Internal control audit report
Zhong Huan Shen Zi [2022] No. 1710030 Honz Pharmaceutical Co.Ltd(300086) all shareholders:
In accordance with the guidelines on audit of internal control of enterprises and the relevant requirements of the practice standards for Certified Public Accountants of China, we have audited the effectiveness of internal control over financial statements of Honz Pharmaceutical Co.Ltd(300086) (hereinafter referred to as ” Honz Pharmaceutical Co.Ltd(300086) “) as of December 31, 2021.
1、 Honz Pharmaceutical Co.Ltd(300086) responsibility for internal control
It is the responsibility of Honz Pharmaceutical Co.Ltd(300086) board of directors to establish, improve and effectively implement internal control and evaluate its effectiveness in accordance with the basic norms of enterprise internal control, guidelines for the application of enterprise internal control and guidelines for the evaluation of enterprise internal control.
2、 Responsibilities of Certified Public Accountants
Our responsibility is to express audit opinions on the effectiveness of internal control over financial reporting based on the implementation of audit work, and disclose the significant defects of non-financial reporting internal control noted.
3、 Inherent limitations of internal control
Internal control has inherent limitations, and there is the possibility that misstatement can not be prevented and found. 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 audit results.
4、 Audit opinion on internal control of financial report
We believe that Honz Pharmaceutical Co.Ltd(300086) has maintained effective internal control over financial reporting in all major aspects in accordance with the basic norms of enterprise internal control and relevant regulations on December 31, 2021. Zhongshen Zhonghuan Certified Public Accountants (special general partnership) Chinese certified public accountant:
(project partner):
Li Hui
Chinese certified public accountant:
Jiang Wenqing
Wuhan, China April 6, 2002
Honz Pharmaceutical Co.Ltd(300086)
Self evaluation report on internal control in 2021
Honz Pharmaceutical Co.Ltd(300086) 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 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
Major defects in the company’s internal control are not identified on the basis of financial report and internal control benchmark date.
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.
The board of Directors believes that the company has maintained effective internal control over financial reporting and non-financial reporting in all major aspects in accordance with the requirements of the enterprise’s internal control standard system and relevant regulations.
3、 Internal control evaluation
(I) evaluation scope of internal control
According to the principle of risk orientation, the company determines that the main units included in the evaluation scope include the company and all holding subsidiaries. The 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.
1. Main units included in the scope of evaluation
On the benchmark date of internal control evaluation report (December 31, 2021), all wholly-owned subsidiaries and holding subsidiaries of the company: Honz Pharmaceutical Co.Ltd(300086) , Hainan Kangzhi Biotechnology Co., Ltd., Shenyang Kangzhi Pharmaceutical Co., Ltd., Hebei Kangzhi Pharmaceutical Co., Ltd., Beijing Shunxin Xiangyun Pharmaceutical Co., Ltd., Guangdong Kangda pharmaceutical marketing Co., Ltd., Guangdong Yuanning Pharmaceutical Co., Ltd., Guangdong Kangda Pharmaceutical Co., Ltd Shenzhen kanghongda Investment Co., Ltd., Zhongshan Hongshi Health Technology Co., Ltd., Haikou kangchengda Technology Co., Ltd., Guangdong Kangzhi Hospital Management Co., Ltd. and Yunnan Jiuzhou hospital Co., Ltd. (the general meeting of shareholders considered and approved the sale of 51% equity on June 29, 2021, and completed all delivery procedures on July 31, 2021, which will not be included in the scope of evaluation after the completion of delivery procedures) Kunming hewanjia maternity hospital Co., Ltd. (the general meeting of shareholders on June 29, 2021 approved the sale of 51% equity, and all delivery procedures were completed on July 31, 2021, which will not be included in the evaluation scope after the completion of delivery procedures), Zhongshan love daily necessities Co., Ltd., Zhongshan love baby and Child Health Technology Research Co., Ltd., Guangzhou love Information Technology Co., Ltd., Hainan love e-commerce Co., Ltd Hainan Kangzhi Medical Technology Co., Ltd. and Guangdong Love Health Technology Co., Ltd.
