Jinhe Biotechnology Co.Ltd(002688)
Self evaluation report on internal control in 2021
Jinhe Biotechnology Co.Ltd(002688) all shareholders:
According to the provisions and internal control requirements of the basic norms of enterprise internal control and its supporting guidelines, combined with the systems and methods of Jinhe Biotechnology Co.Ltd(002688) (hereinafter referred to as “the company”), on the basis of internal control and supervision, we evaluated the effectiveness of the company’s internal control on December 31, 2021 (the benchmark date of 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) scope of internal control evaluation
According to the risk oriented principle, the company determines the main businesses and matters included in the evaluation scope, including: capital, procurement, assets, sales, production, financial management, comprehensive budget, contract management, information system construction, internal and external information and communication, internal supervision, etc.
The high-risk areas of focus mainly include: capital, procurement, production, warehousing, sales, financial management, contract management, personnel management in key positions, etc.
The above businesses and matters included in the evaluation scope basically cover the main aspects of the company’s operation and management, and there are no major omissions. (II) objectives of internal control system
1. Establish and improve the internal organizational structure that meets the requirements of modern company management, and form a scientific decision-making mechanism, execution mechanism and supervision mechanism to ensure the realization of the company’s operation and management objectives;
2. Establish an effective risk control system, strengthen risk management and ensure the normal and orderly operation of the company’s business activities;
3. Establish a good internal control environment of the company, block loopholes, eliminate hidden dangers, prevent and timely discover and correct errors and fraud, and protect the safety and integrity of the company’s assets;
4. Standardize the accounting behavior of the company, ensure the authenticity and integrity of accounting materials, and improve the quality of accounting information; 5. Ensure the implementation of relevant national laws and regulations and the company’s internal rules and regulations. (III) principles followed by the company in establishing internal accounting control system
1. Internal accounting control complies with relevant national laws and regulations, relevant norms of internal control issued by relevant departments and the actual situation of the company;
2. Internal accounting control can restrict all personnel involved in accounting work within the company, and no individual shall have the power to go beyond internal accounting control;
3. Internal accounting control can cover all economic businesses and relevant posts related to accounting work within the company, and implement the key control points in the process of business processing to decision-making, implementation, supervision, feedback and other links;
4. Internal accounting control can ensure the reasonable setting of institutions and posts involved in accounting work and the reasonable division of responsibilities and authorities within the company, adhere to the separation of incompatible posts, and ensure that different institutions and posts have clear rights and responsibilities, restrict and supervise each other;
5. When establishing internal accounting control, the company follows the cost-benefit principle to achieve the best control effect with reasonable cost control;
6. Internal accounting control can be continuously revised and improved with the change of external environment, the adjustment of the company’s business functions and the improvement of management requirements.
（4） Internal control elements of the company
Based on the basic concept of standardized operation, actively strive to create a good control environment, which is mainly reflected in the following aspects:
1. Communication and implementation of integrity and moral values
Integrity and moral values are an important part of the control environment and affect the design and operation of important business processes of the company. The company has always attached importance to the creation and maintenance of this atmosphere, and established a series of internal norms such as employee code of conduct and employee work manual. Managers at all levels set an example and effectively implemented the norms and the contents of the manual.
2. Emphasis on Competence
The company attaches great importance to the improvement of employees’ quality, adheres to the development concept of “people-oriented”, and gradually forms a talent echelon conducive to the development of the company through talent introduction and rational allocation of human resources. The number of master’s and undergraduate staff of the company has increased significantly compared with the previous year. By the end of 2021, the company has 2243 in-service employees, including 8 doctors, 62 masters, 349 undergraduates and 575 junior colleges, A total of 1249 people below junior college. According to the actual needs, the company normalizes the on-the-job training, regularly carries out various forms of follow-up training and education, and continuously improves the management level and on-the-job operation skills of employees, which has laid a solid foundation for the development of the company.
