Internal audit system
(revised in April 2022)
Chapter I General Provisions
Article 1 in order to standardize the internal audit of Gosun Holdings Co.Ltd(000971) (hereinafter referred to as “listed companies”) and establish and improve the internal audit system, in accordance with the Audit Law of the people’s Republic of China, the auditing standards of the Ministry of the people’s Republic of China, the basic norms of enterprise internal control, the guidelines for self discipline supervision of listed companies of Shenzhen Stock Exchange No. 1 – standardized operation of listed companies on the main board and other relevant laws and regulations and the articles of association, This system is formulated in combination with the actual situation of listed companies.
Article 2 the term “internal audit” as mentioned in this system refers to an evaluation activity carried out by the company’s internal audit institutions and personnel on the effectiveness of the company’s internal control and risk management, the authenticity and integrity of financial information, and the efficiency and effect of business activities in accordance with relevant national laws and regulations, financial accounting system and internal management regulations. Through internal audit, we can promote the company to improve internal control, reduce business risks, safeguard shareholders’ rights and interests and improve the value of the company.
Article 3 the board of directors of listed companies and subsidiaries shall be responsible for the establishment, improvement and effective implementation of the internal control system. Important internal control systems shall be reviewed and approved by the board of directors of listed companies and subsidiaries. The board of directors and all members shall ensure the authenticity, accuracy and integrity of the information disclosure related to internal control.
Article 4 this system is applicable to listed companies and subsidiaries. The subsidiaries mentioned in this system refer to the wholly-owned subsidiaries, holding subsidiaries and equity investment enterprises that have not reached the controlling position but have the actual control right included in the consolidated statements of listed companies.
Chapter II Internal Audit institutions and personnel
Article 5 the board of directors of a listed company shall set up an audit committee, in which independent directors shall account for more than half and act as the convener, and at least one independent director shall be an accounting professional.
Article 6 a listed company shall establish an internal audit department to inspect and supervise the establishment and implementation of the internal control system of the listed company and its subsidiaries, and the authenticity and integrity of the company’s financial information. The audit committee supervises and evaluates the work of the internal audit department. The internal audit department is responsible to the audit committee and reports to the audit committee.
Article 7 the internal audit department shall maintain its independence and shall not be placed under the leadership of the financial department or work together with the financial department.
Article 8 the internal organs or functional departments of a listed company and its subsidiaries shall cooperate with the internal audit department in performing its duties according to law and shall not hinder the work of the internal audit department.
Article 9 the internal audit personnel shall have professional knowledge, corresponding professional ability and good professional ethics, and the number of full-time personnel shall ensure the normal development of the work of the internal audit department.
Chapter III responsibilities and authorities of internal audit
Article 10 when supervising and evaluating the work of the internal audit department, the audit committee shall perform the following main responsibilities:
(I) guide and supervise the establishment and implementation of internal audit system;
(II) review the company’s annual internal audit work plan;
(III) supervise and urge the implementation of the company’s internal audit plan;
(IV) guide the effective operation of the internal audit department. The internal audit department of the company must report to the audit committee, and all kinds of audit reports, rectification plans and rectification conditions of audit problems submitted by the internal audit department to the management must be submitted to the audit committee at the same time;
(V) report to the board of directors on the progress and quality of internal audit and major problems found;
(VI) coordinate the relationship between the internal audit department and external audit units such as accounting firms and national audit institutions.
Article 11 the internal audit department of a listed company mainly performs the following duties:
(I) inspect and evaluate the integrity, rationality and effectiveness of the internal control system of listed companies and subsidiaries;
(II) audit the accounting data and other relevant economic data of the listed company and its subsidiaries, as well as the legality, compliance, authenticity and integrity of the reflected financial revenue and expenditure and relevant economic activities, including but not limited to financial reports, performance letters, voluntary disclosure of predictive financial information, etc;
(III) assist in establishing and improving the anti fraud mechanism, determine the key areas, key links and main contents of anti fraud, and reasonably pay attention to and inspect possible fraud in the process of internal audit;
(IV) report to the board of directors or the audit committee at least once a quarter, including but not limited to the implementation of the internal audit plan and the problems found in the internal audit;
(V) other audit work required by the audit committee.
