Dongxing Securities Corporation Limited(601198)
About Changsha Dialine New Material Sci.&Tech.Co.Ltd(300700)
Verification opinions of internal control evaluation report in 2021
Dongxing Securities Corporation Limited(601198) (hereinafter referred to as ” Dongxing Securities Corporation Limited(601198) “) as the sponsor of Changsha Dialine New Material Sci.&Tech.Co.Ltd(300700) (hereinafter referred to as ” Changsha Dialine New Material Sci.&Tech.Co.Ltd(300700) ” or “the company”) to continuously supervise the public issuance of convertible corporate bonds, in accordance with the measures for the administration of securities issuance and listing recommendation business, the guidelines for the recommendation of companies listed on the Shenzhen Stock Exchange, and the rules for the listing of stocks on the gem of the Shenzhen Stock Exchange According to the requirements of relevant laws, regulations and normative documents such as the guidelines for self-discipline supervision of listed companies of Shenzhen Stock Exchange No. 2 – standardized operation of companies listed on GEM, basic norms of enterprise internal control, the self-evaluation report of Changsha Dialine New Material Sci.&Tech.Co.Ltd(300700) 2021 annual internal control (hereinafter referred to as the “evaluation report”) issued by the company has been verified. The specific conditions are as follows:
1、 Evaluation conclusion of the company’s internal control
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.
The company has no factors affecting the evaluation conclusion of internal control effectiveness from the benchmark date of internal control evaluation report to the date of issuance of internal control evaluation report.
2、 Internal control evaluation of the company
(I) evaluation scope of internal control
The company determines the main units, businesses and matters included in the evaluation scope and high-risk areas in accordance with the risk-oriented principle. The main units included in the evaluation scope include the company and its wholly-owned subsidiaries and holding subsidiaries, specifically: Changsha Dialine New Material Sci.&Tech.Co.Ltd(300700) , wholly-owned subsidiary Changsha Dite Superhard Materials Co., Ltd., wholly-owned subsidiary Zhuzhou Changsha Dialine New Material Sci.&Tech.Co.Ltd(300700) Materials Co., Ltd. and holding subsidiary Changsha Daihua science and Technology Co., Ltd. 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.
When determining the scope of internal control evaluation, the company comprehensively considered all businesses and matters of the company and all departments and subordinate units. The main businesses and matters included in the scope of evaluation include: governance structure, organization, internal audit, human resources, corporate culture, capital activities, procurement business, sales business, fund-raising, asset management, financial report, fund-raising management, foreign investment guarantee, related party transactions Information disclosure, information system, R & D and other management control. On this basis, it is determined that the high-risk areas to focus on mainly include capital activities, sales business, procurement business, financial reporting, 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.
(II) 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 relevant requirements of the enterprise’s internal control standard system and its supporting guidelines, and in combination with the company’s internal control related systems, processes and evaluation methods. The board of directors of the company, in accordance with the identification requirements for major defects, important defects and general defects in the basic norms of enterprise internal control and relevant supporting guidelines, and in combination with factors such as the company’s size, industry characteristics, risk preference and risk tolerance, distinguished internal control over financial reports from internal control over non-financial reports, studied and determined specific identification standards for internal control defects applicable to the company, which were consistent with those in 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
The identification standard of internal control defects in financial reports directly depends on the importance of financial report misstatement that may be caused by the existence of internal control defects, which can be divided into three types: major defects, important defects and general defects. The identification of quantitative and qualitative standards for internal control defects in financial reporting determined by the company is as follows:
(1) Quantitative standard:
When implementing the quantitative evaluation of internal control defects, it is necessary to quantitatively evaluate the defects found in combination with the overall importance level and tolerable error of the company’s annual consolidated financial statements.
Category major defect standard important defect standard general defect standard
Total profit potential misstatement = 5% of total profit 1% = misstatement 5% of total profit misstatement total profit
Category major defect standard important defect standard general defect standard
Amount 1%
Potential misstatement of total assets = 1% of total assets, 0.5% of total assets = misstatement 1% of total assets, misstatement 0.5% of total assets
Potential misstatement of operating revenue = 3% of operating revenue, 1% of operating revenue = misstatement 3% of operating revenue, misstatement 1% of operating revenue
(2) Qualitative criteria:
The qualitative criteria for the evaluation of internal control defects in financial reporting determined by the company are as follows:
Qualitative standard of defect nature
A. Fraud of directors, supervisors and senior managers of the company; B. The company corrects the issued financial report; Major defect C. major misstatement in the current financial report found by the certified public accountant but not identified by the company’s internal control; D. The supervision of the audit committee and the audit department on internal control is invalid.
A. Failure to select and apply accounting policies in accordance with GAAP; B. Failure to establish anti fraud procedures and control measures; Important defect C. no corresponding control mechanism has been established or implemented for the accounting treatment of unconventional or special business, and there is no corresponding compensatory control; D. 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 are other control defects other than the above major defects and important defects.
