strategy, business policy and investment plan of the company, making decisions on the internal control of the company as a whole, ensuring that all shareholders, especially small and medium-sized shareholders, enjoy equal status through the rules of procedure, and ensuring that all shareholders can fully exercise their rights.

The board of directors is not only the daily decision-making body of the company, but also the executive body of the resolutions of the general meeting of shareholders. It is specifically responsible for the establishment, improvement, specific implementation and effect evaluation of the company's internal control system, and effectively supervise the internal control through the special committee under it.

Under the board of directors, a strategy committee, an audit committee, a nomination committee and a remuneration and assessment committee are established to review and make decisions on major matters in the company's business activities or submit them to the general meeting of shareholders for deliberation. The above-mentioned institutions have formulated rules of procedure and working system respectively, and perform their duties in strict accordance with the provisions of the articles of association.

The board of supervisors is the company's supervisory body, which supervises the company's internal control, supervises the work of the board of directors, management and the company's finance, and puts forward suggestions for improvement and improvement to promote the further improvement of the company's internal control.

(2) Emphasis on Competence

The management of the company attaches great importance to the setting of the use ability level required for specific jobs, as well as the requirements for the knowledge and ability necessary to achieve this level. The company also carries out various forms of post training and education for different posts according to the needs of actual work, so that employees can be competent for their current jobs.

(3) Participation of governance

The responsibilities of the management of the company have been clearly stipulated in the articles of association and policies of the company. Through its own activities and with the support of the audit committee, the governance layer supervises the company's accounting policies and internal and external audit work and results. The responsibilities of the governance layer also include supervising whether the policies and procedures designed to review the effectiveness of internal control are reasonable and effective.

(4) Management philosophy and business style

The power distribution among the management of the company is reasonable, and the board of directors can effectively supervise the behavior of the management, so that it can properly perform its duties. The company's management has appropriate competence and stability to ensure that they can correctly perform their duties and maintain the continuity of management philosophy and business style. In dealing with risks, the management of the company does not accept risks beyond the risk tolerance, has a responsible attitude towards accounting records and financial reports, and especially emphasizes the accuracy of accounting records and the selection of accounting policies and accounting estimates suitable for the actual situation of the company. For major internal control and accounting matters, the management will consult the opinions and suggestions of certified public accountants.

(5) Establishment and work of the company's internal audit department

The company has a special internal audit department, formulated the internal audit system, and equipped with special auditors to carry out daily internal audit work. The internal audit department is directly responsible to the Audit Committee for the audit work, and other departments or personnel have no right to interfere. The audit department shall take appropriate inspection methods to inspect and evaluate the integrity, compliance and effectiveness of the company's internal control system; Audit the accounting data and other relevant economic data of the company, as well as the legitimacy, compliance, authenticity and integrity of economic activities; Pay reasonable attention to and check possible fraud in the process of internal audit; Establish an anti fraud mechanism. Timely put forward management suggestions for the problems found in the supervision and inspection, and urge relevant departments to rectify in time to ensure the effective implementation of the internal control system and ensure the standardized operation of the company.

(6) Human resources

The company makes detailed provisions on personnel employment, training, job rotation, assessment, rewards and punishments, promotion and elimination, and establishes a perfect performance appraisal system to continuously optimize the allocation of human resources and comprehensively enhance the core competitiveness of the enterprise. The company implements a full-time labor contract system, defines labor relations, participates in social endowment insurance, medical insurance, unemployment insurance and housing provident fund for employees, and ensures that employees enjoy social security benefits according to law. The company pays attention to the humanistic care of employees and provides convenience for employees in terms of food, housing and transportation. It organizes employees to have a physical examination every year and regularly organizes employees to have recreational and sports activities, which improves the sense of belonging and cohesion of employees of the company. The company has a perfect reward and punishment mechanism. Employees and key employees who have made contributions will be rewarded through, evaluation and salary increase. For delays, mistakes and omissions in work, the company has formulated corresponding punishment policies according to the nature of the problem. Through the perfect reward and punishment system, the company can realize the survival of the fittest in human resources, keep the company's employees at the normal flow level and ensure the efficient operation of the company.

2. Risk control

(1) Risk assessment

Third, the company's democratic decision-making and effective feedback system can be established and improved through the company's democratic decision-making, management and effective feedback system. The company has made clear provisions on corporate governance structure, risk assessment, control activities, information communication and internal control supervision and inspection to ensure the integrity and effectiveness of the company's internal control system, supplemented by specific strategies and business process plans to clearly convey the business objectives of the enterprise to every employee. The management attaches great importance to internal control, including information management personnel and accounting personnel, and timely deals with the weaknesses of internal control received.

In the process of establishing and improving the internal control system, the company adheres to the risk oriented principle, timely rectifies the problems found, optimizes the company's internal control, improves the company's internal control management, and promotes the improvement of the company's management level. It is an inevitable choice for the company to improve the internal control system and promote standardization, and also in line with the actual needs of the company to further cultivate the idea that the management bears the ultimate responsibility for the internal control system and has ownership of the system, so as to actively prevent business risks and improve the requirements of operation and management level.

(2) Risk control system

The company applies for short-term export credit insurance comprehensive insurance from China SINOSURE Fujian branch every year, covering the export of all non letter of credit payment methods and the export of some letter of credit payment methods. Its insurance limit can cover the balance of customers' accounts receivable at the end of the period, so as to minimize the risk that the company's accounts receivable cannot be recovered. Up to now, the company has not experienced the situation that large amount of accounts receivable cannot be recovered.

At present, the company has been rated as AA customer by China SINOSURE. Under the same conditions, the key buyer limit of AA customer will be met first; Small claims cases can apply to the green channel for claims settlement and enjoy rapid claims settlement services.

3. Information and communication

(1) Internal information communication

In order to ensure the rapid transmission, collection and effective management of major information within the company, disclose information timely, accurately, comprehensively and completely, and safeguard the legitimate rights and interests of the company and investors, the company has formulated the internal reporting system of major information. The system defines the responsibilities of each internal information reporting obligor and requires each obligor to report major information in strict accordance with the regulations, so that the management can understand all major information at the first time.

The company uses OA system for daily office and promotes enterprise wechat. Both OA and enterprise wechat can be used in computers and mobile phones, realizing mobile office and ensuring the timeliness of information communication.

(2) Communication with investors

The company has formulated the investor relations management system to standardize the communication and contact with investors and specific objects. The Securities Department of the company is responsible for communicating with investors and specific objects and receiving visits from institutional investors. A special direct dial telephone for investors has been set up. Investors can use the telephone and e-mail to ask the company and understand their concerns. And immediately reply to investors' questions through the interactive easy platform.

4. Control activities

In order to ensure the effective implementation of internal control in operation and management and the realization of control objectives, the company has established effective control procedures in related party transactions, external guarantees, use of raised funds, information disclosure and so on.

(1) Authorization approval control

The company has formulated a perfect authorization and approval system for different operations