Shandong Denghai Seeds Co.Ltd(002041)
Internal control evaluation report in 2021
Shandong Denghai Seeds Co.Ltd(002041) 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 internal control system and evaluation methods of the company (hereinafter referred to as the “company”), 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 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.
1. The main units included in the evaluation scope include Shandong Denghai Seeds Co.Ltd(002041) , Shandong Denghai pioneer Seed Industry Co., Ltd. The total assets of the units included in the evaluation scope account for 90.40% of the total assets in the company’s consolidated financial statements, and the total operating revenue accounts for 67.23% of the total operating revenue in the company’s consolidated financial statements.
2. The main businesses and matters included in the evaluation scope include: organizational structure, supervision organization, corporate governance, development strategy, human resources, social responsibility, corporate culture, sales business, procurement business, inventory management, fixed assets management, intangible assets management, fund management, fund-raising activities, investment management, research and development, guarantee business, comprehensive budget, related party transactions, financial reports, contracts and legal affairs Information disclosure, etc. The internal control of the above businesses and matters covers the main aspects of the company’s current operation and management, and there is no major omission.
Business and matters included in the scope of this evaluation:
(1) Organizational structure
The company has established a standardized governance structure and rules of procedure, divided clear responsibilities and authorities in decision-making, implementation and supervision, and formed a more effective division of responsibilities and check and balance mechanism. In terms of internal control, a clear organizational structure and division of responsibilities have also been established. The board of directors is responsible for the establishment, improvement and effective implementation of internal control. The management is responsible for organizing and leading the daily operation of the enterprise’s internal control. The Audit Department of the company is directly responsible to the board of directors and works under the guidance of the audit committee. The audit department is equipped with a full-time auditor to inspect and supervise the authenticity and integrity of the financial information of the company’s internal institutions and subsidiaries (branches), the establishment and implementation of internal control system, etc, The audit department and internal auditors shall exercise their functions and powers independently and shall not be interfered by other departments or individuals.
(2) Supervisory authority
In order to ensure the effective implementation of internal control, the company has set up two supervision institutions: the board of supervisors supervises the establishment and implementation of internal control by the board of directors; The audit committee of the board of directors is responsible for reviewing the internal control of the enterprise, supervising the effective implementation of internal control and self-evaluation of internal control, and coordinating internal control audit and other related matters. In addition, the company also makes full use of various activities organized by the regulatory authorities, such as in-depth self inspection and rectification through special activities on corporate governance, self inspection and self correction activities related to corporate information disclosure, on-site inspection of the company by the provincial regulatory bureau, so as to continuously promote the health and improvement of internal control.
(3) Corporate governance
The company has established a basic organizational framework with the general meeting of shareholders, the board of directors, the board of supervisors and the management as the internal control, and defined the rights and responsibilities of the above subjects in the articles of association. It has formed a basic internal control framework in which the board of directors is responsible for the general meeting of shareholders, the board of supervisors is responsible for the general meeting of shareholders, and supervises the board of directors and the management, and the management is responsible for the board of directors. The board of directors has set up four special committees: Strategy Committee, audit committee, salary and assessment committee and nomination committee to improve the efficiency of decision-making and refine the structure of the board of directors.
In accordance with the company law, the securities law, the Listing Rules of Shenzhen Stock Exchange and other relevant laws and regulations, The company has formulated the articles of association, rules of procedure of the general meeting of shareholders, rules of procedure of the board of directors, rules of procedure of the board of supervisors, working rules of the general manager, working system of independent directors, management system of information disclosure, management measures for the use of raised funds, management system of connected transactions, management system of investor relations, internal audit system and restrictive provisions on the integrity obligations of senior managers and core technicians Internal control systems such as annual report system of independent directors, detailed rules for the implementation of the work of various professional committees, management system for capital transactions with major shareholders and related parties, detailed rules for the management of the trading of shares of the company by directors, supervisors and senior managers, registration and management system for insiders, reporting system for major events of Shandong Denghai Seeds Co.Ltd(002041) subsidiaries, etc. to ensure the standardized operation of the company.
