Zhangjiagang Zhonghuan Hailu High-End Equipmentco.Ltd(301040) : self evaluation report on internal control in 2021

Zhangjiagang Zhonghuan Hailu High-End Equipmentco.Ltd(301040)

Self evaluation report on internal control in 2021

Zhangjiagang Zhonghuan Hailu High-End Equipmentco.Ltd(301040) 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 internal control system and evaluation methods of Zhangjiagang Zhonghuan Hailu High-End Equipmentco.Ltd(301040) (hereinafter referred to as "the company" or "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 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 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

The company's existing internal control system is basically sound, covering all levels and links of the company's operation, forming a relatively standardized management system. 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 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 has 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 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

（1） Scope of internal control evaluation

The main units included in the evaluation scope of the company include: the total assets of the units included in the evaluation scope of the company account for 100% of the total assets of the company's financial statements, and the total operating revenue accounts for 100% of the total operating revenue of the company's financial statements; Among the main businesses and matters included in the evaluation scope, the corporate governance level includes: corporate governance structure, organizational structure, development strategy, social responsibility, corporate culture, human resources, risk assessment, information system and communication, and supervision of control; The business process level includes: fund management, procurement management, sales management, contract management, production management, financing management, investment management, financial report management, related party transaction management, external guarantee management, information disclosure management and budget management; The high-risk areas of focus mainly include: fund management, procurement management, asset management, major investment and external guarantee, related party transactions, information disclosure, use and management of raised funds, financial reports, etc.

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, and there are no major omissions.

1. Corporate governance structure

In accordance with the company law, securities law and other relevant laws and regulations, as well as the provisions of Zhangjiagang Zhonghuan Hailu High-End Equipmentco.Ltd(301040) articles of association, the company has established the general meeting of shareholders, the board of directors, the board of supervisors and the management under the leadership of the board of directors, established the independent director system and formed a more reasonable governance structure. The rules of procedure of the general meeting of shareholders, the rules of procedure of the board of directors, the rules of procedure of the board of supervisors and the working rules of the general manager have been formulated, which clearly stipulates the convening and procedures of the general meeting of shareholders, the board of directors and the board of supervisors.

2. Organization setting and distribution of rights and responsibilities

The company sets up internal institutions in combination with business characteristics and internal control requirements, defines responsibilities and authorities, and implements rights and responsibilities to each responsible unit. The company has established a special organization or designated an appropriate organization to be specifically responsible for organizing and coordinating the establishment, implementation and daily work of internal control. The organization of the company is as follows:

3. Internal audit

The audit committee under the board of directors of the company shall carry out work in accordance with the working rules of the audit committee, be responsible for supervising, inspecting and evaluating the internal control, financial information and internal audit of the company, and report to the board of directors.

The company has established an internal audit department to carry out internal audit in accordance with the company's internal control system, supervise and inspect the daily work of various departments of the company, report to the audit committee, and put forward improvement suggestions and treatment methods.

4. Human resources policy

The company has established and implemented more scientific personnel management systems such as employment, training, assessment, reward and punishment, promotion and elimination, and employed appropriate personnel to complete the assigned tasks. The company has also established a responsibility linked performance appraisal system to evaluate the working ability and performance of all employees, including managers, and the appraisal results are linked to personal salary.

5. Corporate culture

The company attaches great importance to the construction of corporate culture, focuses on the edification and cultivation of employees' professional ethics, gradually establishes professional ethics norms for relevant posts, manages employees through relevant systems of human resources, deals with violations, and urges employees to abide by professional ethics norms.

The company has built a set of corporate culture system covering corporate mission, core values and corporate spirit. With the vision of "science and innovation leading, intelligent driving, green development and high quality and efficiency", the company has strengthened scientific and technological innovation, independent research and development, created a learning organization, continuously promoted energy conservation and emission reduction and environmental protection, and adhered to the core values of "people-oriented and improving team combat effectiveness with cohesion", We will continue to promote the construction of corporate culture and civilization with the enterprise spirit of "integrity, passion, innovation and cooperation".

The company actively cultivates employees' positive values and sense of social responsibility, advocates honesty and trustworthiness, love and dedication, pioneering and innovative spirit and teamwork spirit, establishes modern management concept, and strengthens risk awareness and legal concept.

6. Risk assessment

Since its establishment, the company has attached great importance to risk assessment and established effective risk identification and assessment methods and procedures. In order to ensure the sustainable development of the company, the company focuses on the main factors causing risks, investigates and scientifically analyzes the risks, accurately identifies and evaluates internal and external risks, and reduces the impact of risks on the company.

In the process of business implementation, the company has continuously and effectively monitored and identified the possible business risks, financial risks, market risks, policies and regulations risks. For the identified risks, the company has formulated methods and plans to control or reduce risks according to the risk degree, and effectively carried out risk identification and assessment.

7. Control activities

The company has necessary control policies and procedures for its main business activities. The management has established appropriate protective measures to reasonably ensure that all businesses are properly authorized, incompatible positions have been set up, the management of physical assets can be consistent with records, and the accounting system can ensure the authenticity and integrity of financial report information.

(1) Authorization approval control: it defines the scope, authority, procedures, responsibilities and other relevant contents of authorization approval. The management at all levels within the unit must exercise the corresponding authority within the scope of authorization, and the handling personnel must also handle economic business within the scope of authorization.