Article 12 the main authorities of the internal audit department of a listed company are as follows:
(I) have the right to require the auditee to timely submit internal control data, financial revenue and expenditure plan, budget implementation, financial data and other relevant documents and materials according to work needs;
(II) have the right to hold meetings related to audit matters;
(III) have the right to participate in relevant meetings on operation, financial management decision-making, project construction, foreign investment, major contracts, etc;
(IV) have the right to examine original vouchers, accounting vouchers, account tables, budgets and final accounts, inspect assets and property, test financial and accounting software, and consult relevant documents and materials;
(V) have the right to investigate matters related to internal audit and ask for relevant supporting materials;
(VI) have the right to seal up the accounting vouchers, accounting books, accounting statements, contracts and other matters related to financial revenue and expenditure that may be transferred, concealed or tampered with with with the consent of the board of directors;
(VII) have the right to correct and deal with violations of financial and economic regulations and the company’s rules and regulations according to the actual situation of the auditee, and put forward suggestions to improve operation management and improve operation efficiency;
(VIII) have the right to make a decision to stop the ongoing serious violations of financial and economic regulations, internal rules and regulations or serious dereliction of duty that may cause major economic losses and report to the audit committee in time, and put forward handling suggestions to the Audit Committee for the acts that have caused major economic losses and impact;
(IX) have the right to put forward suggestions to the board of directors, take necessary measures and investigate the responsibilities of the person in charge of the audited unit and the persons directly responsible for obstructing and damaging the audit work and refusing to provide audit materials;
(x) have the right to report the major problems found in the audit to the board of directors in time as required;
（11） Other authorities granted by the board of directors.
Chapter IV specific audit implementation
Article 13 the internal audit department shall implement appropriate review procedures in accordance with relevant regulations, evaluate the effectiveness of the company’s internal control, and submit an internal control evaluation report to the audit committee at least once a year. The evaluation report shall state the purpose, scope, conclusions and suggestions for improving internal control of the review and evaluation. Article 14 internal audit shall cover all business links related to financial reports and information disclosure in the company’s business activities, including sales and collection, procurement and payment, inventory management, fixed assets management, capital management, investment and financing management, human resources management, information system management and information disclosure management.
The internal audit department can adjust the above business links according to the industry and production and operation characteristics of the company. The internal audit department shall focus on the integrity, rationality and effectiveness of the internal control system related to foreign investment, purchase and sale of assets, external guarantee, related party transactions, use of raised funds, information disclosure and other matters.
Article 15 the internal audit department shall urge relevant responsible departments to formulate rectification measures and rectification time for internal control defects found in the review process, conduct follow-up review of internal control, and supervise the implementation of rectification measures.
The person in charge of internal audit shall timely arrange the follow-up review of internal control and incorporate it into the annual internal audit work plan.
Article 16 if the internal audit department finds that there are major defects or risks in internal control during the review process, it shall timely report to the board of directors or the audit committee.
If the audit committee considers that there are major defects or risks in internal control, the board of directors shall timely report to Shenzhen Stock Exchange and disclose them. A listed company shall disclose in its announcement the major defects or risks existing in its internal control, the consequences that have been or may be caused, and the measures that have been taken or are to be taken.
Article 17 the internal audit department shall conduct audit in time after the occurrence of important foreign investment. When auditing foreign investment, we should focus on the following contents:
(I) whether the examination and approval procedures for foreign investment are performed in accordance with relevant regulations;
(II) whether the contract is concluded according to the approved contents and whether the contract is normally performed;
(III) whether to assign special personnel or establish special institutions to study and evaluate the feasibility, investment risks and investment returns of major investment projects, and track and supervise the progress of major investment projects;
(IV) whether the entrusted directors have paid attention to the good operation of the entrusted financial management and whether the entrusted management has paid attention to the financial management, whether the entrusted management has paid attention to the good operation status of the entrusted financial management;
(V) for matters involving securities investment, pay attention to whether to establish a special internal control system for securities investment, whether the investment scale affects normal operation, whether the source of funds is self owned funds, whether the investment risk is beyond the acceptable range, and whether to use others’ accounts or provide funds to others for securities investment, Whether independent directors and recommendation institutions (including recommendation institutions and recommendation representatives, the same below) express opinions (if applicable).
