Yantai Tayho Advanced Materials Co.Ltd(002254)
Internal control evaluation report in 2021
Yantai Tayho Advanced Materials Co.Ltd(002254) 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 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. Ningxia Yuxiang Technology Co., Ltd. and Yantai Puxing Fine Chemical Co., Ltd. are mainly included in the evaluation scope of Yantai Yuxiang Technology Co., Ltd., Yantai Puxing Paper Industry Co., Ltd Ningxia Ningdong Yantai Tayho Advanced Materials Co.Ltd(002254) Co., Ltd., Ningxia Taihe Aramid Fiber Co., Ltd., Yantai Newstar spandex Co., Ltd., Yantai Yantai Tayho Advanced Materials Co.Ltd(002254) Sales Co., Ltd., Shandong Guangrui Testing Technology Service Co., Ltd. and Yantai Jingwei Intelligent Technology Co., Ltd. within the scope of evaluation, the total assets per unit 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, corporate culture, capital activities, procurement business, asset management, sales business, engineering projects, guarantee business, business outsourcing, financial reporting, comprehensive budget, contract management, internal information transmission, information system, etc; The high-risk areas of focus mainly include related party transactions, guarantee business, major investment, information disclosure and the use of raised funds.
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 according to the enterprise internal control standard system.
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 judgment standard for the identification of financial report defects is based on the company’s pre tax profit. The importance level is 5% of the company’s pre tax profit and the general level is 1%. In the actual identification of financial report defects, qualitative factors should be fully considered.
(1) Signs of significant deficiencies in financial reporting include:
① Fraud by senior management 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 company’s supervision of internal control is invalid.
(2) Signs of significant deficiencies in financial reporting include:
① Failure to select and apply accounting policies in accordance with generally accepted accounting standards, and failure to establish anti fraud procedures and control measures;
② 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;
③ 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 goal of authenticity and accuracy.
(3) General defects in financial reports 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
According to the impact on the realization of internal control objectives, the internal control defects of non-financial reports are divided into general defects, important defects and major defects. The quantitative identification of internal control defects in non-financial reports refers to the identification standard of internal control defects in financial reports.
The qualitative criteria for the evaluation of internal control defects in non-financial reporting determined by the company are as follows: the following circumstances can be identified as major defects, and other circumstances can be identified as major defects or general defects according to the degree of impact:
① The company lacks democratic decision-making procedures, such as collective decision-making procedures;
② Unscientific decision-making procedures of the company, such as wrong decision-making;
③ Violation of national laws and regulations, such as major production safety or environmental pollution accidents;
④ Loss of management personnel or technicians in key positions;
⑤ The results of internal control evaluation, especially major or important defects, have not been rectified;
⑥ Lack of institutional control or systematic failure of important business.
(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
The company has no other major matters related to internal control that need to be explained.
(no text below)
(there is no text on this page, which is the signature page of Yantai Tayho Advanced Materials Co.Ltd(002254) 2021 annual internal control evaluation report)
Chairman (authorized by the board of directors): Song Xiquan [signature] Yantai Tayho Advanced Materials Co.Ltd(002254) April 11, 2022
