Jiangxi Selon Industrial Co.Ltd(002748)
Self evaluation report on internal control in 2021
Jiangxi Selon Industrial Co.Ltd(002748) all shareholders:
According to the provisions of the basic norms of enterprise internal control and its supporting guidelines and other internal control supervision requirements (hereinafter referred to as the enterprise internal control standard system), combined with the company's (hereinafter referred to as the company's) internal control system and evaluation methods, 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 the internal control evaluation report).
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
The company has established and improved various internal control systems in accordance with the requirements of the enterprise internal control standard system and relevant regulations to ensure the effectiveness of internal control. According to the identification of the company's internal control defects, there are no major defects in the internal control of 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 from the base date of the internal control evaluation report to the date of issuance of the internal control evaluation report.
3、 Internal control evaluation
(I) evaluation scope of internal control
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 the parent company and five subsidiaries. The subsidiaries are Jiangxi Shilong Supply Chain Management Co., Ltd., Jiangxi Shilong chemical technology R & D Center Co., Ltd., Jiangxi Shilong Environmental Protection Technology Co., Ltd., Jiangxi Shilong new materials Co., Ltd. and Jiangxi Shilong Biotechnology Co., Ltd. The total assets of the units included in the evaluation scope account for 100% of the total assets in the company's consolidated financial statements, and the total operating revenue accounts for 100% of the total operating revenue in the company's consolidated financial statements.
The main businesses and matters included in the evaluation scope include: governance structure and organizational structure, fund management, financial management, financial report, information disclosure, internal supervision, external guarantee, related party transactions, etc. The high-risk areas of focus mainly include fund management, financial management, information disclosure, external guarantee and related party transactions.
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.
(II) 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 various internal control systems of the company.
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. The identification standards of internal control defects determined by the company are as follows:
1. 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:
The quantitative standard takes the operating income and total assets as the measurement indicators. If the loss that may be caused or caused by the defect of internal control is related to the income statement, it shall be measured by the operating revenue index. If the amount of financial report misstatement that may be caused by the defect alone or in combination with other defects is less than 2% of the operating revenue, it is recognized as a general defect; If it exceeds 2% but less than 5% of the operating revenue, it is recognized as an important defect; If it exceeds 5% of the operating revenue, it is recognized as a major defect. Losses that may be caused or caused by internal control defects related to asset management shall be measured by the total asset index. If the amount of financial report misstatement that may be caused by the defect alone or in combination with other defects is less than 0.5% of the total assets, it is recognized as a general defect; If it exceeds 0.5% of the total assets and is less than 1%, it is recognized as an important defect; If it exceeds 1% of the total assets, it is recognized as a major defect.
The qualitative criteria for the evaluation of internal control defects in financial reporting determined by the company are as follows:
Signs of significant defects in internal control over financial reporting include: (1) ineffective control environment; (2) Fraud by directors, supervisors and senior managers of the company and causing important losses and adverse effects to the enterprise; (3) Major misstatement in the current financial report found in the external audit but not identified by the company's internal control; (4) The internal control supervision of the company by the board of directors or its authorized institution and the audit and supervision department is invalid. Signs of significant defects in internal control over financial reporting include: (1) failure to select and apply accounting policies in accordance with generally accepted accounting standards; (2) Failure to establish anti fraud procedures and control measures; (3) 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; (4) 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. There are general defects in the internal control of financial reporting, including other internal control defects that do not constitute major defects and important defect standards.
2. 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:
The quantitative standard takes the operating income and total assets as the measurement indicators. If the loss that may be caused or caused by the defect of internal control is related to the income statement, it shall be measured by the operating revenue index. If the amount of financial report misstatement that may be caused by the defect alone or in combination with other defects is less than 2% of the operating revenue, it is recognized as a general defect. If it exceeds 2% of the operating revenue but less than 5%, it is recognized as an important defect; If it exceeds 5% of the operating revenue, it is recognized as a major defect.
Losses that may be caused or caused by internal control defects related to asset management shall be measured by the total asset index. If the amount of financial report misstatement that may be caused by the defect alone or in combination with other defects is less than 0.5% of the total assets, it is recognized as a general defect; If it exceeds 0.5% of the total assets and is less than 1%, it is recognized as an important defect; If it exceeds 1% of the total assets, it is recognized as a major defect
The qualitative criteria for the evaluation of internal control defects in non-financial reporting determined by the company are as follows:
The identification of non-financial report defects is mainly based on the impact of defects on the effectiveness of business processes and the possibility of occurrence. If the possibility of defects is small, it will reduce the work efficiency or effect, or increase the uncertainty of the effect, or make it deviate from the expected goal, which is a general defect;
If the possibility of defects is high, it will significantly reduce the work efficiency or effect, or significantly increase the uncertainty of the effect, or make it significantly deviate from the expected goal as an important defect;
If the possibility of defects is high, it will seriously reduce the work efficiency or effect, or seriously increase the uncertainty of the effect, or make it seriously deviate from the expected goal, which is a major defect
4、 Main internal control operation and existing problems
1. Corporate governance structure
In accordance with the relevant provisions of the company law, securities law and other laws and regulations, normative documents and Jiangxi Selon Industrial Co.Ltd(002748) articles of Association (hereinafter referred to as the "articles of association"), the company has established the general meeting of shareholders, the board of directors and the board of supervisors, established a relatively perfect and standardized corporate governance structure and independent internal management and control system, and formulated the rules of procedure of the general meeting of shareholders and the rules of procedure of the board of directors The rules of procedure of the board of supervisors and other systems, the working rules of the chairman, general manager, independent directors, Secretary of the board of directors, professional committees, measures for the administration of external guarantees and other specific and standardized daily work guidelines. The responsibilities, authorities, procedures and obligations of the general meeting of shareholders, the board of directors, the board of supervisors and the management in terms of decision-making, implementation and supervision are clear, and the power organs, decision-making organs, operation organs and supervision organs are scientifically divided, each responsible and effectively balanced. At the same time, in accordance with the provisions of the articles of association, four professional committees have been established under the board of directors, including audit committee, nomination committee, salary and assessment committee and Strategy Committee. According to the responsibilities of each professional committee, we have formulated the detailed rules for the implementation of the audit committee, the detailed rules for the implementation of the nomination committee, the detailed rules for the implementation of the remuneration and assessment committee and the detailed rules for the implementation of the strategy committee, so as to ensure that each special committee can give full play to its role and assist the board of directors of the company to better perform its responsibilities.
