Elite Color Environmental Resources Science&Technology Co.Ltd(002998)
Working system of the finance and Audit Committee of the board of directors
Chapter I General Provisions
Article 1 in order to strengthen the decision-making function of the board of directors of Elite Color Environmental Resources Science&Technology Co.Ltd(002998) (hereinafter referred to as “the company”), achieve prior audit and professional audit, ensure the effective supervision of the board of directors over the senior management, and further improve the corporate governance structure, according to the company law of the people’s Republic of China, the governance standards of listed companies and the basic norms of enterprise internal control In accordance with the Listing Rules of Shenzhen Stock Exchange (hereinafter referred to as the “Listing Rules”), the Elite Color Environmental Resources Science&Technology Co.Ltd(002998) articles of Association (hereinafter referred to as the “articles of association”) and other laws, regulations and normative documents, the board of directors of the company establishes a finance and audit committee (hereinafter referred to as the “Audit Committee”) and formulates this working system.
Article 2 the audit committee is a special committee under the board of directors, which is responsible to the board of directors and reports its work to the board of directors.
Article 3 the internal audit department established by the company is responsible to the audit committee and reports its work to the audit committee.
Article 4 the members of the audit committee shall ensure sufficient time and energy to perform the duties of the committee, be diligent and responsible, effectively supervise the external audit of the listed company, guide the internal audit of the company, promote the company to establish effective internal control and provide true, accurate and complete financial reports.
Article 5 the company shall provide necessary working conditions for the audit committee and allocate special personnel or institutions to undertake the daily work of the audit committee, such as work liaison, meeting organization, material preparation and file management.
Article 6 when the audit committee performs its duties, the company’s management and relevant departments shall cooperate.
Chapter II composition of the audit committee
Article 7 the members of the audit committee shall be appointed by the board of directors from among the members of the board of directors and shall be composed of three or more members.
Article 8 in principle, the members of the audit committee must be independent of the company’s daily operation and management. Independent directors of the audit committee shall account for more than 1 / 2 of the total number of members of the audit committee.
Article 9 all members of the audit committee shall have professional knowledge and business experience competent for the duties of the audit committee.
Article 10 the audit committee shall have a convener, who shall be an independent director, who shall be responsible for presiding over the work of the Committee. The convener of the audit committee must have professional experience in accounting or financial management.
Article 11 the company shall organize the members of the audit committee to participate in relevant training to enable them to obtain the professional knowledge of law, accounting and regulatory norms of listed companies required for performing their duties in time.
Article 12 the board of directors of the company shall regularly evaluate the independence and performance of the members of the audit committee, and may replace the members who are not suitable to continue to serve when necessary.
Chapter III responsibilities of the audit committee
Article 13 the responsibilities of the Audit Committee include the following aspects:
(I) supervise and evaluate the work of external audit institutions, and propose to hire or replace external audit institutions; (II) supervise and evaluate the internal audit work, and be responsible for the coordination of internal audit and external audit;
(III) review the company’s financial information and its disclosure;
(IV) supervise and evaluate the company’s internal control;
(V) coordinate the communication between the management, internal audit department and relevant departments and external audit institutions;
(VI) be responsible for other matters authorized by laws and regulations, the articles of association and the board of directors.
Article 14 the responsibilities of the audit committee to supervise and evaluate the work of external audit institutions must at least include the following aspects:
(I) evaluate the independence and professionalism of external audit institutions, especially the impact of non audit services provided by external audit institutions on their independence;
(II) propose to the board of directors to hire or replace the external audit institution;
(III) review the audit fees and employment terms of the external audit institution;
(IV) discuss and communicate with external audit institutions on audit scope, audit plan, audit methods and major matters found in the audit;
(V) supervise and evaluate whether the external audit institutions are diligent and responsible.
The audit committee shall hold a separate communication meeting with the external audit institution without the participation of management at least once a year. The Secretary of the board of directors may attend the meeting as nonvoting delegates.
Article 15 the responsibilities of the audit committee in guiding internal audit shall at least include the following aspects:
(I) review the company’s annual internal audit work plan;
(II) supervise and urge the implementation of the company’s internal audit plan;
(III) review the internal audit work report, evaluate the results of internal audit work, and urge the rectification of major problems;
(IV) guide the effective operation of the internal audit department.
The internal audit department of the company shall report to the audit committee. Various audit reports submitted by the internal audit department to the management, the rectification plan and rectification of audit problems must be submitted to the audit committee at the same time.
Article 16 the duties of the audit committee to review the company’s financial reports and express opinions on them must at least include the following aspects:
(I) review the company’s financial report and put forward opinions on the authenticity, completeness and accuracy of the financial report;
(II) focus on major accounting and audit issues of the company’s financial report, including major accounting error adjustment, major accounting policy and estimation changes, matters involving important accounting judgment, matters leading to non-standard unqualified audit report, etc;
(III) pay special attention to the possibility of fraud, fraud and material misstatement related to financial reporting;
(IV) supervise the rectification of financial reporting problems.
