China Dive Company Limited(300526)
Self evaluation report on internal control in 2021
China Dive Company Limited(300526) all shareholders:
China Dive Company Limited(300526) (hereinafter referred to as “the company”, “the company” or ” China Dive Company Limited(300526) “) in order to strengthen and standardize the internal control of the enterprise, improve the operation and management level and risk prevention ability of the enterprise, promote the sustainable development of the enterprise and safeguard the legitimate rights and interests of shareholders, according to the company law and the basic norms of enterprise internal control In accordance with the requirements of relevant laws and regulations such as the guidelines for the standardized operation of companies listed on the gem of Shenzhen Stock Exchange and the guidelines for the governance of listed companies, we conducted a comprehensive and in-depth self-examination on the current internal control and operation of the company, and evaluated the rationality and effectiveness of the internal control of the company on December 31, 2021 (the benchmark date of the internal control evaluation report).
1、 Board statement
The board of directors and all directors 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 its contents. 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 objective of the company’s internal control is to reasonably ensure the legal compliance of operation, asset safety, financial reports and relevant information to be true, accurate, timely and complete, 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、 Evaluation conclusion of the company’s internal control
According to the identification of the company’s internal control defects in financial reporting, effective internal control over financial reporting has been maintained in all major aspects in accordance with the requirements of the system and relevant regulations on the benchmark date of the internal control evaluation report.
According to the identification of defects in the company’s internal control over non-financial reports, the company found no significant defects in the 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、 Evaluation of internal control
（1） Scope of internal control evaluation
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 main units included in the evaluation scope include the parent company, wholly-owned subsidiaries and holding subsidiaries, including China Dive Company Limited(300526) , Beihai Zhongqian Technology Co., Ltd., Shenzhen Zhongqian Network Technology Co., Ltd., Shenzhen Blue Sports Co., Ltd., Shenzhen Zhongqian International Travel Agency Co., Ltd., Huizhou Zhongqian Property Management Co., Ltd., Huizhou Zhongqian Big Data Technology Co., Ltd., shangmeng sporting goods (Hong Kong) Co., Ltd China submarine equipment (Hong Kong) Co., Ltd., Shenzhen walway sporting goods manufacturing Co., Ltd., Shenzhen China submarine Siasun Robot&Automation Co.Ltd(300024) Co., Ltd., Sanya China submarine outdoor sports Co., Ltd., xilotia Co., Ltd., Huanya semiconductor (Hong Kong) Co., Ltd. and Yangyue Holding Co., Ltd. The evaluation basis of important business units included in the evaluation scope: the total assets account for 5% of the total assets of the company’s consolidated financial statements, the total operating revenue accounts for 5% of the total operating revenue of the company’s consolidated financial statements, the total profit before tax accounts for 5% of the total profit of the company’s consolidated financial statements, and one of the three indicators accounts for an important subsidiary. The main businesses and matters included in the evaluation scope include: organizational structure, human resources, procurement business, asset management, comprehensive budget, sales business, investment activities, external guarantee, related party transaction, financial report, 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.
1. Organizational structure
In order to effectively plan, coordinate and control business activities, the company has reasonably determined the form and nature of organizational units, implemented the principle of separation of incompatible positions, scientifically divided the responsibilities and authorities within each organizational unit, and formed a mutual check and balance mechanism. At the same time, we will earnestly achieve “five independence” from the controlling shareholder of the company. The company has designated special personnel to be specifically responsible for internal audit and ensure the implementation of relevant accounting control systems. 2. Human resources
The company has established and implemented more scientific personnel management systems such as employment, training, job rotation, assessment, reward and punishment, promotion and elimination, and hired enough personnel to complete the assigned tasks.
3. Procurement business
The company has reasonably planned and established institutions and posts for procurement and payment business. The purchase requisition, approval, purchase and acceptance procedures of inventory are clarified. The payment of accounts payable and prepayments can only be handled after the relevant procedures are complete. In terms of authority, within the authorization scope of the headquarters of the company, subordinate enterprises can independently handle procurement and payment business. The company has no major loopholes in the control of procurement and payment.