(2) Separation control of incompatible positions: reasonably set up division of labor, scientifically divide responsibilities and authorities, implement the principle of separation of incompatible positions, and form a mechanism of mutual checks and balances. Incompatible positions mainly include: authorization approval and business handling, business handling and accounting records, accounting records and property custody, business handling and business audit, authorization approval and supervision and inspection, etc.

(3) Property protection control: designed and implemented property management systems such as physical inventory management, physical management of fixed assets, cash management, check management and bank account management, and took measures such as regular inventory, property records, account verification and property insurance to ensure the safety and integrity of various properties.

(4) Accounting system control: the company strictly implements the national unified accounting standards and relevant systems, has a clear division of labor for the preparation and review of accounting vouchers, and stipulates the preparation and processing process of financial statements to ensure the authenticity and integrity of accounting data.

8. Information system and communication

The company obtains external information such as the latest national policies and regulations, customers, suppliers and competitors through online public information, intermediaries, investors, business units and relevant regulatory authorities. The company obtains internal information through financial and accounting materials, operation and management materials, research reports, information systems and other channels.

All departments of the company regularly report production and operation data to the management in a timely and effective manner, so that the management can timely understand important operation information and make timely and appropriate decisions. The procurement department, production department, sales department and financial department of the company communicate and record the implementation of business contracts in a timely manner through weekly meetings. The company communicates with customers and suppliers by telephone, e-mail and visit. The company shall hold annual shareholders' meeting and interim shareholders' meeting in accordance with the company law and the articles of association to ensure shareholders' rights and interests.

The company has established effective communication channels and mechanisms for suspicious inappropriate matters and behaviors, so that the management can effectively communicate with employees' responsibilities and control responsibilities. The adequacy of internal communication enables employees to effectively perform their duties, communicate effectively with customers, suppliers, regulators and other outsiders, and enable the management to take timely and appropriate further actions in the face of various changes.

9. Supervision of control

The company's supervision of control is mainly carried out through the board of directors, the audit committee and the internal audit department. The internal audit department is independent of other departments of the company, performs daily internal control supervision and inspection, and reports directly to the Audit Committee; The remuneration and appraisal committee of the board of directors shall inspect the performance of the directors, supervisors and senior managers of the company, and review the performance appraisal, salary payment and welfare payment of the company; The independent directors of the company actively participate in the board of directors and the general meeting of shareholders in strict accordance with the articles of association, the working system of independent directors and relevant laws, deeply understand the operation of the company and express independent opinions; The supervisors of the company supervise and inspect the behavior of the directors and all managers of the company and the financial situation of the company. The company conducts self-test and evaluation on the implementation of internal control, checks at least once a year, and takes timely measures to correct the defects found in the inspection.

10. The areas of focus mainly include

(1) Sales and collection control

The company has established a complete control system for sales and collection process, which controls customer file maintenance, contract approval and signing, revenue confirmation and invoicing, recording accounts receivable, collection, reconciliation with customers and other links, and has taken measures such as division of responsibilities and level by level review, so that the provisions and procedural requirements of relevant systems can be observed in daily implementation.

(2) Purchase and payment control

The company has established a complete control system for procurement and payment process, which controls supplier management, procurement execution, material acceptance and warehousing, reconciliation with suppliers, invoice processing, payment application and approval, recording accounts payable and payment information, and has taken measures such as division of responsibilities, regular job rotation and level-by-level review, so that the provisions and procedural requirements of relevant systems can be observed in daily implementation.

(3) Production and storage control

The company has established a complete control system for production and warehousing process, which controls the organization of production, finished product warehousing, production cost accounting, entrusted processing process, physical management and other links, and has taken measures such as division of responsibilities, regular inventory, order production and level by level audit. The daily implementation can comply with the provisions and procedural requirements of relevant systems.

(4) Research and development control

The company has established a complete control system for the research and development process to control the establishment of R & D projects, R & D material requisition, R & D progress, R & D achievements and other links, and has taken measures such as division of responsibilities and level by level audit. It can comply with the provisions of relevant systems and procedural requirements in its daily implementation.

(5) Fund management control

The company has established a complete control system of fund management process to control the opening and cancellation of bank accounts, daily management of bank deposits, daily management of cash, bill management, expense reimbursement, borrowing, internal transactions and transactions, and has taken measures such as division of responsibilities, regular job rotation and level-by-level review. The daily implementation can comply with the provisions and procedural requirements of relevant systems.

(6) Human resource management

The company has established a complete control system of human resource management process to control employee recruitment, regularization, job transfer, promotion, dismissal, basic salary data management, salary processing and other links, and has taken measures such as division of responsibilities and level-by-level review, so as to comply with the provisions and procedural requirements of relevant systems in daily implementation. (7) Fixed assets management control

The company has established a complete control system for the management process of fixed assets to control the acquisition and acceptance of fixed assets, the use and maintenance of fixed assets, the physical management of fixed assets and other links, and has taken measures such as division of responsibilities, regular inventory and level by level audit. It can comply with the provisions and procedural requirements of relevant systems in its daily implementation.

(II) evaluation basis of the company's internal control and identification standard of internal control defects

The internal control system of the company is based on the internal control system of the company.

The board of directors of the company distinguished the internal control of financial report from the internal control of non-financial report according to the identification requirements for major defects, important defects and general defects of the enterprise internal control standard system, combined with the factors such as the company's size, industry characteristics, risk preference and risk tolerance, and studied and determined the specific identification standards of internal control defects applicable to the company, which are consistent with the previous years. The identification standards of internal control defects determined by the company are as follows:

1. Identification standard of internal control defects in financial reporting

Defect type definition company standard

Quantitative standard