2. Matters included in the scope of evaluation
(1) Governance structure
In accordance with the requirements of the company law, the securities law and other 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 company’s management, and formed a mutual coordination and balance mechanism with clear rights and responsibilities and standardized operation among the authority, decision-making body, supervision body and management.
The company has established four professional committees: Strategy Committee, nomination committee, salary and assessment committee and audit committee, formulated corresponding working rules, and clarified their rights and responsibilities, decision-making procedures and rules of procedure. (2) Development strategy
The company has a strategy committee under the board of directors, which is responsible for the company’s strategic management, studying and making suggestions on the company’s long-term planning, major investment and financing schemes, major capital operation and asset management project decisions. Members of the strategy committee have strong comprehensive quality and practical experience, are familiar with the characteristics of the company’s business industry and operation, have strong market sensitivity and comprehensive judgment ability, and can fully understand the trend of national macro policies and development trends at home and abroad to ensure the effective implementation of the company’s strategic planning.
The company held a seminar on strategic planning of medical undertakings. From the perspective of enterprise development vision, finance, investment and medical specialty, the company discussed and analyzed the possibility and feasibility of the future development of medical sector in a multidimensional manner, followed the direction of women’s and children’s health, selected appropriate areas, integrated resources, looked for appropriate targets in the surrounding areas of Guangzhou and Hainan, and made use of the policy advantages of Hainan, Introduce upstream and downstream consumables related to women’s and children’s health to Haikou base for production and marketing.
(3) Human resource management
The company’s human resources headquarters is responsible for the unified management of the company’s human resources, and has established a relatively perfect personnel management system, which has made detailed provisions from the aspects of social security, labor contract, employee selection and employment, training and assessment, promotion and reward and punishment, exit mechanism, salary system and so on. All work related to human resource management shall be carried out in accordance with the labor law of the people’s Republic of China and the relevant human resource management system of the company. Human resource management is highly standardized, institutionalized and unified.
(4) Procurement and payment
The company has procurement, acceptance, payment request and payment processes in line with the current situation of the company, formulated operation and management systems related to material and material procurement, and gradually updated and strengthened them according to the development of the company’s business scale.
The headquarters of the company shall set up a procurement headquarters and a procurement center, and each base shall set up documentary personnel. The procurement headquarters is responsible for the formulation of management documents, the establishment of supplier database, the assessment of suppliers and procurement personnel, the improvement of the ability of procurement personnel, etc; The procurement center is responsible for supplier development, price consultation and negotiation, contract negotiation and signing, etc; Subordinate enterprises, departments and production bases of the company are equipped with documentary personnel, who are responsible for placing orders with suppliers for the materials required by the unit according to the price and contract terms determined by the procurement center, purchasing the goods, and following up the acceptance and payment processes. This division of labor effectively clarifies the relationship between centralization and decentralization, so as to achieve centralized procurement, make full use of the procurement scale effect, strengthen the bargaining power, and make the material procurement of each base have synergy effect; It can also cooperate with the production and operation status of each base in time to respond in time. The procurement methods are divided into negotiation procurement and bidding procurement. The company has carried out effective supervision and management during the bidding implementation process.
(5) Sales and collection
According to the characteristics of the sales and collection business process, the company sets up the internal accounting control system – sales, which specifically includes: Division of labor and authorization approval of each post, sales and delivery control, sales invoice issuance control, sales payment collection control and sales accounting record control, etc.