4. Asset management
The company has established a post responsibility system for physical asset management, which can control the key links such as acceptance and warehousing, receiving and issuing, storage and disposal of physical assets, and has taken measures such as division of responsibilities, regular physical inventory, property records, account verification and property insurance, which can effectively prevent the theft, theft, damage and major loss of various physical assets.
5. Comprehensive budget
The company has established a cost control system and a comprehensive budget system, which can do a good job in the basic work of cost management and budget, and clarify the expense standard. However, it is not in-depth and timely in comparing the actual performance and planned objectives in time and applying the comparison results to the actual work.
6. Sales business
The company has formulated a relatively feasible sales policy, and has made clear provisions on the pricing principle, credit standards and conditions, collection method, responsibilities and authorities of institutions and personnel involved in sales business. The sale of goods and provision of labor services between enterprises within the scope of the joint stock company shall be settled according to the unified internal settlement price. The system of responsibility for Dunning and collection is implemented, and the management of reconciliation and collection is strong. The company and its subordinate enterprises will implement the collection responsibility to the sales department, and list the recovery rate of sales payment as one of the main assessment indicators. In terms of authority, within the authorization scope of the headquarters of the company, subordinate enterprises can independently handle the business of selling goods, providing labor services and payment settlement.
7. Investment activities
In order to strictly control investment risks, the company has established a more scientific decision-making procedure for foreign investment and implemented a responsibility system for major investment decisions. The corresponding authority for foreign investment is concentrated in the company’s headquarters (adopting the mechanism that different investment amounts are decided by the power organs at different levels of the company). All branches are not allowed to make foreign investment without authorization.
Strong management of investment project initiation, evaluation, decision-making, implementation, management, income, investment disposal and other links. The company has not seriously deviated from the company’s investment policies and procedures.
8. External guarantee
The company can strictly control the guarantee behavior, establish the guarantee decision-making procedure and responsibility system, clearly stipulate the guarantee principles, guarantee standards and conditions, guarantee liability and other relevant contents, strictly manage the conclusion of the guarantee contract, and timely understand and master the operation and financial status of the guaranteed, so as to prevent potential risks and avoid and reduce possible losses.
9. Related party transactions
The company has formulated the management measures for related party transactions, which clearly stipulates the approval authority, decision-making procedures and consideration of related party transactions, standardizes the transaction behavior with related parties, and strives to follow the principles of honesty, impartiality, fairness and openness to protect the interests of the company and minority shareholders.
10. Financial reporting
In order to guide the company to standardize the preparation of financial reports, prevent the significant impact of improper preparation on financial reports, and ensure the authenticity and reliability of accounting information, the accounting manual and financial management system are formulated in accordance with relevant national laws and regulations and the relevant provisions of the evaluation report of the articles of Association, which clearly stipulates the preparation basis, main accounting policies and accounting estimates of financial reports. On the basis of continuous operation, the company shall recognize and measure the actual transactions and events in accordance with the accounting standards for business enterprises – Basic Standards and other standards, and prepare the accounting report on this basis.
Among the domestic sales revenue of China Dive Company Limited(300526) company in 2020, the diving equipment revenue of 5.1679 million yuan and the material sales revenue of 145442 million yuan are missing business documents, resulting in incomplete data for the recognition of this part of revenue, so that the occurrence and accuracy of revenue in 2020 cannot be determined.
In 2021 and beyond, in order to eliminate the impact of the above matters on the financial report, the company accompanied the annual audit accountant to supplement relevant materials through visits, letters and other forms. The sales revenue of 7.3143 million yuan can be recognized, and the remaining unrecognized amount is 123978 million yuan.
For the problems existing in the company’s internal control over financial reporting, the company plans to take the following measures to improve: (1) strengthen the professional ethics education and training of the company’s relevant financial and business personnel, and improve the business ability and work level of the relevant financial and business personnel;
(2) Strengthen daily accounting management and account verification, control the whole process of business document circulation and do a good job in archiving, further clarify the processing procedures of relevant records, and improve the post responsibility system, so that the dynamics of business activities can be reflected in the accounting system in a timely and accurate manner.
