Securities No.: suchai 20 Beingmate Co.Ltd(002570) , securities No.: suchai- Changchai Company Limited(000570)
Self evaluation report on internal control in 2021
The company and all members of the board of directors guarantee that the information disclosed is true, accurate and complete without false records, misleading statements or major omissions Changchai Company Limited(000570) all shareholders:
In accordance with the relevant provisions and requirements of the basic norms of enterprise internal control (hereinafter referred to as the “basic norms”) and its supporting guidelines, in combination with the internal control system and evaluation methods of Changchai Company Limited(000570) (hereinafter referred to as the “company”), on the basis of daily and special supervision of internal control, the internal control team of the company has conducted a self-evaluation on the effectiveness of the company’s internal control in 2021, which is hereby submitted to the board of directors for deliberation:
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 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 company’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 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
On the benchmark date, there were no major defects in the internal control of financial reporting. The audit committee of 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 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) internal control scope
According to the risk oriented principle, the company determines the main units, businesses and matters included in the evaluation scope and high-risk areas.
1. The main units included in the evaluation scope include Changchai Company Limited(000570) , Changzhou Changchai Benniu Diesel Engine Parts Co., Ltd., Changzhou Wanzhou Diesel Engine Co., Ltd., Changzhou Housheng Investment Co., Ltd., Changzhou Changchai Housheng Agricultural Equipment Co., Ltd., Changzhou Fuji Changchai Robin Gasoline Engine Co., Ltd., Changzhou Xingsheng Property Management Co., Ltd. and Jiangsu Changchai Machinery Co., Ltd.
2. Proportion of units included in the evaluation scope: the total assets of the units included in the evaluation scope account for 100% of the total assets of the company’s consolidated financial statements, and the total operating revenue accounts for 100% of the total operating revenue of the company’s consolidated financial statements.
3. The main businesses and matters included in the evaluation scope include: organizational structure, human resources, social responsibility, corporate culture, fund management, expense management, procurement management, fixed assets management, inventory management, sales management, contract management, accounting, financial report, etc.
Focus on the following high-risk areas: authorization risk, human resources risk, operation risk, asset safety risk, procurement acceptance risk, credit risk, production safety risk, financial accounting risk, capital control risk, etc.
The internal control of the above businesses and matters covers the main aspects of the company’s operation and management, and there is no major omission.
(II) procedures and methods of internal control evaluation
The internal control evaluation of the company shall be carried out in strict accordance with the procedures specified in the basic norms, evaluation guidelines and the internal control evaluation scheme of the company.
The procedure of this internal control evaluation is mainly divided into the following stages:
1. Formulate evaluation work plan
According to the company’s control management system and division of labor requirements, the audit department is responsible for preparing the company’s internal control test work plan.
2. Establish an internal control evaluation Working Group
As the leading department of internal control evaluation, the audit department formulates the internal control test work plan, cooperates with all functional departments of the company to organize and implement the internal control evaluation, and establishes an internal control evaluation working group.
3. Conduct on-site inspection and test
In the process of evaluation, the internal control evaluation working group fully collected the evidence of the effectiveness of the internal control design and operation of the evaluated department, truthfully filled in the evaluation working paper, recorded the relevant test results, and preliminarily identified the internal control defects found by comprehensively using various evaluation methods such as individual interview, questionnaire, special discussion, walk through test and sampling according to the specific division of evaluation personnel. 4. Analyze internal control defects and rectify them
The internal control evaluation team shall summarize the evaluation results, and the relevant responsible departments shall comprehensively review, analyze and judge the causes of the internal control defects found in the inspection, and organize personnel to rectify the defects.
5. Preparation of evaluation report
According to the implementation of the company’s internal control construction and inspection results, the internal control evaluation working group prepares the 2021 annual internal control evaluation report (Draft), which is submitted to the board of directors for deliberation after being reviewed by the internal control leading group and the company’s audit committee.
(III) internal control evaluation basis and internal control defect identification standard
The board of directors of the company studied and determined the specific identification standards of internal control defects applicable to the company according to the identification requirements of major defects, important defects and general defects in the basic norms and evaluation guidelines, combined with the factors such as the company’s scale, industry characteristics and risk level.
Internal control defects include design defects and operation defects. Design defect refers to the lack of control necessary to achieve the control objectives, or the existing control design is inappropriate, and it is difficult to achieve the control objectives even in normal operation. Operation defect refers to that the existing control with good design does not operate according to the design intention, or the executor does not obtain the necessary authorization or lack the competence to effectively implement the control.
According to the influence degree of internal control defects, the company divides them into major defects, important defects and general defects:
Major defect: refers to the combination of one or more control defects, which may cause the enterprise to seriously deviate from the control objectives;
Important defect: refers to the combination of one or more control defects, whose severity and economic consequences are lower than those of major defects, but it may still cause the enterprise to deviate from the control objectives;
General defects: refer to other defects except major defects and important defects.
1. Identification standard of internal control defects in financial reporting
(1) Qualitative criteria
Major defects: fraud of directors, supervisors and senior managers of the company; The combination of one or more control defects may cause the enterprise to seriously deviate from the control objectives.
Significant deficiencies: failure to select and apply accounting policies in accordance with GAAP; 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.
General defects refer to other control defects other than the above major defects and important defects.
(2) Quantitative standard
Based on the consolidated statement data of 2021, the quantitative standard for determining the importance of misstatement (including omission) in the consolidated statements of listed companies is as follows:
Major defects: misstatement ≥ 5% of annual profit
Important defects: annual profit 2.5% ≤ misstatement ＜ annual profit 5%
General defect: misstatement ＜ 2.5% of annual profit
2. Identification standard of internal control defects in non-financial reporting
(1) Qualitative criteria
Defects with any of the following characteristics shall be recognized as major defects:
1) Serious violation of national laws, administrative regulations and normative documents;
2) “Three important and one major” issues have not gone through the collective decision-making process;
3) The important business involving the production and operation of the company lacks system control or the system fails;
4) Failure of internal control over information disclosure, resulting in the company being publicly condemned by the regulatory authorities;
5) Major defects in the internal control evaluation results have not been rectified.
Other situations are identified as important defects or general defects according to the degree of influence.
(2) Quantitative standard
With reference to the quantitative standard of internal control defects in financial reports, the quantitative standard for determining the importance of internal control defects in non-financial reports of listed companies is as follows:
Major defect: possible direct loss ≥ 0.1% of net assets
Important defect: 0.05% of net assets ≤ possible direct loss ＜ 0.1% of net assets
General defect: possible direct loss 0.05% of net assets
The quantitative identification standard of internal control defects is based on the company’s 2021 financial statement data. The company will dynamically adjust the quantitative identification standard of internal control defects according to the changes of financial statement data.
According to the above identification standards, combined with daily supervision and special supervision, we found no major defects during the reporting period.
(IV) 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.
3. General defects and rectification
For the general defects found in the self-evaluation of internal control by the Audit Department of the company, various defects have been rectified in time through discussion, investigation, special meetings, document supplement and other means.
4、 Description of other major matters related to internal control
As of December 31, 2021, the company’s internal control system is basically sound, and no other internal control information that may have a significant impact on investors’ understanding of internal control evaluation report, evaluation of internal control or investment decision-making is found.
Changchai Company Limited(000570)
Board of directors
April 13, 2022
