Yonker Environmental Protection Co.Ltd(300187) : self evaluation report on internal control in 2021

Yonker Environmental Protection Co.Ltd(300187)

Self evaluation report on internal control in 2021

Yonker Environmental Protection Co.Ltd(300187) all shareholders:

In accordance with the provisions of the basic norms of enterprise internal control and its supporting guidelines jointly issued by the Ministry of finance, China Securities Regulatory Commission and other departments and other internal control regulatory requirements (hereinafter referred to as the “enterprise internal control normative system”), combined with the relevant internal control systems and evaluation methods of Yonker Environmental Protection Co.Ltd(300187) (hereinafter referred to as the “company”), in order to further strengthen the construction of the company’s internal control, improve the process system To reduce operational risks, improve operational efficiency and effectiveness, promote the realization of the company’s development strategy and business objectives, and protect the legitimate rights and interests of investors, on the basis of daily and special supervision of internal control, we conducted a comprehensive inspection on the company’s internal control as of December 31, 2021 (the benchmark date of internal control evaluation report) and evaluated the effectiveness of internal control.

1、 Important 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 content of the internal control self-evaluation report (hereinafter referred to as “the report”), and bear individual and joint liabilities for the authenticity, accuracy and integrity of the report.

According to the provisions of the enterprise internal control standard system, it is the responsibility of the company’s board of directors to establish, improve and effectively implement internal control. 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 objective of the company’s internal control is to reasonably ensure the legal compliance of operation, asset safety, authenticity and integrity of financial reports and relevant information, improve operation efficiency and effect, promote the realization of development strategy, and bring maximum value to the company’s shareholders, especially small and medium-sized investors. Due to the inherent limitations of internal control, it can only provide reasonable assurance for the realization of the above objectives. Due to changes in the market environment or uncontrollable factors, the original internal control system may not adapt to the company’s business development, or the degree of compliance with control policies and procedures may be reduced. According to the internal control evaluation results, it is speculated that there are certain risks in the effectiveness of internal control in the future.

2、 Internal control evaluation conclusion

According to the identification of major defects in the company’s internal control over financial reporting, on the benchmark date of the internal control evaluation report, the company has no major defects in the internal control over financial reporting, and no major defects in the internal control over non-financial reporting have been found. The board of Directors believes that the company has maintained no factors affecting the evaluation conclusion of the effectiveness of internal control in all major aspects in accordance with the requirements of the enterprise’s internal control standard system and relevant regulations.

3、 Internal control evaluation

(I) evaluation basis of internal control

This report mainly evaluates the effectiveness of the design and operation of the company’s internal control as of December 31, 2021, based on the basic norms of enterprise internal control, guidelines for the application of enterprise internal control and guidelines for the evaluation of enterprise internal control, combined with the company’s own internal control system and evaluation methods, following the principles of comprehensiveness, importance and objectivity, and on the basis of daily and special supervision of internal control.

(II) evaluation scope of internal control

The scope of this report covers all departments of the company and its holding subsidiaries, focusing on the inspection and evaluation of key departments and major wholly-owned subsidiaries of the company. The businesses and matters included in the evaluation scope include: organizational structure, development strategy, human resources, social responsibility, corporate culture, capital activities, procurement business, asset management, sales business, financial report, comprehensive budget, contract management, internal information transmission, information system, etc. The internal control of the above businesses and matters basically covers the main aspects of the current operation and management of the company and its subsidiaries. The overall work operates normally under the internal control system, and the relevant risks are effectively controlled and improved without major omissions.

(III) internal control evaluation basis and internal control defect identification standard

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) Qualitative criteria

The company divides the defects of internal control over financial reporting into major defects, important defects and general defects. When identifying the defects of financial reporting, the company fully considers the qualitative standards of financial reporting as follows:

1) Major defects:

Invalid control environment;

Fraud by directors, supervisors and senior managers of the company and causing heavy losses and adverse effects to the enterprise; The certified public accountant finds that there is a material misstatement in the current financial report, but the internal control fails to find the misstatement in the operation process;

The supervision of the board of directors, the audit committee or its authorized institutions and the internal audit department on the company’s internal control is invalid.

2) Important defects:

Failure to select and apply accounting policies in accordance with GAAP;

Failure to establish anti fraud procedures and control measures or invalid anti fraud procedures and control measures;

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;

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 goal of authenticity and accuracy;

Failure to establish an effective internal audit function; Important defects after communication have not been corrected within a reasonable period. 3) General defects:

Other internal control defects that do not constitute major defects and important defect standards.

