Shanghai Hi-Road Food Technology Co.Ltd(300915) : self evaluation report on internal control in 2021

Shanghai Hi-Road Food Technology Co.Ltd(300915)

Self evaluation report on internal control in 2021

Shanghai Hi-Road Food Technology Co.Ltd(300915) 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 Shanghai Hi-Road Food Technology Co.Ltd(300915) (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 requirements of basic specifications and relevant supporting guidelines, the company determines the main units, businesses and matters and high-risk fields included in the evaluation scope according to the risk oriented principle.

1. The main units included in the evaluation scope include Shanghai Hi-Road Food Technology Co.Ltd(300915) , Shanghai walrus food ingredients Co., Ltd., Shanghai Yifu Enterprise Management Consulting Co., Ltd., Hairong (Hong Kong) Investment Development Co., Ltd. and shineroad foods (India) private limited. 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, The total operating revenue accounts for 100% of the total operating revenue in the company’s consolidated financial statements.

2. The main businesses and matters included in the evaluation scope include: corporate governance structure, corporate organizational structure, internal supervision, human resources policies, corporate culture construction, accounting system control, etc.

(1) Corporate governance structure

In strict accordance with the requirements of the company law and other laws and regulations, the company has established and improved governance institutions, rules of procedure and decision-making procedures such as the general meeting of shareholders, the board of directors and the board of supervisors, and performed various duties specified in the company law and the articles of association. Major decision-making matters, such as the approval of the company’s business policy and investment plan, the election and replacement of directors and supervisors, and the amendment of the articles of association, shall be deliberated and approved by the general meeting of shareholders. The board of directors is responsible for implementing the decisions made by the general meeting of shareholders and reporting to the general meeting of shareholders. Important decisions on major investment projects, mergers and acquisitions, the purchase of important assets and the signing of important contracts and agreements shall be decided by the board of directors. When the board of directors is not in session, the board of directors authorizes the chairman to exercise some functions and powers of the board of directors. In view of the particularity of the food industry, the general manager of the company is the legal representative of the company and exercises the functions and powers of the legal representative in accordance with the resolutions of the board of directors or the decisions of the chairman of the board of directors. The board of supervisors is the supervisory organ of the company, which is responsible for and reports to the general meeting of shareholders. It is mainly responsible for supervising whether directors and senior managers violate laws and regulations and infringe on the interests of the company and shareholders when performing their duties, and inspecting the financial situation of the company. Regulate the relationship between the controlling shareholders and the company, separate the institutions, personnel, assets, finance and business between the controlling shareholders and the company, and the controlling shareholders exercise their rights in accordance with laws and regulations, the rights granted by the general meeting of shareholders and the articles of association.

Establish the general manager responsibility system under the leadership of the board of directors. In accordance with the provisions of the articles of association, the senior management of the company

Management personnel (including general manager, deputy general manager, Secretary of the board of directors and chief financial officer) shall be appointed and dismissed by the board of directors. The general manager is the person in charge of the company’s management. The board of directors authorizes the general manager to make decisions within a certain limit in terms of major business, large capital lending and cash payment, contract signing, etc. The deputy general manager and other senior managers are responsible for handling the work under the leadership of the general manager.

(2) Organizational structure of the company

The company’s management structure system includes the general manager’s office, human resources center, administrative center, financial center, procurement center, logistics center, Quality Assurance Center, R & D center, manufacturing center, audit department, marketing center, securities affairs department, overseas business department, e-commerce operation Department, etc., clearly stipulates the responsibilities and authorities of each center and department, and forms the form of performing their own duties, assuming their own responsibilities, coordinating and restricting each other The interlocking internal control system has played a vital role in the normal operation, expansion of scale, improvement of quality and increase of benefits of the company.

(3) Internal supervision

The company’s internal supervision, audit and internal audit system is relatively perfect, and a relatively perfect internal supervision mechanism has been established. Internal supervision is divided into daily supervision and special supervision. Daily supervision refers to the routine and continuous supervision and inspection of the establishment and implementation of internal control by the company; Special supervision refers to the company’s targeted supervision and inspection of one or some aspects of internal control in the event of major adjustments or changes in development strategy, organizational structure, business activities, business processes and key positions.

The Audit Department of the company is directly responsible to the board of directors and the audit committee, and is responsible for the audit and supervision of the financial revenue and expenditure and economic activities of the company and its subordinate enterprises and departments. Under the guidance of the board of directors and the audit committee of the company, the Audit Department of the company shall independently exercise audit functions and powers without interference from other departments and individuals. Have the right to directly report the problems and defects found in the supervision and inspection to the board of directors, its audit committee and the board of supervisors of the company.

The board of supervisors of the company is responsible for supervising the performance of directors, managers and other senior executives and the operation of the company according to law, and is responsible for the general meeting of shareholders.

(4) Human resources policy

The company has continuously improved its human resource management system and competitive salary system, and has made detailed provisions on personnel recruitment, induction, reemployment, training, resignation, welfare security, performance appraisal, salary, transfer and promotion. It also takes professional ethics and professional competence as important standards for the selection and employment of employees, effectively strengthens employee training and continuing education, and continuously improves the quality of employees, Continuously improve the supporting ability of human resources to enterprise strategy.

(5) Enterprise culture construction

The company prepares the development plan of corporate culture and determines the objectives and contents of cultural construction. The company defines the company’s vision, mission, spirit, core values, logo and other contents, and establishes and improves the brand image identification system. The company defines appearance, labor discipline, dealing with people and things, environmental health, safety assurance, quality cultivation, etc., and advocates the directors and supervisors to set an example and take the lead in creating a positive corporate cultural environment.

