Sichuan Huaxin (Group) accounting firm address: 28th floor, jinmaolidu south, No. 18, Ximianqiao street, Chengdu Tel: (028) 85560449
(special general partnership) fax: (028) 85560449
Si Chuan Hua Xin (Group) CPA 610041
(LLP) email: [email protected].
Chongqing Lummy Pharmaceutical Co.Ltd(300006)
Internal control assurance report
Chxs (2022) No. 0110
catalog:
1. Anti counterfeiting mark
2. Body of internal control assurance report
3. Internal control evaluation report
Chongqing Lummy Pharmaceutical Co.Ltd(300006) internal control assurance report
Internal control assurance report
Chuan Hua Xin Zhuan (2022) No. 0110 Chongqing Lummy Pharmaceutical Co.Ltd(300006) all shareholders:
We have reviewed the attached confirmation made by the management of Chongqing Lummy Pharmaceutical Co.Ltd(300006) (hereinafter referred to as your company) on the effectiveness of internal control related to the financial statements on December 31, 2021 in accordance with the basic norms of enterprise internal control (CK [2008] No. 7) and relevant regulations of the Ministry of finance.
1、 Description of significant inherent limitations
Internal control has inherent limitations, and there is the possibility of misstatement and undetected due to error or fraud. In addition, due to the change of circumstances, the internal control may become inappropriate, or the degree of compliance with control policies and procedures may be reduced. According to the internal control evaluation results, it is speculated that the effectiveness of internal control in the future has a certain risk.
2、 Restrictions on the users and purposes of the report
This assurance report is only for the disclosure of your annual report and shall not be used for any other purpose. We agree to take this assurance report as a necessary document of your company’s annual report, submit it together with other documents and disclose it to the public.
3、 Responsibilities of management
It is the responsibility of the Ministry of Finance and accounting to establish and improve the internal control of the company and maintain its effectiveness in accordance with the regulations of the Ministry of Finance and accounting on December 31, 2008.
4、 Responsibilities of Certified Public Accountants
Our responsibility is to independently put forward the assurance conclusion on the above determination made by the management of your company.
5、 Job overview
We have carried out the assurance business in accordance with the provisions of other assurance business standards for Chinese certified public accountants No. 3101 – assurance business other than audit or review of historical financial information. The above provisions require us to plan and implement the assurance work to obtain reasonable assurance on whether the information of the assurance object is free from material misstatement. In the assurance process, we have implemented other procedures including understanding, testing and evaluating the rationality of the design and effectiveness of the implementation of the internal control system, as well as other procedures that we consider necessary. We believe that our assurance work provides a reasonable basis for expressing opinions.
Chongqing Lummy Pharmaceutical Co.Ltd(300006) internal control assurance report
6、 Assurance conclusion
Your company has maintained effective internal control related to accounting statements in all major aspects on December 31, 2021 in accordance with the basic norms of enterprise internal control (CK [2008] No. 7) and relevant regulations of the Ministry of finance.
This conclusion is formed under the inherent limitations pointed out in the assurance report.
Sichuan Huaxin (Group) certified public accountants China Certified Public Accountant: Chen Jie
(special general partnership)
Chengdu, China Certified Public Accountant: Li Youming
Chinese certified public accountant: Zhao Xiangyu
March 24, 2002
Chongqing Lummy Pharmaceutical Co.Ltd(300006)
Internal control evaluation report in 2021
Chongqing Lummy Pharmaceutical Co.Ltd(300006) all shareholders:
In accordance with the provisions and requirements of the basic norms of enterprise internal control and supporting guidelines, gem stock listing rules, Shenzhen Stock Exchange self regulatory guidelines for listed companies No. 2 – standardized operation of GEM listed companies and other laws and regulations and relevant documents, in combination with the rules and regulations of Chongqing Lummy Pharmaceutical Co.Ltd(300006) (hereinafter referred to as the “company”), on the basis of daily supervision and special supervision, The company has evaluated the effectiveness of internal control as of December 31, 2021 (benchmark date of 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. Senior managers are 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、 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 from the base date of the internal control evaluation report to the date of issuance of the internal control evaluation report.
3、 Construction and implementation of internal control system
(I) internal environment
1. Corporate governance
In accordance with the company law, the securities law and other relevant laws, regulations and the articles of association, the company has established a corporate governance structure composed of the general meeting of shareholders, the board of directors, the board of supervisors and the general manager, and formulated the rules of procedure of the general meeting of shareholders, the rules of procedure of the board of directors, the working system of independent directors, the rules of procedure of the board of supervisors and the working rules of the general manager. The company’s “three meetings” system has made clear provisions on the nature, responsibilities and working procedures of the company’s general meeting of shareholders, the board of directors, the board of supervisors and the general manager, as well as the qualifications, powers, obligations, assessment, rewards and punishments of the chairman, directors (including independent directors), supervisors and the general manager, defined the responsibilities and authorities in decision-making, implementation and supervision, and formed a scientific and effective division of responsibilities and check and balance mechanism.
The general meeting of shareholders is the highest authority of the company; The board of directors of the company is the operation decision-making body of the company, and the board of directors is responsible for the general meeting of shareholders; The board of supervisors of the company is the supervision organization of the company, which is responsible for the supervision and inspection of the company’s operation and financial status, the performance of the company’s directors and senior managers according to law, and is responsible to the general meeting of shareholders; Entrusted by the board of directors, the general manager is fully responsible for the operation and management of the company.
