Foshan Nationstar Optoelectronics Co.Ltd(002449)
Self evaluation report on internal control in 2021
Foshan Nationstar Optoelectronics Co.Ltd(002449) all shareholders:
In order to further strengthen and standardize the company’s internal control, improve the company’s operation and management level and risk prevention ability, promote the standardized operation and healthy development of the company, and safeguard the legitimate rights and interests of all shareholders and stakeholders, according to 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 guidelines for the application of enterprise internal control and the guidelines for the evaluation of enterprise internal control The normative requirements of documents such as the guidelines for self discipline supervision of listed companies of Shenzhen Stock Exchange No. 1 – standardized operation of listed companies on the main board (hereinafter referred to as the “enterprise internal control normative system”), combined with the internal control system and evaluation methods of Foshan Nationstar Optoelectronics Co.Ltd(002449) (hereinafter referred to as ” Foshan Nationstar Optoelectronics Co.Ltd(002449) ” or “the company”), on the basis of daily and special supervision of internal control, and based on the principle of objectivity and prudence, We have evaluated the effectiveness of the company’s internal control as of December 31, 2021 (benchmark date of internal control evaluation report) as follows. 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 company’s 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.
2、 Basis of internal control evaluation, classification and identification standard of internal control defects
1. Evaluation basis
The company complies with the requirements of relevant laws, regulations, rules and regulations, such as self regulatory guidelines for listed companies of Shenzhen Stock Exchange No. 1 – standardized operation of listed companies on the main board, guidelines for internal control of listed companies of Shenzhen Stock Exchange, basic norms of enterprise internal control, guidelines for the application of enterprise internal control, guidelines for the evaluation of enterprise internal control, and the company’s internal audit system, Organize and carry out internal control evaluation. The evaluation of internal control shall be carried out in strict accordance with the procedures of basic norms and evaluation guidelines. The management is responsible for the implementation of internal control self-assessment; The internal audit department of the company is independently responsible for the inspection and supervision of the self-assessment results of internal control.
2. Classification of internal control defects
(1) According to the essential classification of internal control defects, they are divided into design defects and operation defects.
Design defect means that the enterprise lacks the necessary control to achieve the control objectives, or the existing control is unreasonable and fails to meet the control objectives;
Operation defect refers to the design of reasonable and effective internal control, but it is not correctly implemented in operation. (2) According to the severity of affecting the realization of the company’s internal control objectives, it can be divided into major defects, important defects and general defects.
Major defect: the combination of one or more control defects may cause the company to seriously deviate from the control objectives. Important defect: the combination of one or more control defects, whose severity is lower than that of major defects, but may still cause the company to deviate from the control objectives.
General defects: refer to other control defects except major defects and important defects.
(3) According to the specific forms that affect the objectives of internal control, internal control defects can be divided into financial reporting defects and non-financial reporting defects.
3. Identification standard of internal control defects
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 standards of internal control defects in financial reports
The defects of internal control over financial reporting are divided into major defects, important defects and general defects.
a. The quantitative criteria for the evaluation of internal control defects in financial reporting determined by the company are as follows:
If the loss that may be caused or caused by the defect of internal control is related to the income statement, it shall be measured by the total profit index. If the amount of misstatement in the financial report caused by the defect alone or in combination with other defects is less than 5% of the total profit, it shall be recognized as a general defect; If the profit before tax exceeds 5% and less than 10%, it is recognized as an important defect; If it exceeds 10% of the pre tax profit, it is recognized as a major defect.
Losses that may be caused or caused by internal control defects related to asset management shall be measured by the total asset index. If the amount of financial report misstatement that may be caused by the defect alone or in combination with other defects is less than 0.5% of the total assets, it is recognized as a general defect; If it exceeds 0.5% of the total assets and is less than 1%, it is recognized as an important defect; If it exceeds 1% of the total assets, it is recognized as a major defect.
b. The qualitative evaluation criteria of the company’s internal financial control report are as follows:
Under the following circumstances (including but not limited to), it shall generally be recognized as a major defect in the internal control of financial reporting:
(a) It is found that directors, supervisors and senior managers have major fraud in the company’s management activities;
(b) The external audit found that there were significant misstatements in the current financial statements, but the internal control failed to find such misstatements in the operation process;
(c) The supervision of the company’s audit committee and internal audit institutions on internal control is invalid;
(d) Invalid control environment;
(e) Once the major defects found and reported to the management are not corrected within a reasonable time;
(f) Administrative penalties imposed by securities regulatory authorities due to accounting errors.
