Self evaluation report on internal control in 2021
Tellgen Corporation(300642) 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 the company (hereinafter referred to as the “company”), on the basis of daily and special supervision of internal control, the board of directors evaluated the effectiveness of the company’s internal control on December 31, 2021.
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 between the benchmark date of the internal control evaluation report and the signing date of the internal control self-evaluation report.
3、 Internal control evaluation
（1） Scope of internal control evaluation
The scope of this internal control evaluation covers the company’s main businesses and matters. The businesses and matters included in the evaluation scope include: fund management, procurement and payment, inventory, sales and collection, costs and expenses, foreign investment, financing, fixed assets, research and development; Human resources, financial reports, information disclosure, computer systems, intellectual property rights, contract management and related party transactions and other elements conduct a comprehensive evaluation of internal control.
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.
（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.
According to the identification requirements of major defects, important defects and general defects in the basic norms and evaluation guidelines, and in combination with the company’s scale, industry characteristics, risk preference, risk tolerance and other factors, the company has studied and determined the specific identification standards of internal control defects applicable to the company, and considered the internal control deficiencies found in the self-inspection and evaluation of internal control from both qualitative and quantitative aspects, Judge whether it constitutes internal control defect of financial report or internal control defect of non-financial report, and judge whether it belongs to major defect, important defect and general defect.
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:
(1) the directors, supervisors and senior managers abuse their power and commit corruption, bribery, misappropriation of public funds and other fraudulent acts; ② The company corrects the reported or disclosed financial report due to major accounting errors in previous years; ③ The audit committee and internal audit institution of the company have no effect on the supervision of internal control; ④ If the external auditor finds that there is a major misstatement in the current financial report and the internal control operation fails to find the misstatement, it is recognized as a major defect in the internal control of financial report.
(2) Quantitative standard:
If the amount of misstatement (or omission) in the financial statements is greater than or equal to 5% of the total profits in the financial statements, it is recognized that there are major defects in the internal control of financial statements; The amount of misstatement (or omission) in the financial statements is greater than or equal to 3% of the total profits in the financial statements and less than 5% of the total profits in the financial statements, that is, it is recognized that there are important defects in the internal control of financial statements; If the amount of misstatement (or omission) in the financial statements is less than 3% of the total profit in the financial statements, it is considered that there are general defects in the internal control of financial reporting.
2. Identification standard of internal control defects in non-financial reporting
(1) Qualitative criteria:
It is determined according to the nature and scope of its direct or potential negative impact. The following signs usually indicate that there may be major defects in the internal control of non-financial reporting: ① serious violations of laws and regulations; ② In addition to the reasons for policy losses, the enterprise has suffered losses for consecutive years and its sustainable operation has been challenged; ③ Lack of institutional control or systematic failure of important business; ④ The company’s managers have left one after another or the loss of key positions is serious.
(2) Quantitative standard:
If the direct property loss caused by the internal control defect of non-financial report exceeds 0.5% of the net assets of the company’s consolidated statements, it is deemed to have major defects; The direct property loss caused by the internal control defect of non-financial report is less than or equal to 0.5% of the net assets of the company’s consolidated statements and greater than 0.3% of the net assets of the company’s consolidated statements, that is, it is deemed to have important defects; If the direct property loss caused by the internal control defect of non-financial report is less than or equal to 0.3% of the net assets in the company’s consolidated statements, it is deemed to have a general defect.
（3） Identification and rectification of internal control defects
During the reporting period, the company continued to carry out special activities on corporate governance and made continuous rectification on relevant problems, as follows:
1. Identification and rectification of defects in financial report
According to the above identification standards of internal control defects in financial reports, no major defects and important defects in the company’s internal control over financial reports were found 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） Specific situation of internal control evaluation
1. Internal environment
(1) Corporate governance structure
The company has established and improved the corporate governance structure and standardized the management and operation of the company in strict accordance with the requirements of the company law, the securities law, the guidelines for the governance of listed companies and other laws and regulations. The company, controlling shareholders and actual controllers have achieved complete independence in assets, business, institutions, personnel and finance. The general meeting of shareholders, the board of directors and the board of supervisors perform their respective duties and operate in a standardized manner. They have established and improved the rules of procedure of the general meeting of shareholders, the rules of procedure of the board of directors and the rules of procedure of the board of supervisors.
These systems clarify the responsibilities and authorities of the company’s power organs, decision-making organs, operating organs and supervision organs, form a scientific and effective division of responsibilities and check and balance mechanism, and meet the normative requirements of the CSRC on the corporate governance structure.
The general meeting of shareholders is the highest authority of the company and decides major matters of the company. The company holds the general meeting of shareholders in strict accordance with the requirements of the articles of association and the rules of procedure of the general meeting of shareholders to ensure the standardized operation of the general meeting of shareholders and ensure that all shareholders enjoy equal status and can fully exercise their corresponding rights.
The board of directors is responsible for the general meeting of shareholders and elects directors in strict accordance with the relevant provisions of the company law and the articles of association. The board of directors shall perform its duties in accordance with the articles of association, rules of procedure of the board of directors and other systems, exercise the business decision-making power of the enterprise according to law, and be responsible for the establishment, improvement and effective implementation of internal control. The board of Directors consists of a strategy committee, an audit committee, a nomination committee and a remuneration and assessment committee. Each special committee carries out its work in accordance with the rules of procedure of the strategy committee, the rules of procedure of the audit committee, the rules of procedure of the nomination committee and the rules of procedure of the remuneration and assessment committee.
