Netac Technology Co.Ltd(300042)
Annual internal control evaluation report in 2021
Netac Technology Co.Ltd(300042) 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
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 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 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: functional management departments, business divisions, centers and holding subsidiaries of the company, Shenzhen Changzhou Langbo Sealing Technology Co.Ltd(603655) Co., Ltd., Netac Technology (Hong Kong) Limited, Beijing Longke Innovation Technology Development Co., Ltd. and Shenzhen Langsheng Electronics Co., Ltd. The total assets of the units included in the evaluation scope account for 100.00% of the total assets in the company’s consolidated financial statements, and the total operating revenue accounts for 100.00% of the total operating revenue in the company’s consolidated financial statements. The main businesses and matters included in the evaluation scope include: governance organization, organizational structure, human resources, capital activities, asset management, sales business, procurement management, research and development, production management, financial reporting, internal audit, contract management, information disclosure and other businesses. The high-risk areas of focus mainly include: capital asset management, income related risks, cost related risks, related party transaction risks, important risk businesses and major risk events, risks related to the preparation of 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.
（2） Basis of internal control evaluation and identification standard of internal control defects
The company organizes and carries out internal control evaluation in accordance with the basic norms of enterprise internal control, supporting guidelines for enterprise internal control, guidelines for evaluation of enterprise internal control, guidelines for standardized operation of companies listed on GEM and other relevant provisions issued by the Ministry of finance, CSRC and other five departments, and in combination with the company’s internal control system and other relevant provisions.
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
(1) The quantitative criteria for the evaluation of internal control defects in financial reporting determined by the company are as follows:
Based on the data of the consolidated financial statements in 2021, the quantitative standard for determining the importance of misstatement (including omission) in the consolidated financial statements of listed companies is as follows:
Major defect: misstatement ≥ 5% of pre tax profit
Important defect: 2% of pre tax profit ≤ misstatement ＜ 5% of pre tax profit
General defects: misstatement 2% of pre tax profit (2) the qualitative criteria for the evaluation of internal control defects in financial reporting determined by the company are as follows:
A. Identification criteria for major defects:
Fraud by directors, supervisors and senior managers;
Corrections to published financial statements;
The certified public accountant finds that there is a material misstatement in the current financial statements, but the internal control fails to find the misstatement in the operation process;
The supervision of internal control by the audit committee and internal audit institutions is invalid.
B. Identification standard of important defects
The certified public accountant found that there was a general misstatement in the current financial report, but the internal control failed to find the misstatement in the operation process;
There are important defects in the supervision of internal control by the audit committee and internal audit institutions.
C. Identification standard of general defects
The certified public accountant found that there was a small amount of misstatement in the current financial report, but the internal control failed to find the misstatement in the operation process;
There are general defects in the supervision of internal control by the audit committee and internal audit institutions.
2. Identification standard of internal control defects in non-financial reporting
(1) The quantitative criteria for the evaluation of internal control defects in non-financial reporting determined by the company are as follows:
Major defect: direct loss amount 0.5% of total assets
Important defect: 0.2% of total assets direct loss ≤ 0.5% of total assets
General defect: direct loss amount ≤ 0.2% of total assets
(2) The qualitative criteria for the evaluation of internal control defects in non-financial reporting determined by the company are as follows:
A. Identification standard of major defects
The company’s business activities seriously violate national laws, administrative regulations and normative documents;
The control environment is invalid, and the decision-making procedures for major internal matters are not performed in accordance with relevant regulations;
Serious loss of middle and senior managers and senior technicians;
The frequent exposure of negative media news has caused significant damage to the company’s reputation;
The important business involving the production and operation of the company lacks system control or the system fails;
Failure of internal control over information disclosure, resulting in the company being publicly condemned by the regulatory authorities;
The results of internal control evaluation, especially major defects or important defects, have not been rectified.
B. Identification standard of important defects:
Minor punishment for violation of national laws and regulations;
Serious loss of business personnel in key positions;
Negative news in the media, affecting local areas;
Defects in important business system or control system;
Important defects in internal control have not been rectified.
C. Identification standard of general defects:
Violating the internal rules and regulations of the enterprise without causing losses;
Serious loss of business personnel in general posts;
Negative news appears in the media, but the impact is small;
Defects in general business system or system;
General defects in internal control have not been rectified.
(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 major matters related to internal control that need to be explained.
The board of Directors believes that the company has maintained effective internal control in major aspects in accordance with the requirements of the enterprise’s internal control standard system and relevant regulations. In the next year, combined with the changes of the company’s development strategy and external environment, the company will continue to improve and revise the internal control system, sort out and optimize various business processes, further strengthen the construction and implementation of the system, and improve the performance salary, income, profit Establish a quantitative assessment index system for key business indicators such as operating cash flow, establish and improve the management mechanism of business objectives at the company level, and establish a scientific linkage mechanism between the incentive mechanism of business personnel and the profit level of relevant businesses and loan recovery. Managers at all levels of the enterprise should continue to strengthen their own learning, expand their horizons and provide impetus for the development of the enterprise. The company provides necessary support and help to employees who actively study. At the same time, strengthen supervision and inspection, optimize the internal control environment, prevent business risks through effective internal control, and promote the healthy and sustainable development of the company.
Netac Technology Co.Ltd(300042)
Board of directors
April 6, 2022