The company vigorously promotes cultural construction, publicity and implementation through various channels and tools such as cultural corridor, website, wechat, poster and picture album, so as to improve the cohesion and centripetal force of the enterprise.

(6) Accounting system control

The company has set up an independent financial department. In terms of financial management and accounting, we have set up more reasonable posts, responsibilities and authorities, and equipped with corresponding personnel to ensure the smooth progress of financial work. The financial department has a clear division of labor and implements the post responsibility system. Each post can play a role of mutual restraint, and the approval, execution and recording functions are separated.

The company’s financial and accounting system strictly implements the national accounting standards for business enterprises and relevant supplementary provisions on financial accounting, and defines the processing procedures of accounting vouchers, accounting books and accounting reports according to the actual situation of the company. At present, the financial management system that has been formulated and implemented includes: responsibilities of the financial department, division of personnel positions, cash revenue and expenditure management measures, capital budget management measures, comprehensive budget management measures, project budget implementation management measures, expense reimbursement regulations, etc. These financial and accounting systems provide a strong guarantee for standardizing the company’s accounting, strengthening accounting supervision, ensuring the accuracy of financial and accounting data, preventing mistakes and fraud and plugging loopholes in time.

Unify the financial computerization software, make full use of the automatic processing ability of the computer, and realize the automatic generation of business accounting real-time vouchers, timely reporting of financial data, automatic statistics, summary and analysis of financial data through reasonable program setting, so as to realize remote management and monitoring.

3. The high-risk areas of focus mainly include corporate governance, human resources policies, internal supervision, 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.

(II) basis of internal control evaluation and identification standard of internal control defects

The company carries out internal control evaluation according to the requirements of the enterprise’s internal control standard system and the company’s internal control 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 identification standards of internal control defects determined by the company are as follows: 1. Identification standards of internal control defects in financial reports

The quantitative criteria for the evaluation of internal control defects in financial reporting determined by the company are as follows:

Quantitative standard for determining the importance of misstatement (including omission) in the company’s consolidated financial statements based on the data of annual consolidated financial statements:

Quantitative standard of defect grade

The amount of material defect misstatement ≥ 5% of the total profit

1% of total profits from major defects ≤ amount of misstatement ＜ 5% of total profits

General defect misstatement amount ＜ 1% of total profit

The qualitative criteria for the evaluation of internal control defects in financial reporting determined by the company are as follows:

(1) Major defects

It refers to the combination of one or more control defects, which may cause the enterprise to seriously deviate from the control objectives. The following features are identified as major defects:

A. Directors, supervisors and senior managers commit fraud;

B. The certified public accountant found that there were significant misstatements in the current financial report, and the internal control was in operation

The error is not found in the process;

C. The supervision of the audit committee and the internal audit department on the internal control of financial reports is invalid;

D. Make misstatement correction for major errors in the announced financial report.

(2) Important defects

It refers to the combination of one or more control defects, whose severity and economic consequences are lower than those of major defects, but may still cause the enterprise to deviate from the control objectives. The following characteristics are identified as important defects:

A. To select and apply accounting policies in accordance with GAAP;

B. Failure to establish anti fraud procedures and control measures;

C. 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;

D. There are one or more defects in the control of the financial report at the end of the period, and it can not reasonably ensure that the prepared financial statements achieve the goal of authenticity and accuracy.

(3) General defect

It refers to other control defects except major defects and important defects.

2. Identification standard of internal control defects in non-financial reporting

Quantitative standard of defect grade

The amount of material defect misstatement ≥ 5% of the total profit

1% of total profits from major defects ≤ amount of misstatement ＜ 5% of total profits

General defect misstatement amount ＜ 1% of total profit

The qualitative criteria for the evaluation of internal control defects in non-financial reporting determined by the company are as follows:

(1) Major defects

A. Lack of internal control, resulting in serious violation of the prohibitive provisions of national laws and regulations, major economic penalties or major property losses;

B. Lack of development strategy or inadequate implementation of the strategy leads to serious deviation from the development strategy; C. The lack of human resource system guarantee leads to the massive loss of key talents;

D. Improper performance of social responsibility leads to negative events and continues to attract the attention of international and national mainstream media;

E. Lack of system control or systematic failure of important business;

F. Failure to establish risk assessment mechanism or take control measures for major risks, resulting in major property losses or significant negative impact;

G. The “major defects” identified in the internal control evaluation have not been rectified;

H. The internal control supervision organization has no effect on the internal control supervision.

(2) Important defects

A. The lack of internal control leads to the violation of the prohibitive provisions of national laws and regulations, large economic penalties or large property losses;

B. The development strategy is not adjusted in time, or the implementation of the strategy is not in place, resulting in the development direction and development strategy

Large deviation;

C. Insufficient guarantee of human resource system, resulting in the loss of key talents;

D. Improper performance of social responsibility leads to negative events and continues to attract the attention of local mainstream media;

E. Lack of institutional control of major businesses or failure of important systems;

F. The risk assessment mechanism is not perfect, and no control measures are taken for important risks, resulting in large property losses or certain negative effects;

G. The “important defects” identified in the internal control evaluation have not been rectified;

H. The internal control supervision organization is obviously insufficient in the supervision of internal control.

(3) General defect

commonly