The board of supervisors is the supervisory body of the company and is responsible to all shareholders. The company elects supervisors in strict accordance with the relevant provisions of the company law and the articles of association. The board of supervisors shall, in accordance with the articles of association and the rules of procedure of the board of supervisors, exercise supervision over the directors, senior managers and finance of the company.
The management level is the executive body of the decision-making of the board of directors. The general manager, deputy general manager and financial director of the company are appointed or dismissed by the board of directors, responsible for the business activities of the company and accountable to the board of directors.
(2) Development goals
According to the internal and external environment and its own development needs, the company has defined the medium and long-term development objectives and main work measures, and implemented the company’s development strategy into the annual production and operation activities through the annual business plan, so as to ensure that the company’s development plan is implemented step by step, and strive to build the company into a company with first-class innovation ability, first-class technical equipment, first-class staff quality and first-class economic benefits.
(3) Organization
In order to effectively plan, coordinate and control business activities, the company has established an organization that meets the business scale and operation and management needs of the company, implemented the principle of separation of incompatible positions, scientifically divided the responsibilities and authorities within each organizational unit, and formed an internal control mechanism of mutual restriction and coordination. The internal audit department, finance department, marketing center, R & D center, production department, quality department, logistics department, personnel department, general manager’s office and other functional departments shall perform their duties within their established functional scope.
(4) Management philosophy and corporate culture
The company has made some exploration in the construction of corporate culture, and strive to use corporate culture as a booster to promote the development of the company, improve the core values and social responsibility of the enterprise, comprehensively improve the organizational culture, production culture and management culture of the enterprise, and promote the harmonious and stable development of the company.
(5) Human resources policy
According to the labor law and relevant laws and regulations, the company implements the full staff labor contract system, and formulates the personnel management system, salary and welfare management system and other systems to regulate personnel employment, employee training, salary, welfare guarantee and performance appraisal.
(6) Internal audit
The company has formulated the internal audit system, which follows the principle of supervision before, during and after the company’s internal supervision on the scope, content and procedures. It is specially responsible for the supervision and inspection of business activities and the implementation of internal control, evaluates the objects and contents of each inspection, and puts forward improvement suggestions and handling opinions to ensure the implementation of internal control and the normal progress of production and business activities. The management can adopt the reasonable opinions of internal audit and deal with the audit results in time, but the breadth and depth of internal audit still need to be strengthened. 2. Risk assessment
According to the characteristics of the subsidiary’s business, the risk prevention and management system has been established, which is composed of three parts: the risk prevention and management system of the subsidiary’s strategic development, and the risk prevention and management system is being formed according to the characteristics of the subsidiary’s business. The company focuses on safety production, product quality management, fund management, accounts receivable management, inventory management and fixed assets management, and each counterpart responsible department or business unit carries out risk assessment and identification, so as to timely find out the possible production safety risks, quality risks, business risks, environmental risks and financial risks, and take countermeasures.
3. Control activities
In order to reasonably ensure the realization of various objectives, the company has established relevant control systems and processes, mainly including: authorization approval control, separation control of incompatible positions, accounting system control, procurement and supply management control, safety production management control, product quality management control, sales management control, property preservation control, operation analysis, performance evaluation control, etc.
(1) Authorization approval control: the company stipulates the approval scope, authority and procedures of personnel at all levels according to the changes of organizational structure and management personnel and in combination with the actual situation of the company. All units and departments must exercise their powers and assume responsibilities within the scope of authorization.
(2) Separation of incompatible jobs: the company sets up an organization according to the control requirements of incompatible job separation to divide the responsibilities of authorization, approval, execution, recording, property custody and maintenance of economic and business activities. Each link is implemented by relatively independent departments or personnel.
(3) Accounting system control: according to the accounting law and accounting standards for business enterprises, the company adopts the accounting and management mode of “unified accounting methods and hierarchical management” to ensure that the accounting results are true, complete and accurate.
(4) Procurement and supply management control: the company has formulated and improved the procurement and payment management system, defined the material procurement and supply management system, stipulated the purchase requisition, approval, procurement, acceptance and supervision procedures of materials, and the payment procedures of accounts payable and prepayments. It also makes clear provisions on material planning, material procurement, warehouse acceptance, storage and distribution, disposal of dead materials, etc. For the procurement of raw materials, fixed assets and temporary goods controlled according to the minimum stock and economic order batch, the user department shall submit the procurement application.
(5) Safety production management and control: as a pharmaceutical enterprise, in order to strengthen the supervision and management of safety production, prevent and reduce production safety accidents, ensure the life safety of employees and create a harmonious society, the company has formulated the post safety operation procedures and other documents in accordance with the safety production law and other safety laws and regulations, and established a strict safety production supervision and management system to make all post personnel clarify their responsibilities Carry out production and improve product quality on the premise of ensuring safety. The implementation of the above system fully ensures the safe production of the company, reduces the occurrence of safety accidents and creates good economic and social benefits.
(6) Sales management control: the company has formulated sales management measures such as sales and collection management system. The company shall formulate appropriate sales policies and sales plans according to market conditions, target profits and production and operation capacity, and implement them to the sales personnel. Formulate credit policies, determine credit standards, credit conditions, and responsibilities and authorities of institutions and personnel involved in sales business; Make clear provisions on sales and collection, check with customers regularly or irregularly, and assign the responsibility of collection to the salesperson.
(7) Asset control: the company has established the purchase and payment management system and inventory management system to standardize the purchase, acceptance, recording, storage, use, contact management and disposal of assets, and clarify the responsibilities and authorities of the user department, financial department and other departments. All assets are accounted for by the financial department. The financial department performs the responsibility of accounting supervision on the management of assets by taking regular inventory, account and material verification, transaction reconciliation and other methods.
4. Information and communication
To strengthen and improve internal and external information
