Zhe Kuang Heavy Industry Co.Ltd(300837)
Self evaluation report on internal control in 2021
Zhe Kuang Heavy Industry Co.Ltd(300837) all shareholders:
According to the provisions of the basic norms of enterprise internal control and its supporting guidelines jointly issued by the Ministry of finance, the CSRC and other departments and other internal control supervision requirements (hereinafter referred to as the enterprise internal control system), combined with the company’s internal control system and evaluation methods, and on the basis of daily and special supervision of internal control, this paper evaluates the rationality of the establishment of internal control of the company as of December 31, 2021 (the benchmark date of internal control evaluation report) The integrity and effectiveness of implementation are evaluated, and the defects existing in the design and operation of internal control are identified. The self-evaluation of the company’s internal control related to the company’s financial statements as of December 31, 2021 is reported as follows:
1、 Important statement
Internal control is a process implemented by the board of directors, the board of supervisors, managers and all employees to achieve control objectives. It is the responsibility of the board of directors of the company to design, implement and maintain effective internal control, evaluate its effectiveness and truthfully disclose the internal control evaluation report under the supervision of the corporate governance and 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 liabilities for the authenticity, accuracy and completeness of the contents of the report.
The objective of establishing and implementing internal control is to reasonably ensure the legal compliance of enterprise operation and management, asset safety, authenticity and integrity of financial reports and relevant information, improve operation efficiency and effect, and promote the realization of enterprise 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 or procedures, there is a certain risk to speculate the effectiveness of internal control in the future according to the internal control evaluation results.
2、 Organization of internal control evaluation
The internal control evaluation is led by the board of directors of the company and its audit committee, forming an evaluation team led by the audit department and participated by multiple departments to evaluate the main risk areas and units included in the evaluation scope.
（1） Evaluation procedure: establish an evaluation team and formulate an evaluation plan; On site inspection; The evaluation team studies and identifies the defects of internal control; Discuss and review the rectification plan; Report to the board of directors for deliberation and approval in accordance with the specified authorities and procedures.
（2） Evaluation method: an evaluation team is formed to comprehensively collect the evidence of the company’s internal control design and effective operation by using various methods such as individual interview, questionnaire, special discussion, walk through test, statistical sampling and comparative analysis, and study and identify the defects of internal control design and operation.
3、 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. The main units included in the evaluation scope include: Zhe Kuang Heavy Industry Co.Ltd(300837) . The total assets of the units included in the consolidation scope account for 100% of the total assets in the company’s consolidated financial statements, and the total operating revenue accounts for 99.62% of the operating revenue in the company’s consolidated financial statements.
The main businesses and matters included in the evaluation scope include: corporate governance structure, organizational structure, corporate culture, information disclosure, information system, internal audit, human resources, financial report, fund management, asset management, procurement business, production management, sales business, research and development, foreign investment management, related party transactions, guarantee business, control of subsidiaries, etc.
The high-risk areas of focus mainly include fund management, procurement business, production management, sales business, research and development.
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.
（1） Governance structure
In accordance with the company law, the securities law, the articles of association and other laws and relevant provisions, the company has established a standardized corporate governance structure and rules of procedure, defined the responsibilities and authorities in decision-making, implementation and supervision, and formed a scientific and effective division of responsibilities and check and balance mechanism.
1. The general meeting of shareholders is the highest authority of the company. It has formulated the rules of procedure of the general meeting of shareholders, which clearly stipulates the nature and functions of the general meeting of shareholders and the working procedures such as convening and notification, proposal, voting and resolution of the general meeting of shareholders. The formulation and effective implementation of the rules ensure that the general meeting of shareholders exercises the decision-making power on major matters according to law, which is conducive to protecting the legitimate rights and interests of shareholders.