(2) Quantitative standard

The company divides the defects of internal control over financial reporting into major defects, important defects and general defects. The quantitative judgment criteria for the identification of defects in financial reporting are as follows:

The quantitative standard takes the operating income and total assets as the measurement indicators. If the loss caused or likely to be caused by the defect of internal control is related to the income statement, it shall be measured by the operating revenue index; Losses caused or likely to be caused by internal control defects related to asset management shall be measured by the total asset index.

Major defect: when the existence of one or a group of internal control defects leads to or has a reasonable possibility to prevent or find the following misstatement in the financial report in time, it is recognized as a major defect.

The amount of misstatement in the financial statements falls within the following range:

1) Misstatement ≥ 0.85% of total assets or RMB 20 million;

2) Misstatement ≥ 0.30% of total operating income or RMB 5 million;

Important defects: when the existence of one or a group of internal control defects leads to or has a reasonable possibility to prevent or find the following misstatement in the financial report in time, it is recognized as important defects.

The amount of misstatement in the financial statements falls within the following range:

1) 0.34% of total assets or RMB 10 million ≤ misstatement 0.85% of total assets or RMB 20 million;

2) 0.12% of total operating income or RMB 1 million ≤ misstatement 0.30% of total operating income or RMB 5 million.

General defects: defects other than major defects and important defects are regarded as general defects.

The amount of misstatement in the financial statements falls within the following range:

1) Misstatement 0.34% of total assets or RMB 10 million;

2) Misstatement 0.12% of total operating income or RMB 1 million.

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

According to the impact on the realization of internal control objectives, the internal control defects of non-financial reports are divided into major defects, important defects and general defects. The identification of internal control defects in non-financial reports is divided into quantitative standards and qualitative standards with reference to the identification standards of internal control defects in financial reports.

(1) Qualitative criteria

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

Major defects in non-financial reporting:

Major defects in internal control over non-financial reporting shall be recognized as major defects in the following circumstances:

1) Serious violation of national laws, regulations or normative documents;

2) Unscientific decision-making procedure leads to major decision-making mistakes;

3) Serious loss of middle and senior managers and senior technicians;

4) Institutional deficiency or systematic failure of important business and lack of effective compensatory control;

5) Major negative impact of safety and environmental protection accidents on the company;

6) The negative news of the media is frequent, which is difficult to restore its reputation;

7) Major defects cannot be effectively rectified;

8) Other situations that have a significant negative impact on the company.

Significant defects in internal control over non-financial reporting:

1) Defects in important business systems or systems;

2) Important defects found in internal control and internal supervision are not rectified in time;

3) The decision-making process leads to general mistakes;

4) Serious loss of business personnel in key positions;

5) Other situations that have a great negative impact on the company.

General defects of internal control over non-financial reporting:

1) Defects in general business system or system;

2) The efficiency of decision-making procedure is not high;

3) General defects found in internal control and internal supervision are not rectified in time;

(2) Quantitative standard

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

Major defects: the direct property loss is more than 20 million yuan (including 20 million yuan), which has a significant negative impact on the company.

Important defect: the amount of direct property loss is between 5 million yuan (including 5 million yuan) – 20 million yuan or punished by the national government department.

General defects: the amount of direct property loss is less than 5 million yuan or punished by government departments below the provincial level (including the provincial level).

(IV) identification and rectification of internal control defects

1. Identification and rectification of defects in financial report

According to the above identification standards of internal control defects in financial reports, there were no major defects and important defects in the company’s internal control over financial reports during the reporting period.

2. Identification and rectification of internal control defects in non-financial reports

According to the above identification standards of internal control defects in non-financial reports, no major defects and important defects in the company’s internal control over non-financial reports were found during the reporting period.

4、 Description of other major matters related to internal control

The board of directors of the company believes that the design and operation of the company’s current internal control are generally effective and reasonable in combination with the basic norms of enterprise internal control and its supporting guidelines and the requirements of other relevant laws and regulations. During the reporting period, the company has established and effectively implemented internal control over the businesses and matters included in the evaluation scope, achieved the objectives of the company’s internal control, had no major defects, and met the regulatory requirements of listed companies and the actual needs of the company’s production and operation.

With the changes of the company’s scale, business scope, national laws and regulations and other internal and external environment, the company will continue to supplement and improve the internal control system, standardize the implementation of the internal control system, optimize the internal control process, establish and improve the comprehensive risk management system, further improve the execution and efficiency of internal control, improve the company’s operation and management level and risk prevention ability, and promote the sustainable, healthy and stable development of the company.

Yonker Environmental Protection Co.Ltd(300187) board of directors

April 23, 2022