Elite Color Environmental Resources Science&Technology Co.Ltd(002998)
Self evaluation report on internal control in 2021
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 Elite Color Environmental Resources Science&Technology Co.Ltd(002998) (hereinafter referred to as the "company") internal control system and evaluation methods, 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 the 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 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 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, due to the change of circumstances, the internal control may become inappropriate or reduce the degree of compliance with control policies and procedures. According to the internal control evaluation results, it is speculated that the effectiveness of internal control in the future has a certain risk.
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.
The units included in the scope of this evaluation are the company and its wholly-owned subsidiaries Jiangsu hengze composite material technology Co., Ltd., Jiangyin Wanjie waste plastic recycling Co., Ltd., Jiangyin Zhongcai photovoltaic material technology Co., Ltd. and Shanghai Yilite International Trade 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.
The main businesses and matters included in the scope of internal control evaluation in 2021 include: organizational structure, development strategy, human resources, social responsibility, corporate culture, capital activities, procurement business, asset management, sales business, research and development, engineering projects, guarantee business, production management, financial report, comprehensive budget, contract management, internal information transmission, information system, etc.
The high-risk areas of focus mainly include capital, related party transactions, foreign investment, foreign guarantee, financial management and contract management.
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 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 specific identification standards of internal control defects are as follows:
1. Identification standard of internal control defects in financial reporting
The quantitative criteria for the evaluation of internal control defects in financial reporting determined by the company are as follows:
The quantitative standard takes the operating income and total assets as the measurement indicators. If the loss that may be caused or caused by the defect of internal control is related to the income statement, it shall be measured by the operating revenue index. If the amount of misstatement in the financial report caused by the defect alone or in combination with other defects is less than 1.00% of the operating revenue, it is recognized as a general defect; If it exceeds 1.00% but less than 2.00% of the operating revenue, it is recognized as an important defect; If it exceeds 2.00% of the operating revenue, it is recognized as a major defect.
Losses that may be caused or caused by internal control defects related to asset management shall be measured by the total asset index. If the amount of financial report misstatement that may be caused by the defect alone or in combination with other defects is less than 0.50% of the total assets, it is recognized as a general defect; If it exceeds 0.50% but less than 1.50% of the total assets, it is recognized as an important defect; If it exceeds 1.50% of the total assets, it is recognized as a major defect.
The qualitative criteria for the evaluation of internal control defects in financial reporting determined by the company are as follows (mainly determined according to the nature, scope and other factors of the potential negative impact of defects):
Signs of significant deficiencies in financial reporting include: (1) identifying any degree of fraud in senior management. (2) Make corrections to the published financial reports. (3) The certified public accountant found that there was a material misstatement in the current financial report, but the internal control failed to find the misstatement in the operation process. (4) The supervision of the company's audit committee and internal audit department on internal control is invalid.
Signs of significant deficiencies in financial reporting include: (1) failure to select and apply accounting policies in accordance with generally accepted accounting standards. (2) No anti fraud procedures and control measures have been established. (3) For the accounting treatment of unconventional or special transactions, no corresponding control mechanism is established or not implemented and there is no corresponding compensatory control. (4) 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 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
The quantitative criteria for the evaluation of internal control defects in non-financial reporting determined by the company are as follows:
The quantitative standard for the evaluation of internal control defects in non-financial reports shall be implemented with reference to the quantitative standard for the evaluation 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 (mainly based on the impact of defects on the effectiveness of business processes and the possibility of occurrence):
If the possibility of defects is small, it will reduce the work efficiency or effect, or increase the uncertainty of the effect, or make it deviate from the expected goal, which is a general defect;
If the possibility of defects is high, it will significantly reduce the work efficiency or effect, or significantly increase the uncertainty of the effect, or make it significantly deviate from the expected goal as an important defect;
If the possibility of defects is high, it will seriously reduce the work efficiency or effect, or seriously increase the uncertainty of the effect, or make it seriously deviate from the expected goal, which is a major defect.
The following indications usually indicate that there may be significant defects in non-financial reporting internal control:
(1) The company's decision-making procedure is unscientific, such as wrong decision-making, which leads to the failure to achieve the expected goal after M & A.
(2) Violation of national laws and regulations.
(3) Management personnel or key technical personnel have been lost one after another.
(4) Negative news in the media is frequent.
(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 did not have 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 or 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
There are no major matters related to internal control that need to be disclosed.
Elite Color Environmental Resources Science&Technology Co.Ltd(002998)
April 14, 2022