(4) Development strategy
In order to meet the needs of the company’s strategic development, enhance the company’s core competitiveness, standardize the formulation and decision-making procedures of the company’s development strategy, and ensure the realization of the company’s strategic objectives, the company has formulated the working rules of the strategy committee.
The strategy committee under the board of directors of the company is a special working organization responsible for development strategy management, which is mainly responsible for studying the company’s long-term development strategy and major investment decisions and making suggestions to the board of directors.
(5) Human resources
Relying on the overall strategic objectives, the company has established a relatively perfect human resource management system, which has detailed provisions on personnel employment, employee training, salary, welfare guarantee, performance appraisal, internal transfer, job promotion, etc.
In terms of performance appraisal management, the company sets up an appraisal team to select the corresponding evaluation indicators and their work priorities according to the positions and responsibilities of the assessed employees, and set the weights to form the corresponding appraisal results.
(6) Social responsibility
The company pays attention to the realization of corporate social value, takes “creating a high-yield path of Chinese corn and catching up with and surpassing the world advanced level” as the highest mission of the company, and has always taken “to ensure national food security, increase agricultural production, increase farmers’ income and provide returns to shareholders” as its own responsibility. While pursuing economic benefits and protecting shareholders’ interests, the company treats and protects other stakeholders in good faith, and promotes environmental protection and friendship Resource conservation and recycling, participate in and contribute to social public welfare and philanthropy, influence and drive the revitalization of local economy with their own development, and promote the natural coordinated and harmonious development of the company and local society.
(7) Corporate culture
The company pays attention to the construction of corporate culture, advocates civilization, and creates a hard-working and positive corporate culture. The core value of the company is: “safety and health, environmental protection, professional ethics, respect for employees, develop and cultivate talents, integrity.” The company takes “creating a high-yield path of Chinese corn and catching up with and surpassing the world advanced level” as the highest mission of the company, adheres to independent innovation, promotes the healthy and sustainable development of the company through technological innovation and cultural innovation, and builds an innovative Shandong Denghai Seeds Co.Ltd(002041) . (8) Sales business
All subsidiaries and branches formulate annual sales plans according to the target profit indicators and in combination with the sales situation of the previous year. The company summarizes, reviews, puts forward modification opinions and distributes them to all subsidiaries and branches after approval. In terms of standardizing sales activities and preventing sales related risks, the main subsidiaries and branches have focused on the control of sales plan formulation, customer development, credit management, sales contract management, sales delivery, sales return and exchange, customer service and other processes. There are clear authorization and provisions for contract signing, sales pricing, discount policy and collection policy.
(9) Procurement business
The company has established and improved the control procedures of procurement and payment business, focusing on procurement and approval, inquiry and determination of suppliers, negotiation and approval of procurement contracts, procurement acceptance and relevant accounting records, payment application, approval and implementation, acceptance and warehousing, regular checking of current accounts with suppliers and other links, and clarified their respective rights and responsibilities, mutual restriction requirements and control measures, so as to make the procurement and payment procedures complete and the process compliant Procedure specification. The main subsidiaries of the subsidiaries shall formulate procurement plans according to the annual production, operation and financial plans.
(10) Inventory management
According to the characteristics of seed life cycle, the company dynamically manages the stored seeds, pays attention to the market sales of relevant seeds at all times, and timely grasps and adjusts the seed inventory structure; At the same time, in the inventory management activities, the company comprehensively standardized the inventory business process, clearly defined the processes of acceptance and warehousing, specially assigned person custody, picking and delivery, regular or irregular inventory, rental warehouse management, inventory disposal and other related activities, and strictly authorized the change records of inventory and the judgment of seed quality, optimized the inventory structure and effectively guaranteed the quality of seeds. Reasonably ensure the authenticity and integrity of the inventory.
(11) Fixed assets management
The company has formulated the cost accounting and depreciation accrual methods of fixed assets that meet the unified requirements of the state, controlled the key links such as purchase application, acceptance and warehousing, registration, maintenance and transformation, inventory and inventory of fixed assets, and adopted control measures such as division of responsibilities, regular physical inventory, property records and account verification to ensure the authenticity and reliability of financial information of fixed assets.