（2） 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 basic norms of enterprise internal control, guidelines for enterprise internal control evaluation, guidelines for enterprise internal control evaluation, internal control and relevant systems and evaluation methods formulated by the enterprise.
According to the identification requirements of the enterprise internal control standard system for major defects, important defects and general defects, and in combination with the company’s scale, industry characteristics, risk preference, risk tolerance and other factors, the board of directors of the company distinguished the internal control of financial reports from the internal control of non-financial reports, and studied and determined the specific identification standards of internal control defects applicable to the company. The identification standards of internal control defects determined by the company are as follows:
1. Identification standard of internal control defects in financial reporting
(1) The quantitative criteria for the evaluation of internal control defects in financial reporting determined by the company are as follows:
Major defects of the project major defects general defects
Potential misstatement of total assets in consolidated statements ≥ 5% 2% ≤ potential misstatement 5% potential misstatement 2%
Total profit of consolidated statements
Potential misstatement ≥ 5% 2% ≤ absolute value of potential misstatement 5% potential misstatement 2%
The qualitative criteria for the evaluation of internal control defects in financial reporting determined by the company are as follows:
If the potential misstatement impact caused by internal control defects is related to the income statement, it shall be measured by the absolute value of the total profits in the consolidated statements. If the potential misstatement impact caused by internal control defects is related to the balance sheet, it shall be measured by the total assets in the consolidated statements.
In case of any of the following circumstances, it is recognized that there are major defects in the internal control of financial reporting:
1) The company’s control environment is invalid;
2) The company’s directors, supervisors and senior managers commit fraud and cause heavy losses and adverse effects to the enterprise;
3) The certified public accountant found that there was a material misstatement in the current financial report, but the company’s internal control failed to find the misstatement in the operation process.
The supervision of the company’s audit committee and internal audit institutions on internal control is invalid.
Under the following circumstances, it is recognized that there are important defects in the internal control of financial reporting:
1) Failure to select and apply accounting policies in accordance with GAAP;
2) Failure to establish anti fraud procedures and control measures;
3) No corresponding control mechanism has been established or implemented for the accounting treatment of unconventional or special transactions, 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 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
(1) The quantitative criteria for the evaluation of internal control defects in non-financial reporting determined by the company are as follows:
Major defects: the amount of loss accounts for 7% or more of the total audited profit of the previous year;
Major defects: the amount of loss accounts for 4% (including 2%) to 7% of the total audited profit of the previous year;
General defect: the loss amount is less than 4% of the total audited profit of the previous year
(2) The qualitative criteria for the evaluation of internal control defects in non-financial reporting determined by the company are as follows:
1) Major defects: lack of democratic decision-making procedures: decision-making procedures lead to major mistakes; Lack of institutional control or systematic failure of important business, and lack of effective compensatory control; The results of internal control evaluation, especially the important defects, have not been rectified; Other situations that have a great negative impact on the company.
2) Important defects: General mistakes caused by decision-making procedures; Defects in important business systems or systems; Serious loss of business personnel in key positions; The results of internal control evaluation, especially the important defects, have not been rectified; Other situations that have a great negative impact on the company..
3) General defects: the efficiency of decision-making procedure is not high; Defects in general business system or system; Serious loss of business personnel in general posts; General defects have not been rectified.
（3） 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 reports, the following important defects were found in the company’s internal control over financial reports during the reporting period:
In the domestic sales revenue of China Dive Company Limited(300526) company in 2020, there was a lack of business documents for the sales revenue of 197121 million, resulting in the incompleteness of relevant data for the recognition of this part of the revenue, so that the occurrence and accuracy of the revenue in 2020 could not be determined.
In 2021 and beyond, in order to eliminate the impact of the above matters on the financial report, the company accompanied the annual audit accountant to supplement relevant materials through visits, letters and other forms. The sales revenue of 7.3143 million yuan can be recognized, and the remaining unrecognized amount is 123978 million yuan.
The company has taken the following measures to improve the problems existing in the internal control of financial reporting in the early stage