2. The board of directors is the company’s permanent decision-making body, which is responsible to the general meeting of shareholders, deliberates and makes decisions on major decision-making issues in the company’s business activities, or submits them to the general meeting of shareholders for deliberation. The directors are elected by the general meeting of shareholders and the chairman is elected by the board of directors. The board of directors is composed of seven directors, with one chairman, including three independent directors. There are four special committees and the office of the board of directors, including the strategy committee, the audit committee, the remuneration and assessment committee and the Nomination Committee; The special committees are held by the directors and independent directors of the company. The company has formulated the rules of procedure of the board of directors, the system of independent directors, the rules of procedure of the strategy committee, the rules of procedure of the audit committee, the rules of procedure of the remuneration and assessment committee and the rules of procedure of the nomination committee, which stipulate the selection and appointment procedures of directors, the obligations of directors, the composition and responsibilities of the board of directors, the rules of procedure of the board of directors, the working procedures of independent directors, the composition and responsibilities of each special committee, etc. The formulation and effective implementation of these systems can ensure that the special committee can effectively perform its duties and provide help for the scientific decision-making of the board of directors.
3. The board of supervisors is the supervisory body of the company, which is responsible for supervising the behavior of the directors and managers of the company and the company’s finance. The board of supervisors of the company is composed of three supervisors, one of whom is the employee representative. The company has formulated the rules of procedure of the board of supervisors, which clearly stipulates the responsibilities of supervisors, the functions and powers of the board of supervisors, the convening and notification of the board of supervisors, resolutions, etc. The formulation and effective implementation of the rules will help give full play to the supervisory role of the board of supervisors and protect the interests of shareholders, the company and the legitimate interests of employees from infringement.
4. The general manager shall be fully responsible for the daily operation and management activities of the company and organize the implementation of the resolutions of the board of directors. The company has formulated the general manager’s working rules, which stipulates the responsibilities of the general manager, the general manager’s office meeting and production scheduling meeting, the general manager’s reporting system, supervision system and other contents. The formulation and effective implementation of these systems ensure the effective implementation of various decisions of the board of directors, and improve the operation and management level and risk prevention ability of the company.
（2） Internal organizational structure
The internal institutions set up by the company include: Sales Department, technical quality control center, after-sales service department, procurement department, administration department, production equipment operation center and finance department. By reasonably dividing the responsibilities of each department and post, and implementing the principle of separation of incompatible positions, a mechanism of clear division of labor, mutual cooperation and mutual checks and balances is formed between each department, which ensures the orderly and healthy operation of the company’s production and operation activities and the realization of control objectives.
（3） Corporate culture
Adhering to the enterprise spirit of “pursuing excellent technology, casting excellent products and providing first-class service”, the company strives to become a leader in the industry. The company attaches great importance to strengthening cultural construction, cultivating positive values and sense of social responsibility, advocating honesty and trustworthiness, love and dedication, innovation and teamwork, establishing modern management concept and strengthening risk awareness. Directors, supervisors, managers and other senior managers shall play a leading role in the construction of corporate culture. Employees of the enterprise shall abide by the code of conduct for employees and earnestly perform their post responsibilities.
（4） Information disclosure
The company has formulated information disclosure management system, investor relations management system, accountability system for major errors in annual report information disclosure, internal reporting system for major information, registration management system for insiders and financial report preparation and disclosure management system, which have made corresponding provisions on the company’s information disclosure. The above systems ensure the rapid transmission of information inside and outside the company Efficient communication and timely feedback to ensure the effective operation of internal control.
（5） Information and communication
The company has established an information and communication system to clarify the collection, processing and transmission procedures of information related to internal control, ensure timely communication of information and promote the effective operation of internal control.
(1) Information collection channels are unblocked. The company can obtain internal information through financial and accounting materials, operation and management materials, research reports, special information, office network and other channels; External information can also be obtained through industry associations, social intermediaries, business units, market research, letters and visits, online media and relevant regulatory authorities.
(2) Timely information transmission procedures. The company can timely communicate and feed back information related to internal control among internal management levels, responsible units and business links, as well as between the enterprise and external investors, creditors, customers, suppliers, intermediaries and regulatory authorities. Problems found in the process of information communication can be reported and solved in time. Important information can be transmitted to the board of directors, the board of supervisors and the management in time.
(3) Information system operation security. The company has established control systems for information system development and maintenance, access and change, data input and output, document storage and custody, network security and other aspects to ensure the safe and stable operation of the information system.
(4) The anti fraud mechanism is transparent. The company has established an anti fraud mechanism to clarify the key areas and key links of anti fraud work and the responsibilities and authorities of relevant institutions in anti fraud work, and standardize the reporting, investigation, handling, reporting and remedial procedures of fraud cases. We have established a reporting and complaint system and a whistleblower protection system, set up a reporting special line, and clarify the reporting and complaint handling procedures, handling time limit and completion requirements, so as to ensure that reporting and complaints become an important way for enterprises to effectively grasp information. The reporting and complaint system and whistleblower protection system have been timely communicated to all employees.