2. Identification standard of internal control defects in non-financial reporting
The identification of non-financial report defects of the company is mainly based on the severity of the business nature involved, the nature of direct or potential negative impact, the scope of impact and other factors. Whether it leads to the quantitative index of the amount of direct asset loss is also divided into three types: major defects, important defects and general defects. The identification of quantitative and qualitative standards for internal control defects in non-financial reporting determined by the company is as follows:
(1) Quantitative standard:
The quantitative criteria for the evaluation of internal control defects in non-financial reporting determined by the company are as follows:
Category major defect standard important defect standard general defect standard
Direct loss amount loss amount ≥ 0.5% of total assets ≤ loss amount total assets
1% amount 0.5% of 1% of total assets
(2) Qualitative criteria:
The qualitative criteria for the evaluation of internal control defects in non-financial reporting determined by the company are as follows:
Qualitative standard of defect nature
A. The company’s business activities violate national laws and regulations; B. Serious loss of senior managers and senior technicians of the company; C. Negative news frequently appears in the media, involving a wide range, and the negative impact has not been eliminated; D. Major defects in the company’s important business, lack of system control or failure of control system; E. Major or important defects in the company’s internal control have not been rectified; F. The company is punished by the CSRC or warned by the stock exchange.
A. The company’s decision-making process leads to consistent errors; B. The company violates the internal rules and regulations of the enterprise, resulting in losses; C. Serious loss of business personnel in key positions of the company; D. Negative news in the media, involving local areas; E. There are defects in the company’s important business system or system; F. Important defects in the company’s internal control have not been rectified.
General defects are other control defects other than the above major defects and important defects
(III) contents of internal control evaluation
Through years of practice and continuous improvement, the company has established a set of effective management and risk prevention system, held regular or irregular production and operation working meetings such as general manager office meeting and operation analysis meeting, timely handled the new problems of the company, analyzed the new dynamics of the market, sought the best solution, ensured the normal, orderly and stable operation of the company’s production and operation, and timely prevented all kinds of risks. The company makes an independent evaluation on the overall situation of the design and operation of the company’s internal control from five aspects: control environment, risk assessment, control activities, information and communication and internal supervision. The specific evaluation contents are described as follows:
1. Control environment
(1) Governance structure
The company has established the general meeting of shareholders, the board of directors and the board of supervisors in accordance with the provisions of the company law, the securities law and the articles of association. The general meeting of shareholders is the highest authority of the company, which is composed of all shareholders. The structure of the board of directors is reasonable, the selection and appointment procedures of directors are standardized and transparent, and the selection and appointment process of directors is open, fair, impartial and independent. The board of directors has four special committees, including strategy committee, audit committee, remuneration and assessment committee and Nomination Committee. All members of the board of supervisors have relevant professional knowledge and work experience; The company has formulated various rules of procedure to clarify the responsibilities and authorities in decision-making, implementation and supervision. All institutions are independent, check and balance each other, and their rights and responsibilities are clear. The three committees and professional committees of the company perform their respective duties and operate in a standardized manner.
(2) Organizational structure and power distribution
The company shall set up corresponding functional departments and formulate corresponding post responsibilities according to the needs of operation and management. In accordance with the principle of independent operation and mutual checks and balances, each department has clear functions, clear rights and responsibilities and can effectively implement various decisions of the company’s management through corresponding post responsibilities.
(3) Internal audit
The company establishes an audit committee under the board of directors, which is responsible for reviewing the company’s internal control, supervising the effective implementation of internal control and self-evaluation of internal control, coordinating internal control audit and other related matters. The company has set up an audit department, which is responsible to the board of directors and the audit committee and independently exercises audit functions and powers without interference from other departments and individuals. According to the requirements of internal audit management system, be responsible for the company’s internal audit and supervision, including supervising and inspecting the implementation of the company’s internal control system, evaluating the scientificity and effectiveness of internal control, and putting forward suggestions for improving internal control; Regularly and irregularly conduct audit and routine inspection on the finance, internal control, major projects and other businesses of functional departments and subsidiaries to control and prevent risks. Have the right to report directly to the board of directors, its audit committee and the board of supervisors on the major defects of internal control found in the supervision and inspection. The establishment of the company’s audit department and relevant systems has further improved the company’s internal control and governance structure, and promoted and ensured the effective operation of internal control.
(4) Human resources
According to the needs of its own development, the company has formulated a talent strategy and a series of relatively perfect human resources policies for the employment, training, dismissal and resignation of employees; Salary, assessment, promotion, reward and punishment of employees; Relevant systems have been formulated to regulate the restrictive provisions on the departure of employees who master important trade secrets and intellectual property rights. The remuneration and Nomination Committee of the company is responsible for proposing the remuneration policy, structure and approval procedures of directors and senior managers; Evaluate and approve the remuneration scheme of directors and senior managers; And be responsible for supervising the implementation of the company’s salary system.
(5) Corporate culture
Over the years, the company has taken “gratitude, responsibility, struggle, innovation and win-win” as its core culture, adhered to the coordination and unity of social responsibility and economic benefits, people-oriented, standardized operation, honest and trustworthy, pioneering and enterprising, developed and expanded rapidly, and built a world-class comprehensive service provider of hard and brittle material processing consumables.
2. Risk assessment
The company’s internal control system continuously and effectively identifies, measures, evaluates and monitors the possible business risks, financial risks, market risks, policies and regulations risks and moral risks in all links of the company in the actual implementation of business. For the identified and acceptable risks, the company requires to quantify the risks, formulate methods to control and reduce risks, and conduct continuous monitoring; For the identified unacceptable risks, the company requires to formulate a risk treatment plan and implement the treatment.
The company pays attention to the influence of internal factors in the risk assessment, including the professional ethics of senior managers, employees’ professional competence, team spirit and other personnel quality factors; Management factors such as business mode, business process design and financial report preparation; Cash flow and financial results, etc