Signs of significant deficiencies in financial reports include:
(a) Failure to select and apply accounting policies in accordance with GAAP;
(b) Failure to establish anti fraud procedures and control measures;
(c) No corresponding control mechanism has been established or implemented for the financial treatment of unconventional or special transactions, and there is no corresponding supplementary control;
(d) 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 objectives;
General defects refer to other control defects other than the above major defects and important defects.
(2) Identification standard of internal control defects in non-financial reporting
The defects of internal control over non-financial reporting are also divided into three categories: major defects, important defects and general defects. a. The quantitative criteria for the evaluation of internal control defects in non-financial reporting determined by the company are as follows:
If the loss that may be caused or caused by the defect of internal control is related to the income statement, it shall be measured by the total profit index.
If the amount of misstatement in the financial report caused by the defect alone or in combination with other defects is less than 5% of the total profit, it shall be recognized as a general defect; If the profit before tax exceeds 5% and is less than 10%, it will be recognized as an important defect; If it exceeds 10% of the pre tax profit, it is recognized as a major defect.
Losses that may be caused or caused by internal control defects related to asset management shall be measured by the total asset index. If the amount of financial report misstatement that may be caused by the defect alone or in combination with other defects is less than 0.5% of the total assets, it is recognized as a general defect; If it exceeds 0.5% of the total assets and is less than 1%, it is recognized as an important defect; If it exceeds 1% of the total assets, it is recognized as a major defect.
b. The qualitative criteria for the evaluation of internal control defects in non-financial reporting determined by the company are as follows:
Defects with the following characteristics are recognized as major defects:
(a) The company’s business activities seriously violate national laws and regulations;
(b) Unscientific decision-making procedures of the company lead to major mistakes;
(c) Major defects in the company’s internal control have not been rectified;
(d) Other situations that have a significant negative impact on the company.
Defects with the following characteristics are recognized as important defects:
(a) The company received punishment for violating national laws and regulations, but did not have a negative impact on the disclosure of the company’s periodic reports;
(b) General mistakes caused by the company’s decision-making procedures;
(c) Major defects in the company’s internal control have not been rectified;
(d) Other situations that have a great negative impact on the company.
General defects refer to other control defects other than the above major defects and important defects.
3、 Internal control evaluation
(I) evaluation scope of internal control
According to the risk oriented principle, the company determines the main units, businesses and matters included in the evaluation scope and high-risk areas. The main units included in the scope of evaluation include:
1 Foshan Nationstar Optoelectronics Co.Ltd(002449) ；
2. Foshan Guoxing Semiconductor Technology Co., Ltd. (hereinafter referred to as “Guoxing semiconductor”);
3. Foshan Guoxing Electronic Manufacturing Co., Ltd;
4. Nanyang Baoli Vanadium Industry Co., Ltd;
5. Foshan Nationstar Optoelectronics Co.Ltd(002449) (Germany) Co., Ltd;
6. Guangdong Xinli electronic information import and Export Co., Ltd;
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, and the total operating revenue accounts for 100% of the total operating revenue in the company’s consolidated financial statements; The main businesses included in the evaluation scope include: R & D, manufacturing and sales of optoelectronic semiconductor devices, optoelectronic display devices, LED display screens, optoelectronic semiconductor lighting lamps and lighting, semiconductor integrated circuits; Photoelectric module; Undertake photoelectric display engineering and photoelectric lighting engineering; Production, R & D and sales of LED epitaxial chips and chips; Technical R & D and technical consulting services of vanadium products; Self support and agency of import and export business of various commodities and technologies, processing with supplied materials and “three supplies and one compensation” business, foreign trade and entrepot trade, sales of chemical products, exhibition services, etc.