（6） Establishment of internal audit institutions
The audit committee under the board of directors of the company is responsible for the communication, supervision and verification of internal and external audits of the company in accordance with the rules of procedure of the audit committee and other provisions. The audit committee consists of three directors and two independent directors, one of whom is an accounting professional and serves as the convener of the Committee. The audit committee has an internal audit department, a manager of the internal audit department and two auditors, who have the professional ability to carry out audit work independently. The company has established the internal audit management system to clarify the responsibilities and authorities of internal audit institutions and other internal institutions in internal supervision, and standardize the procedures, methods and requirements of internal supervision, as well as the scope and frequency of daily supervision and special supervision. For internal control defects found in the process of supervision, timely analyze the nature and causes of defects, put forward rectification plans, and timely report to the board of directors, the board of supervisors or the management in an appropriate form.
（7） Human resources policy
The company has formulated human resources policies conducive to the sustainable development of the enterprise, including: employment, training, dismissal and resignation of employees; Salary, assessment, promotion, reward and punishment of employees; Compulsory leave system and regular job rotation system for employees in key positions; Restrictive regulations on the departure of employees who master state secrets or important business secrets, etc.
At the same time, the company attaches great importance to the quality of employees and takes professional ethics and professional competence as important standards for selecting and employing employees. The company also carries out various forms of follow-up training and education for different positions according to the needs of actual work, so that employees can be competent for their jobs and continuously improve the support of human resources for enterprise strategy.
（8） Financial Report
The company has established a relatively perfect financial management system in accordance with the accounting law, accounting standards for business enterprises, tax law and other relevant laws and regulations. The company has set up an independent accounting organization, set up more reasonable posts in financial management and accounting, formulated corresponding job instructions, and equipped with sufficient full-time personnel to ensure the smooth progress of financial work. The division of labor of accounting personnel is clear, and the post responsibility system is implemented. Each post can play a role of mutual restraint, and the approval, execution and recording functions are separated.
（9） Capital operation management system
1. Monetary fund management
The company has formulated the fund management measures in accordance with the application guidelines for enterprise internal control – Fund activities, established strict authorization and approval procedures for the revenue and expenditure and custody of monetary funds, ensured the separation of incompatible business posts, clarified the scope of cash use and the regulations that should be observed when handling cash revenue and expenditure business, and clarified the procedures for opening, using, changing and clearing bank accounts, And regularly clean up the bank accounts to ensure the authenticity and controllability of the company’s monetary funds.
2. Fund raising and fund management
The company has formulated the fund raising management measures and corresponding business management processes in accordance with the application guidelines of enterprise internal control – capital activities, and defined the authorization, approval procedures and operation processes of loans. The company can reasonably determine the financing scale and financing structure, select appropriate financing methods, strictly control financial risks, reduce capital costs, and ensure the capital needs of the company’s normal production and operation activities.
3. Use and management of raised funds
In accordance with the company law, the securities law, the measures for the administration of initial public offering and listing, the measures for the administration of securities issuance of listed companies, the stock listing rules of Shenzhen Stock Exchange and other laws, administrative regulations, normative documents and the articles of association, and in combination with the actual situation of the company, the company has formulated the management system of raised funds to manage the storage, approval, use, change Supervision and accountability are clearly stipulated. The company’s internal control related to the management of raised funds is effectively implemented.
（10） Asset management
The company has formulated the fixed assets management system and the corresponding business process specifications, which specifically regulate the purchase process of fixed assets, equipment management, maintenance, leasing, transfer and scrapping, as well as the application, maintenance and abandonment of intangible assets.
（11） Procurement and payment business
The company has formulated procurement management measures and fund management measures to clarify the authorization and approval methods, authorities, procedures, responsibilities and relevant control measures for procurement and payment business.
（12） Production process and cost control
1. Production and quality management
The company has formulated the production and operation management measures, product quality management measures and corresponding business management processes, made specific specifications for production plan management, production scheduling management, on-site management, product quality acceptance and quality control, and has mature operation experience.
2. Cost management
Formulated by the company
