Wanxiang Qianchao Co.Ltd(000559)
Self evaluation report on internal control in 2021
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 company’s (hereinafter referred to as the company’s) internal control system and evaluation methods, and 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 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 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、 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 evaluation scope include: the company and all its holding subsidiaries. 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 and matters included in the evaluation scope include: organizational structure, development strategy, human resources, social responsibility, fund management, production management, asset management, investment management, external guarantee, financial report, subsidiary management, etc.
The high-risk areas of focus mainly include capital activities, procurement business, asset management, sales business, research and development, related party transactions, 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.
（2） Basis of internal control evaluation and identification standard of internal control defects
The company organizes and carries out internal control evaluation on the basis of daily and special supervision of internal control according to the enterprise internal control standard system, the company’s internal control system, internal control manual and evaluation methods.
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 criteria for defects in internal control over financial reporting
The quantitative criteria for the evaluation of internal control defects in financial reporting determined by the company are as follows:
If one of the following conditions is met, it can be recognized as a major defect in the internal control of financial reporting:
Impact of project defects
The amount of misstatement ≥ 1% of the operating income of the company’s consolidated statements in the latest fiscal year, potential misstatement of the income statement
Or RMB 20 million
The amount of misstatement ≥ 1% of the total assets of the company’s consolidated statements in the latest fiscal year. Potential misstatement of the balance sheet
Or RMB 20 million
If one of the following conditions is met, it can be recognized as an important defect in the internal control of financial reporting:
Impact of project defects
0.5% of the operating income of the company’s consolidated statements in the latest fiscal year or 1000 yuan of potential misstatement in the income statement ≤ the amount of misstatement ＜ 1% of the operating income of the company’s consolidated statements in the latest fiscal year or 20 million yuan
0.5% of the total assets of the company’s consolidated statements in the latest fiscal year or RMB 10 million ≤
The amount of potential misstatement in the balance sheet is less than 1% of the total assets of the company’s consolidated statements in the latest fiscal year or RMB
20 million
If one of the following conditions is met, it can be recognized as a general defect of internal control over financial reporting:
Impact of project defects
The amount of misstatement ＜ 0.5% of the operating income of the company’s consolidated statements in the latest fiscal year, potential misstatement of the income statement
Or RMB 10 million
The amount of misstatement is less than 0.5% of the total assets of the company’s consolidated statements in the latest fiscal year, and the potential misstatement of the balance sheet
or
Impact of project defects
RMB 10 million
The qualitative criteria for the evaluation of internal control defects in financial reporting determined by the company are as follows:
Signs of significant deficiencies in internal control over financial reporting include:
① Fraud by directors, supervisors and senior managers of the company;
② The company corrects the published financial report;
③ The certified public accountant finds that there is a material misstatement in the current financial report, but the internal control fails to find the misstatement in the operation process;
④ The supervision of the audit committee and internal audit institutions on internal control is invalid;
⑤ The qualification or competence of key financial personnel is obviously insufficient;
⑥ Failure of compliance supervision function and violation of laws and regulations may have a significant impact on the reliability of financial reporting.
Signs of significant deficiencies in internal control over financial reporting include:
① Failure to select and apply accounting policies in accordance with GAAP;
② Failure to establish anti fraud procedures and control measures;
③ No corresponding control mechanism has been established or implemented for the accounting treatment of unconventional or special transactions, and there is no corresponding compensatory control;
④ 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 goal.
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 quantitative criteria for the evaluation of internal control defects in non-financial reporting determined by the company are as follows:
Defect type has a significant negative impact on the amount of direct property loss
Punished by government departments below the provincial level, but failed to report the general defects of the company on a regular basis, which are less than 5 million yuan or
The disclosure of the report has a negative impact.
Major defects of 5 million yuan (including 5 million yuan) or punished by government departments at or above the provincial level, but the company was not regularly punished
RMB) – RMB 10 million, which has a negative impact on the disclosure of the report.
The government has officially disclosed major defects of RMB 10 million or more and has been punished by the government
The disclosure of the company’s periodic reports has a negative impact.
The qualitative criteria for the evaluation of internal control defects in non-financial reporting determined by the company are as follows:
Signs of significant defects in internal control over non-financial reporting include:
① Violation of national laws and regulations, such as environmental pollution, serious damage to the local ecological environment, failure to report or disclose information according to regulations, etc;
② The loss of middle and senior managers and senior technicians is more than 30% and has not been supplemented in time, affecting the normal operation of the company;
③ Negative news frequently appeared in the media, involving a wide range, and did not take corresponding countermeasures and measures to respond positively in time, resulting in a significant negative impact on the company;
④ The results of internal control evaluation, especially major or important defects, have not been rectified;
⑤ Lack of institutional control or systematic failure of important business;
⑥ Unscientific decision-making procedures of enterprises, such as wrong decision-making, lead to unsuccessful M & A;
⑦ In addition to policy reasons, the enterprise has suffered losses for consecutive years and its sustainable operation has been challenged;
⑧ Subsidiaries lack internal control construction and management is scattered.
Signs of significant deficiencies in internal control over non-financial reporting include:
① Middle management fraud;
② Negative news appeared in major media that year;
③ The general defects evaluated last year have not been rectified or reasonably explained;
④ Some managers or operators are not competent enough.
(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 and 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 and 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
During the reporting period, the company has no other internal control information that may have a significant impact on investors’ understanding of internal control self-evaluation report, evaluation of internal control or investment decision-making.
Wanxiang Qianchao Co.Ltd(000559)
March 30, 2002