Article 18 the internal audit department shall conduct audit in time after the important purchase and sale of assets. When auditing the purchase and sale of assets, we should focus on the following contents:
(I) whether the purchase and sale of assets are subject to the approval procedures in accordance with relevant regulations;
(II) whether the contract is concluded according to the approved contents and whether the contract is normally performed;
(III) whether the operation status of the purchased assets is consistent with the expectation;
(IV) whether there is any guarantee, mortgage, pledge or other restricted transfer of the purchased assets, and whether it involves litigation, arbitration and other major disputes.
Article 19 the internal audit department shall conduct audit in time after the occurrence of important external guarantee matters. When auditing external guarantees, we should focus on the following contents:
(I) whether the external guarantee has performed the examination and approval procedures in accordance with relevant regulations;
(II) whether the guarantee risk is beyond the tolerable range, and whether the integrity record, operation status and financial status of the guaranteed party are good;
(III) whether the guaranteed party provides counter guarantee and whether the counter guarantee is enforceable;
(IV) whether the independent directors and the recommendation institution express their opinions (if applicable);
(V) whether to assign special personnel to continuously pay attention to the operation and financial status of the guaranteed party.
Article 20 the internal audit department shall conduct audit in time after the occurrence of important related party transactions. When auditing related party transactions, we should focus on the following contents:
(I) whether the list of related parties is determined and updated in time;
(II) whether the related party transactions fulfill the approval procedures in accordance with relevant regulations, and whether the related shareholders or related directors avoid voting when considering the related party transactions;
(III) whether the independent directors have approved and expressed independent opinions in advance, and whether the recommendation institution has expressed opinions (if applicable);
(IV) whether the related party transaction has signed a written agreement, and whether the rights, obligations and legal liabilities of both parties to the transaction are clear;
(V) whether there is any guarantee, mortgage, pledge or other restricted transfer of the transaction object, and whether it involves litigation, arbitration and other major disputes;
(VI) whether the credit record, operation status and financial status of the counterparty are good;
(VII) whether the pricing of related party transactions is fair, whether the subject matter of transactions has been audited or evaluated in accordance with relevant regulations, and whether related party transactions will encroach on the interests of the company.
Article 21 the internal audit department shall audit the deposit and use of the raised funds at least once a quarter, and express opinions on the authenticity and compliance of the use of the raised funds. When auditing the use of raised funds, we should focus on the following contents:
(I) whether the raised funds are deposited in a special account determined by the board of directors for centralized management, and whether a tripartite supervision agreement is signed with the commercial bank and the recommendation institution where the raised funds are deposited;
(II) whether the raised funds are used in accordance with the investment plan of the raised funds promised in the issuance application documents, whether the investment progress of the raised funds project is in line with the planned progress, and whether the investment income is in line with the expectation;
(III) whether the raised funds are used for pledge, entrusted loan or other investments that change the purpose of the raised funds in a disguised form, and whether the raised funds are occupied or misappropriated;
(IV) whether the examination and approval procedures and information disclosure obligations are performed in accordance with the relevant provisions when the self owned funds that have been invested in the raised funds in advance are replaced with the raised funds, the idle raised funds are used to temporarily supplement the working capital, and the investment direction of the raised funds is changed, and whether the independent directors, the board of supervisors and the recommendation institution express their opinions in accordance with the relevant provisions (if applicable).
Article 22 the internal audit department shall audit the performance express.
When auditing the performance express, we should focus on the following contents:
(I) whether it complies with the accounting standards for business enterprises and relevant regulations;
(II) whether the accounting policies and accounting estimates are reasonable and changed;
(III) whether there are major abnormalities;
(IV) whether the assumption of continuous operation is met;
(V) whether there are significant defects or risks in the internal control related to financial reporting.
Article 23 when reviewing and evaluating the establishment and implementation of the information disclosure management system, the internal audit department shall focus on the following contents:
(I) whether the information disclosure management system and relevant systems have been formulated in accordance with relevant regulations, including the information disclosure management and reporting system of internal institutions and subsidiaries;
(II) whether the scope and content of major information, as well as the transmission, review and disclosure process of major information are clearly specified;
(III) whether to formulate confidentiality measures for undisclosed major information, and clarify the scope and confidentiality responsibilities of insiders of inside information;
(IV) whether the listed company and its directors, supervisors and senior executives are clearly specified