The company sets up a marketing center, which is responsible for credit management of customers. When selecting customers, the credit management personnel of the marketing center shall evaluate the customers’ credit, fully understand and consider the customers’ reputation, financial status and other conditions, and give corresponding evaluation and grading and reasonable credit line, so as to reduce the risk of bad debt of loan. The Sales Department of the marketing center is mainly responsible for processing orders, signing contracts, implementing sales and credit policies, and collecting payment for goods; The delivery business department of the marketing center is mainly responsible for reviewing whether the delivery documents are complete and handling the specific matters of delivery; The financial department of the marketing center is mainly responsible for the settlement and recording of sales funds, supervision and management of loan recovery. For overdue accounts receivable that may not be recovered in time, the marketing center shall evaluate the possibility of bad debts of accounts receivable. For accounts receivable that are more likely to have bad debts, the business departments of the marketing center shall file an application, which shall be reviewed by the chief financial officer, reported to the authorized leaders and the board of directors for approval, written off or solved through legal procedures.
(6) Production and inventory
① Pharmaceutical and medical device production
The production of the company’s pharmaceutical and medical device production sector is market-oriented. The sales department timely understands the market information and trends, and then the production center formulates the production plan of each production base and timely organizes the production, so that a series of activities such as the company’s business plan, product R & D, product design, manufacturing and marketing form a complete system.
Each production base shall make preparations for personnel, equipment and materials, and the production center shall supervise the implementation and implementation of the production plan. The change of production plan shall be adjusted according to the demand of market order. At the same time, each production base has formulated and improved the internal control standards of product quality, analyzed and evaluated the factors affecting product quality, ensured product quality and product safety and effectiveness, and improved the production management level through the continuous introduction of advanced management modes at home and abroad, so as to ensure product quality.
Local warehouse departments are responsible for warehouse management and material distribution, and strictly implement GMP, GSP and other relevant systems. The whole process meets the requirements of the new version of GSP and GMP.
② Baby care products
Zhongshan love is to set the production according to the sales, determine the monthly production plan according to the market forecast, and then adjust the production plan according to the actual demand of the market order.
Zhongshan love factory is China’s leading production base of high-tech and highly automated mother and baby washing products. It is one of the largest production bases of baby washing liquid in China. The production environment of the products is constructed in strict accordance with the standard of code for design of clean workshop in pharmaceutical industry, and has passed the latest international standard: iso22716 [cosmetics – Good Manufacturing Practice (GMP)]. In the production process, Zhongshan cherish strictly abides by the production specifications and continuously improves the production quality and efficiency to ensure that it can continue to provide consumers with better products.
(7) Monetary Fund Management
For fund management, the company has established a perfect management system. Strengthen the publicity of internal control system and process in the company, and specially train the cashier on post responsibilities and internal control process, so as to ensure that the cashier can timely record the cash journal and bank deposit journal every day; At the same time, the company further improved the monetary fund management and internal control management system, and continued to strengthen the inspection of the implementation of internal control system and process. The company shall do a good job in fund management in strict accordance with relevant management systems to ensure that the use of the company’s funds complies with the principles of rationality, efficiency and safety, and to ensure sufficient financial support for the development of the company.
(8) Fixed assets management
The company has formulated a series of internal control measures for the acquisition, movement and disposal of fixed assets. The company stipulates that the acquisition of fixed assets must comply with the requirements of internal accounting control system – fixed assets, and the application for new construction and purchase of users must be approved by the supervisor. Self built fixed assets shall be implemented in accordance with internal accounting control system – engineering projects. The purchase of fixed assets shall be subject to level by level approval procedures. The movement of fixed assets shall be reported for approval, and the transfer form shall be filled in and signed by the parties for confirmation. The scrapping or damage of fixed assets shall be approved by the relevant supervisor. For the fixed assets that are scrapped before reaching the service life, the reasons shall be checked and analyzed. At the end of the year, the fixed assets management department and the financial department shall conduct a comprehensive inventory of all fixed assets of the company. In order to standardize the management of fixed assets and ensure the accuracy of the value of fixed assets and the safety and integrity of assets.
To strengthen and standardize work