Article 17 the evaluation of the effectiveness of the company’s internal control system shall include at least the following aspects: (I) the evaluation of the effectiveness of the company’s internal control system;
(II) review the internal control self-evaluation report;
(III) review the internal control audit report issued by the external audit institution, and communicate with the external audit institution the problems found and the improvement methods;
(IV) evaluate the results of internal control evaluation and audit, and urge the rectification of internal control defects.
Article 18 the responsibilities of the audit committee in coordinating the communication between the management, internal audit department and relevant departments and external audit institutions include:
(I) coordinate the communication between the management and external audit institutions on major audit issues;
(II) coordinate the communication between internal audit department and external audit institutions and the cooperation of external audit. Article 19 the audit committee shall report to the board of directors on the measures or improvements it deems necessary and put forward suggestions.
Article 20 if the Audit Committee deems it necessary, it may hire an intermediary institution to provide professional opinions, and the relevant expenses shall be borne by the company.
Article 21 when the company hires or replaces an external audit institution, the audit committee must form a review opinion and put forward suggestions to the board of directors before the board of directors can review relevant proposals.
Chapter IV meetings of the audit committee
Article 22 the meetings of the audit committee are divided into regular meetings and interim meetings.
Convened and presided over by the convener of the audit committee.
When the convener of the audit committee is unable or refuses to perform his duties, he shall appoint an independent director to perform his duties on his behalf.
Article 23 the audit committee may hold interim meetings as needed. When two or more members of the audit committee propose, or when the convener of the Audit Committee deems it necessary, an interim meeting may be held.
Article 24 the audit committee meeting shall not be held unless more than two-thirds of the members are present.
Article 25 the deliberation opinions put forward by the audit committee to the board of directors must be adopted by more than half of all members. If effective deliberation opinions cannot be formed due to the avoidance of audit committee members, relevant matters shall be directly deliberated by the board of directors.
Article 26 members of the audit committee shall attend the meeting in person and express clear opinions on the matters under consideration. If a member is unable to attend the meeting in person for some reason, he may submit a power of attorney signed by the member and entrust other members to attend and express their opinions on his behalf. The power of attorney must specify the scope and duration of authorization. Each member shall be entrusted by at most one member. If an independent director is unable to attend the meeting in person for some reason, he shall entrust other independent director members to attend the meeting on his behalf.
Article 27 when the Audit Committee deems it necessary, it may invite representatives of external audit institutions, company supervisors, internal auditors, financial personnel, legal advisers and other relevant personnel to attend the meeting of the Committee and provide necessary information.
Article 28 minutes of the audit committee meeting shall be made. Members and other personnel attending the meeting shall sign the minutes of the committee meeting. The minutes of the meeting shall be properly kept by the person or organization responsible for daily work. Article 29 the deliberation opinions adopted at the meeting of the audit committee must be submitted to the board of directors of the company in writing.
Article 30 all personnel attending the meeting shall be obliged to keep confidential the items discussed at the meeting and shall not disclose relevant information without authorization.
Article 31 If any member of the audit committee has an interest in the matters discussed at the meeting, he shall withdraw.
Article 32 the convening procedures, voting methods and proposals adopted at the meeting of the audit committee shall comply with the provisions of relevant laws, regulations, the articles of association and the working system.
Chapter V Information Disclosure
Article 33 the company shall disclose the personnel of the audit committee, including the composition, professional background, working experience within five years and the changes of the personnel of the audit committee.
Article 34 while disclosing the annual report, the company shall disclose the annual performance of the Audit Committee on the website of Shenzhen Stock Exchange, mainly including the performance of its duties and the convening of the meeting of the audit committee.
Article 35 If the major problems found by the audit committee in the performance of its duties touch the information disclosure standards specified in the listing rules, the company shall disclose such matters and their rectification in a timely manner.
If not adopted by the board of directors, the company shall disclose the matter and fully explain the reasons.
Article 37 the company shall disclose the special opinions issued by the Audit Committee on major matters of the company in accordance with laws, administrative regulations, departmental rules, listing rules and relevant normative documents.
Chapter VI supplementary provisions
Article 38 matters not covered in this working system shall be implemented in accordance with relevant national laws, administrative regulations, departmental rules, normative documents, listing rules and articles of association.
Article 39 the working system shall come into force from the date of deliberation and adoption by the board of directors of the company.
Article 40 the board of directors of the company shall be responsible for the interpretation and modification of this working system.
Elite Color Environmental Resources Science&Technology Co.Ltd(002998) April 2022