3. Management’s business philosophy
The company has formed a management team with the chairman as the core. The management team has advanced management technology and concept, which provides technical support and guarantee for the sustainable development of the company. In addition, through the continuous introduction of excellent personnel and rational allocation of human resources, the company has established an efficient staff team and stable scientific research team, closely combined with the scientific research and market advantages of its subsidiary in the United States, and continuously improved and innovated in the field of production technology, providing technical support for the sustainable development of the enterprise.
The company attaches great importance to the construction of product quality system and brand promotion strategy, and always implements the business purpose of “survival by quality and development by science and technology”. It has passed the certification and acceptance of national veterinary drug production GMP, American FDA, European COS and customs AEO for many times, and accepted the quality audit of many major international customers.
According to the actual situation of the enterprise, the company has formulated a series of practical internal control management systems, and through the continuous implementation, implementation and improvement of the system, the company’s internal control environment has been significantly improved, and various management has gradually become rationalized and scientific, so as to realize standardized and refined management.
In terms of safety work, the company has always adhered to the basic policy of “safety first, prevention first and comprehensive treatment”, firmly established the idea of “safety responsibility is more important than Mount Tai”, earnestly implemented various rules and regulations, implemented the main responsibilities of personnel at all levels, strengthened the on-site supervision and inspection of safety production, actively organized employees to carry out safety production training according to relevant regulations, and timely found out the hidden dangers and signs of accidents Timely rectification has effectively curbed the occurrence of safety accidents. During the covid-19 epidemic prevention and control period, we attached great importance to it and actively implemented the epidemic prevention and control plan to ensure the normal operation of production and operation.
4. Distribution of authority and responsibility
The company has established a set of authorization mechanism to perform specific functions (including transaction authorization) to ensure that relevant personnel clearly understand the reporting relationship and responsibilities. In order to effectively control and supervise the authorized use, the company has established a budget control system to modify the control policies of the accounting system in time according to the changes of the situation. Through various measures, the financial department reasonably ensures that business activities are carried out in accordance with appropriate authorization, so that the preparation of financial statements meets the relevant requirements of the accounting standards for business enterprises.
5. Human resources policy and Practice
The company has established and implemented scientific personnel management systems such as employment, training, job rotation, assessment, reward and punishment and promotion, and employs personnel through multiple channels according to post needs, so that they can give full play to their professional expertise and complete the assigned tasks. The rapid growth of the company is inseparable from excellent talents. The company always adheres to the development concept of “people-oriented”, pays attention to business expansion and talent development, and improves relevant systems, including human resource management system, personnel recruitment and promotion management system, labor contract management system, etc., and establishes and improves employee employment, training, salary system, performance appraisal, internal transfer, job promotion Relevant provisions have been made in terms of welfare and security, and a relatively perfect human resource management system has been established.
6. Social responsibility
Adhering to the corporate culture of “credibility, affection, dedication and innovation”, the company actively implemented practical and good deeds for employees, helped difficult employees solve or alleviate their difficulties, expressed the company’s concern for them, reflected the chairman’s care for them, and distributed condolences to the relief households, difficult employees and retired old employees jointly built by village enterprises in accordance with the work arrangement of the superior party committee and trade union. At the same time, it joined the employee medical mutual assistance activities of the Federation of trade unions of the autonomous region. In 2021, 21 people were rescued and relief funds were paid. The company attaches great importance to work safety, has established a work safety committee and implemented a safety responsibility system, has established a professional safety management department, and has established a regular safety meeting mechanism, a safety education mechanism, “one-day safety officer” and other mechanisms to conduct safety production assessment on a monthly basis. The company has formulated 59 safety systems, including safety production management system, safety technical measures management regulations, production safety accident emergency plan, and standardized safety production management.
The company regards product quality as the lifeline, establishes the quality technology department, formulates more than 130 quality management systems covering quality control, quality inspection, verification management and measurement management, and strictly supervises the implementation. It has continuously passed the high-standard acceptance such as FDA and GMP.