(12) Intangible assets management
Intangible assets, including variety use rights, are important core assets of the company. The company has established and improved a series of management and decision-making processes for the acquisition, acceptance, use, accounting and disposal of intangible assets according to different ways of obtaining intangible assets such as independent research and development and outsourcing. The company shall conduct dynamic management on the use right of relevant varieties after obtaining, including assessing the performance of each intangible asset during the operation period; At the same time, the company strengthened the protection of intangible assets such as brand and variety use rights, strengthened the market rights protection and law enforcement inspection, and ensured that the legitimate rights and interests of the company were not infringed. In addition, the company confirmed the cost and amortization method of intangible assets according to the specific conditions of relevant intangible assets and the provisions of national unified accounting standards, so as to ensure the authenticity and reliability of the financial information of intangible assets.
(13) Fund management
According to its development strategy and business objectives, the company can strengthen the supervision of its subsidiaries and branches, ensure the reasonable operation of funds, obtain income, prevent risks and ensure the safe and effective operation of funds. At the same time, incompatible Posts handling monetary capital business have been separated, and there are mutual constraints between relevant institutions and personnel. The operating procedures for fund payment application, approval authority, review and payment are clearly stipulated.
(14) Fund raising activities
In order to standardize the use of the raised funds, the company has formulated the raised funds management system, which has detailed provisions on the storage, use, change, supervision and accountability of the raised funds, and clearly stipulates the use application, hierarchical approval authority, decision-making procedure, risk control measures and information disclosure procedures of the raised funds, so as to ensure the safety of the raised funds and use them in the raised funds projects.
(15) Investment management
In order to control investment risks and effectively manage the company’s major investment activities, the company has clearly stipulated the approval authority of the board of directors for foreign investment in the articles of association. The board of directors has the right to decide venture capital, asset disposal and asset mortgage accounting for less than 5% (inclusive) of the company’s latest audited net assets. When the board of directors makes major investment decisions accounting for more than 5% of the latest audited net assets, strict project review and The feasibility analysis and decision-making procedures shall be reviewed by relevant experts and professionals and submitted to the general meeting of shareholders for approval. Relevant provisions have been made on investment scheme, feasibility analysis report, risk assessment, risk monitoring, tracking record and other matters. The company implements strict examination and approval procedures in accordance with the relevant requirements of the articles of association and the stock listing rules of Shenzhen Stock Exchange, and performs corresponding information disclosure obligations in accordance with the provisions. (16) Research and development
The research and development of new crop varieties is the main research and development activity of the company. The company is a seed industry enterprise integrating education, reproduction and promotion. Independent innovation is the main way to improve the company’s core competitiveness. In order to effectively control R & D risks, strengthen the protection and management of intellectual property rights, and encourage employees’ invention and creation, the company has formulated systems such as scientific research management measures and restrictive provisions on the integrity obligations of senior managers and core technicians, which clearly stipulates the control of project initiation, fund use, reward for scientific researchers, talent introduction and reserve, ownership of intellectual property rights, etc. (17) Guarantee business
The company’s guarantee shall be uniformly managed in accordance with the articles of association and the guarantee risk shall be strictly controlled. The company has strengthened the examination and approval authority and review procedures of the guarantee object, the financial indicators, business status and management level of the guaranteed, the conclusion of the guarantee contract and risk management. Meanwhile, timely disclosure shall be made in strict accordance with the relevant provisions of Shenzhen Stock Exchange.
(18) Comprehensive budget
The company has established a comprehensive budget management system and defined the responsibilities and processes of budget preparation and approval, implementation and control, assessment and supervision. In the process of establishing and implementing budget control, the distribution of rights and responsibilities and the division of responsibilities are clear, and the organization setting and staffing are scientific and reasonable, ensuring that the basis for budget preparation and adjustment is sufficient, the scheme is reasonable, the procedure is standardized and the method is scientific. The budget implementation control complies with the company’s authorization and approval regulations, strictly controls the extra budgetary expenditure, regularly analyzes the budget implementation, strengthens the communication of budget information, timely finds out the problems in the process of budget implementation and formulates the budget