The main items included in the evaluation scope include: organizational structure, development strategy, human resources, social responsibility, corporate culture, fund management, procurement business, asset management, sales business, subsidiary management, foreign investment control, guarantee business, related party transactions, comprehensive budget, contract management, information disclosure, etc; The high-risk areas mainly include: subsidiary management, investment management, guarantee business, related party transactions, procurement management, sales business, information disclosure, 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.
(II) internal control in high-risk areas of key concern
1. Subsidiary management
The company has established the subsidiary management system by appointing directors, supervisors and important senior managers to the holding subsidiaries; Supervise them to establish corresponding business plans, risk management procedures, major event reporting system and deliberation procedures, timely report major business events and important documents to the person in charge of the company and the Secretary of the board of directors of the company, and submit major events to the board of directors or the general meeting of shareholders of the company for deliberation in strict accordance with the authorization provisions; Regularly obtain and analyze various quarterly (monthly) business reports of subsidiaries; Establish and improve the performance appraisal system of holding subsidiaries to strengthen the management and control of subsidiaries.
During the reporting period, each holding subsidiary was able to operate in accordance with the company’s established guidelines and policies, timely submit and submit relevant business reports, important documents and matters, and accept irregular internal audit supervision and inspection.
2. Investment management
The company has formulated the investment management system to clarify the functions of the company’s investment project management organization, establish the decision-making and approval procedures for investment projects, and improve the management requirements for pre -, in – and post evaluation and information disclosure of investment projects, so as to effectively standardize the company’s investment behavior, avoid the risks brought by investment and use funds effectively and reasonably. The company strictly performs legal procedures and information disclosure obligations, follows the principles of legality, prudence, safety and effectiveness, controls investment risks and pays attention to investment income.
3. External guarantee
The company’s external guarantee management system specifies that the internal control of external guarantee shall follow the principles of legality, prudence, mutual benefit and safety. It is stipulated that the company’s external guarantee must be subject to unified management, and the company’s branches shall not provide external guarantee. The external guarantee of the company must be approved by the board of directors or the general meeting of shareholders. Directors, general managers and other senior managers shall not sign guarantee contracts on behalf of the company without authorization. It also makes detailed provisions on the guarantee object, guarantee management functional department, guarantee review and resolution restrictions, approval authority and decision-making procedures, guarantee risk management measures, etc. when the company has external guarantee behavior.
4. Related party transactions
The company has made clear provisions on the confirmation of related party relations and transactions, the deliberation and decision-making procedures of related party transactions and the information disclosure of related party transactions in the articles of association, the rules of procedure of the general meeting of shareholders, the rules of procedure of the board of directors, the management system of related party transactions and other relevant documents. The company has formulated the special system to prevent major shareholders and related parties from occupying the company’s funds, A long-term mechanism has been established to prevent major shareholders from occupying the company’s funds. It ensures that the related party transactions between the company and related parties comply with the relevant provisions of the regulatory authorities, and follow the principles of honesty and credibility, fairness, openness and impartiality, and do not damage the legitimate rights and interests of the company and non related shareholders.
5. Procurement management
The company has established system documents such as purchase management procedure, supplier management procedure, reconciliation management regulations and price verification management regulations, and clarified their respective rights and responsibilities and mutual restriction requirements and measures in the links of purchase requisition and approval, supplier management, purchase price negotiation, purchase contract management, arrival acceptance, purchase business bills and relevant accounting records, payment application, approval and implementation;
The supplier management procedure standardizes the supplier development, evaluation and exit mechanism, and ensures the stability and efficiency of the supply chain. Standardized procurement contract signing procedures can effectively avoid legal and commercial risks. The company has established a strict approval and tracking mechanism for purchase advance / payment, and fully controlled the procurement process. For the procurement of products or services with sufficient market competition, the price of suppliers and goods shall be determined by price comparison or bidding; For the procurement of goods with insufficient competition, the procurement cost can be effectively controlled by establishing a mutually beneficial relationship of long-term cooperation and win-win with suppliers. The control traces of key nodes of relevant processes are clear and complete.
The internal procurement of the company is jointly completed by the sales, R & D, production, quality and procurement departments. From the purchase requisition to the order of the actual order, it needs to be related to the sales demand, the performance verification and quality confirmation of raw materials, and finally summarized and generated