The board of directors of the company has four special committees: Strategy Committee, audit committee, nomination committee and salary and assessment committee, and each special committee is responsible to the board of directors. The company has established an independent director system, and the audit committee has a chairman, who is held by an independent director. Independent directors have the obligation of integrity and diligence to all shareholders of the company, perform their duties independently and fairly, and safeguard the overall interests of the company.
2. Organizational structure
The organizational structure of the company is as follows:
3. Internal audit
The company sets up an internal audit department, which is responsible to the audit committee of the board of directors and carries out audit work independently according to the provisions of the internal audit system. Under the leadership of the audit committee, the internal audit department shall supervise and inspect the construction and implementation of business activities and internal control system; Report the internal control defects found in the supervision and inspection in accordance with the company’s internal audit procedures, and put forward corresponding improvement suggestions and handling opinions; The major defects of internal control found in the supervision and inspection can be directly reported to the board of directors and its audit committee to ensure the implementation of internal control and the normal operation of business activities.
4. Human resources policy
The company takes “talent oriented, people make the best use of their talents” as the employment concept, and adheres to the employment principle of “morality first, quality first and behavior-oriented”, so that employees and the company can grow together and achieve win-win results. According to the labor law and relevant laws and regulations, the company has established a relatively perfect personnel management system for employee employment, training, education, assessment, reward and punishment, promotion and elimination, so as to ensure that employees in different positions have corresponding work competence and effectively improve their professional ethics and professionalism. Scientific and effective personnel management mechanism provides a strong guarantee for the company to attract and retain high-quality talents.
5. Corporate culture
The company takes “providing innovative, excellent and effective drugs and technologies for human health” as its mission, takes “self-discipline, care, trust and struggle” as its core values, adheres to the business philosophy of “meeting health needs, expanding health cause, advocating health concept and creating health value”, advocates the enterprise spirit of “integrity, professionalism and pursuit of excellence”, makes pragmatic innovation, keeps pace with the times, and pursues high-quality, efficient and sustainable operation.
(II) risk assessment
According to the company’s development strategy and industry characteristics, the company always pays attention to the external environment such as economic situation, market competition and relevant laws and regulations. The company maintains good communication with the government and regulatory authorities, and learns the changes of external information such as industrial policy, regulatory requirements, economic form and financing environment in time. By collecting relevant information, analyzing and discussing, the company identified the main risks brought by covid-19 epidemic, such as operation risk, industry policy risk, technology development risk, drug price reduction risk, foreign investment risk, product quality and safety risk and so on. The company comprehensively uses the strategies of risk avoidance, risk reduction, risk sharing and risk tolerance, and takes appropriate and effective control measures to deal with these risks.
(III) control activities
According to the risk assessment results, the company has taken corresponding control measures to control the risk within the tolerable range. Specifically, according to the management requirements of modern enterprise system, the company has established a series of internal management systems for various production and operation links, such as sales and collection process management, procurement and payment process management, production and storage process management, personnel and salary management, financing and investment management, monetary fund management and so on, so as to ensure that all work has rules to follow and form a standardized management system.
1. Control measures
(1) Incompatible job separation control
The company shall reasonably set up division of labor, scientifically divide responsibilities and authorities, implement the principle of separation of incompatible positions and that each person’s work can automatically check the work of another person or more people, and form a mutual check and balance mechanism. 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.
(2) Authorization approval control
In addition to the provisions on the authority of the board of directors, the board of supervisors and the general meeting of shareholders, the company has made clear the scope, authority, procedures, responsibilities and other relevant contents of authorization and approval for the chairman, general manager and other senior managers of the company and department heads. 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.
(3) Accounting system control
In accordance with the requirements of the company law, accounting law, accounting standards for business enterprises and other laws and regulations and their supplementary provisions, the company has formulated an accounting system and financial management system suitable for the company, established a post responsibility system, and equipped with qualified accounting practitioners, giving full play to the supervision function of accounting. The company has clearly stipulated the processing procedures of accounting vouchers, accounting books and financial accounting reports, and continuously strengthened the basic work of accounting to ensure the authenticity and integrity of accounting materials.
(4) Property protection control
The company strictly restricts the direct contact of unauthorized personnel with property, and takes measures such as property records, physical storage, regular inventory, account verification and property insurance to ensure the safety of property.
(5) Budget control
The company prepares the annual plan and budget, strengthens the management of budget implementation, analysis and assessment, analyzes and controls budget differences, and takes improvement measures to ensure budget implementation.
(6) Operational analysis
In the actual operation process, the company’s operation and management team comprehensively uses the information of production, purchase and sales, finance and other aspects, and regularly carries out operation analysis through factor analysis, comparative analysis, trend analysis and other methods, so as to find problems and improve them in time. (7) Performance appraisal control
The company formulates and strictly implements the salary system of performance evaluation, implements the evaluation method of combining monthly, quarterly and annual, constantly optimizes and revises various evaluation indicators of employees, and strives to be scientific, objective and fair. For the repeated problems in the assessment, the personnel department communicates with the employees of relevant departments, makes performance diagnosis, and looks for continuous and effective improvement methods, so as to achieve the purpose of motivating employees and improving overall performance.
2. Key control activities
(1) Management and control of foreign investment
