Shanxi Lu’An Environmental Energydev.Co.Ltd(601699)
Internal control evaluation report in 2021
Shanxi Lu’An Environmental Energydev.Co.Ltd(601699) 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 company’s (hereinafter referred to as the company’s) internal control system and evaluation methods, and 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 internal control evaluation report). I 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. II Internal control evaluation conclusion 1 On the benchmark date of the internal control evaluation report, does the company have any major defects in the internal control of financial reporting
□ yes √ no
2. Evaluation conclusion of internal control over financial reporting
√ valid □ invalid
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. 3. Whether major defects in internal control over non-financial reporting are found
□ yes √ no
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.
4. Factors affecting the evaluation conclusion of internal control effectiveness from the benchmark date of internal control evaluation report to the date of issuance of internal control evaluation report □ applicable √ not applicable
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. 5. Whether the internal control audit opinion is consistent with the company’s evaluation conclusion on the effectiveness of internal control over financial reporting
√ yes □ No 6 Whether the disclosure of major defects in internal control of non-financial reports in the internal control audit report is consistent with the disclosure of the company’s internal control evaluation report √ yes □ no III Internal control evaluation (I) 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. 1. The main units included in the evaluation scope include: the parent company of the listed company, its subordinate branches and subsidiaries 2 Proportion of units included in the scope of evaluation:
Proportion of indicators (%)
The total assets of the units included in the evaluation scope accounted for 88.16% of the total assets in the company’s consolidated financial statements
The total operating income of the units included in the evaluation scope accounted for 91.29% of the total operating income in the company’s consolidated financial statements
3. The main operations and matters included in the scope of evaluation include:
Corporate governance structure, development strategy, human resources, social responsibility, corporate culture, capital activities, procurement business, asset management, sales business, research and development, engineering projects, guarantee business, related party transactions, financial reporting, comprehensive budget, contract management, internal information transmission and information system. 4. High risk areas of focus mainly include:
The company’s overall internal control, preparation process of financial statements, financing and investment process, sales and collection process, construction in progress process, safety production process, etc. 5. the above units, businesses, matters and high-risk areas included in the evaluation scope cover the main aspects of the company’s operation and management. Are there any major omissions □ yes √ no 6 Is there a statutory exemption
□ yes √ No 7 Other explanatory matters
（2） 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 and relevant internal rules and regulations of the company. 1. Whether the specific identification standard of internal control defects is adjusted with that of previous years
□ yes √ no
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. 2. 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:
Index name major defect quantitative standard important defect quantitative standard general defect quantitative standard
Profit before tax: 5% – 5% – less than 1%
Note: the quantitative standard for the identification of internal control defects of the company, including that the defects alone or together with other defects may cause property losses of the company.
The qualitative criteria for the evaluation of internal control defects in financial reporting determined by the company are as follows:
Qualitative standard of defect nature
Major defect a. the defect involves fraud by senior managers;
B. This defect indicates that there is no internal supervision organization or the internal supervision organization fails to perform its basic duties;
C. When there is a material misstatement in the financial report, and the corresponding control activities fail to identify the misstatement, or it is necessary to correct the published financial report.
Significant defect A. There are significant misstatements identified above in the current financial report, and the control activities fail to identify the misstatements.
B. Although the importance level is not reached or exceeded, the nature of the misstatement should still attract the attention of the board of directors and management.
General defects internal control defects in financial statements other than major defects and important defects shall be recognized as general defects.
Note: none 3 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:
Index name major defect quantitative standard important defect quantitative standard general defect quantitative standard
Profit before tax: 5% – 5% – less than 1%
Note: the quantitative standard for the identification of internal control defects of the company, including that the defects alone or together with other defects may cause property losses of the company.
The qualitative criteria for the evaluation of internal control defects in non-financial reporting determined by the company are as follows:
Qualitative standard of defect nature
Major defect A. lack of democratic decision-making procedures, such as decision-making procedures for major problems, appointment and removal of important cadres, investment decision-making of major projects, and decision-making procedures for the use of large amounts of funds (three important and one large);
B. Unscientific decision-making procedures, such as major decision-making mistakes, causing major property losses to the company;
C. Serious violation of national laws and regulations;
D. Massive loss of key management personnel or important talents;
E. Frequent negative news in the media;
F. Major defects in internal control evaluation have not been rectified;
G. Major losses are caused to the company due to the lack of quantitative control system.
Important defect a. the company has important property losses identified according to the above quantitative standards due to management errors, and the control activities fail to prevent such errors;
B. Although the property loss does not reach or exceed the importance level, from the nature, it should still attract the attention of the board of directors and management.
General defects other internal control defects of non-financial reporting other than major defects and important defects shall be recognized as general defects.
Note: none (III) Identification and rectification of internal control defects 1 Identification and rectification of internal control defects in financial reporting 1.1 Major defects
Whether the company has major defects in internal control over financial reporting during the reporting period □ yes √ no 1.2 Important defects
Whether the company has significant defects in internal control over financial reporting during the reporting period □ yes √ no 1.3 General defect
During the year, the general defects of the company’s internal control over financial reporting have been rectified as required. 1.4. After the above rectification, on the benchmark date of the internal control evaluation report, does the company have any major defects in the internal control of financial reporting that have not been rectified □ yes √ no 1.5 After the above rectification, on the benchmark date of the internal control evaluation report, whether the company has any important defects in the internal control of financial reporting that have not been rectified □ yes √ No 2 Identification and rectification of internal control defects in non-financial reporting 2.1 Major defects
Whether the company found any major defects in internal control over non-financial reporting during the reporting period □ yes √ no 2.2 Important defects
Whether the company found any significant defects in internal control over non-financial reporting during the reporting period □ yes √ no 2.3 General defect
During the year, the general defects of the company’s internal control over non-financial reporting have been rectified as required.
2.4. After the above rectification, on the benchmark date of the internal control evaluation report, does the company find any major defects in the non-financial reporting internal control that have not been rectified □ yes √ no 2.5 After the above rectification, on the benchmark date of the internal control evaluation report, whether the company finds any important defects in non-financial reporting internal control that have not been rectified □ yes √ no IV Description of other major matters related to internal control 1 Rectification of internal control defects in the previous year □ applicable √ not applicable 2 Operation of internal control in this year and improvement direction in the next year
□ applicable √ not applicable 3 Description of other major events
□ applicable √ not applicable
Chairman (authorized by the board of directors): Wang Zhiqing Shanxi Lu’An Environmental Energydev.Co.Ltd(601699) April 23, 2022