The company attached great importance to environmental protection and resource conservation, established waste gas and sewage treatment system, and invested in the establishment of Inner Mongolia Jinhe Environmental Protection Technology Co., Ltd., which fundamentally solved the problem of sewage discharge of biopharmaceutical.
(V) risk assessment process
In the process of formulating the development strategic objectives, the company employs professional consulting companies to analyze and evaluate the company’s strategy, actively face and deal with the threatening and opportunistic risks in line with the company’s strategic development direction, avoid all risks brought by engaging in speculative business, and reasonably ensure that all risks affecting the strategic objectives are controlled within the tolerable range in combination with the company’s risk preference and risk tolerance, Provide effective guarantee for the realization of the company’s overall strategic objectives.
(VI) control activities
Based on the requirements of the basic norms of enterprise internal control on control activities, the company has formulated nearly 90 internal control management systems for capital activities, procurement business, asset management, sales business, research and development, engineering projects, guarantee business, business outsourcing, financial reporting, comprehensive budget, contract management, senior management code of conduct and other contents to strictly control all business links. The company’s financial management system specifically stipulates investment and financing, capital operation, procurement and storage, low value consumables, creditor’s rights and debts, fixed assets, cost management, expenses, etc., and avoids the company’s business risks from the internal control links and system level.
1. Incompatible job separation control
When setting the organization and posts, the company comprehensively and systematically analyzed and combed the company’s business processes, implemented corresponding separation measures for posts prone to fraud risk, and formed a working mechanism of performing their respective duties and mutual restriction.
2. Authorization approval control
According to the articles of association, the responsibilities of the general meeting of shareholders, the board of directors, the board of supervisors and the management are clearly divided, and effective rules of procedure are formulated. Managers at all levels have formed a working mechanism of performing their respective duties, mutual supervision and mutual promotion. According to the different division of responsibilities and the amount of funds involved, the corresponding authorization and approval authority and approval process are clarified from the institutional level. According to the measures for the management of subsidiaries, the authority and process of authorization and approval control are defined for the affiliated subsidiaries according to relevant regulations to ensure the operation safety of the company; According to the contract management measures, clear authorization management is carried out for the contract formulation, contract approval and signing, contract performance and other links of various contracts, so as to effectively prevent internal and external risks in contract management.
3. Accounting system control
The company has carried out accounting management in strict accordance with the requirements of the accounting standards for business enterprises and the relevant provisions of the governance of listed companies, improved the preparation, consolidation, internal audit, external audit and disclosure of accounting information, and established a relatively sound accounting system management and control system to ensure the authenticity, integrity and usefulness of financial reports.
4. Property protection control
The company has formulated relevant systems for the management of fixed assets, standardized the purchase, daily management, use and disposal of fixed assets, and clarified the work flow and operation rules. The fixed assets management department and the finance department shall conduct regular asset inventory to ensure that the accounts are consistent with the facts. The company regularly handles the scrapped assets according to the asset disposal procedures, and actively strengthens the management of fixed assets, accounts receivable and inventory to ensure property safety.
5. Budget control
The company has established a comprehensive budget management system. Combined with the actual situation of the company, the company has established the annual financial budget, semi annual budget adjustment, preparation and approval workflow. Through the actual investigation of the operation of each company, interview with the main operation managers, and monthly monitoring of the budget implementation, the company has realized the dynamic monitoring of the financial budget implementation of each company.
6. Operation analysis control
By strengthening the collection, analysis and research of information on major product markets and competitors, the company modifies its own business strategy and action plan according to the changing trend, actively avoids risks, reduces losses caused by risks and increases profits.
7. Performance appraisal control
The company’s comprehensive evaluation team formulates the evaluation methods for senior managers and carries out the evaluation of senior managers on a monthly basis; The general affairs office shall formulate the evaluation methods for middle-level managers and carry out the evaluation of middle-level managers on a monthly basis; The planning and Evaluation Department of the company formulates the management of production and operation evaluation