From January 1, 2021 to August 24, 2021, the board of directors of the company consists of 7 directors. Among them, there is one chairman and three independent directors. Mr. Wang Limin, an independent director, resigned in July 2021. In view of the fact that Mr. Wang Limin's resignation will result in the number of independent directors on the board of directors being less than one-third of the members of the board of directors, Mr. Wang Limin still performed his duties as an independent director during the reporting period in accordance with the company law, the rules for independent directors of listed companies and the articles of Association; From August 25, 2021 to December 31, 2021, the board of directors of the company consists of five directors, including three independent directors. The directors of Mr. Zeng Daolong and Mr. Liu Linsheng were removed at the first extraordinary general meeting of the company in 2021.
The board of supervisors of the company is composed of three supervisors, including one chairman of the board of supervisors and one employee representative supervisor. Among them, the supervisor Luo Jincan resigned in December 2020. In view of the fact that Mr. Luo Jincan's resignation will lead to the number of members of the board of supervisors of the company being lower than the legal minimum, according to the provisions of the company law and the articles of association, Mr. Luo Jincan's resignation application will not take effect until the company elects a new supervisor. During the reporting period, Mr. Luo Jincan continued to perform his duties as a supervisor; On November 29, 2021, the first employee congress of the company in 2021 deliberated and approved the proposal on the election of employee supervisors. After the deliberation and voting of the employee representatives attending the meeting, Mr. Gao Zhonghua was elected as the employee representative of the new board of supervisors of the company. He will perform the duties of employee supervisor from the date of making the resolution, and the former employee supervisor Mr. Pan Yingshu will no longer perform the duties of supervisor. During the reporting period, the company held 2 general meetings of shareholders, 13 meetings of the board of directors and 9 meetings of the board of supervisors.
The management of the company is responsible for organizing and implementing the resolutions of the general meeting of shareholders and the board of directors. Under the leadership of the board of directors and the articles of association of the company, the general manager shall be fully responsible for the daily work of the general manager. The company now has three deputy general managers and one chief financial officer. The deputy general manager and the chief financial officer perform their respective duties and jointly assist the general manager in his work. At the same time, in the process of daily operation and management, the company has also established a complete set of internal management systems such as financial management, human resource management, contract management, file management and administrative management according to law to ensure the smooth and orderly operation of the company.
In 2021, the contradiction between the company's indirect controlling shareholders on the nomination right in the general election intensified, and matters related to the general election of the board of directors and the board of supervisors seriously lagged behind. Without affecting the normal production and operation, the internal governance structure of the company fluctuates greatly. During the reporting period, the number of members of the board of directors changed from 7 to 5, the positions of the chairman and general manager of the company experienced many changes, and other senior managers such as deputy general manager, chief financial officer and Secretary of the board of directors also changed; In the case of fluctuations in the governance structure, the company's seals and licenses were out of control during the reporting period. The company recovered them by reporting to the public security organ. Under the mediation of Leping Municipal People's court, the original and duplicate of the company's seals and business licenses have been returned to the company, and the company has resumed normal operation. In addition, the "Shenzhen Stock Exchange Zone digital certificate" used by the company for external information disclosure during the reporting period was out of control from September 1, 2021 to October 24, 2021, resulting in the failure of the company to disclose relevant matters in time; In addition, on October 18, 2021, the company received the decision on taking corrective measures against Jiangxi Selon Industrial Co.Ltd(002748) , Liu Yiyun, Zeng Daolong and Zhang Huilin issued by Jiangxi regulatory bureau of China Securities Regulatory Commission (hereinafter referred to as "Jiangxi regulatory bureau") ([2021] No. 8), which pointed out the relevant problems existing in the standardized operation of the general meeting of shareholders and the board of directors of the company, It is mainly reflected in the short interval between the notice of the relevant board meeting and the convening date, and the relevant contents of the new interim proposal are not disclosed in the notice of the annual general meeting of shareholders. The above situations show that the instability of the internal governance structure has a certain non-financial impact on the company, and there are some defects in the internal governance of the company during the reporting period.
In view of the above problems, the company has timely held special meetings and established a special rectification working group led by the chairman, who acts as the leader to comprehensively coordinate the rectification work. Based on the principle of seeking truth from facts, the directors, supervisors, senior managers and personnel of relevant departments of the company conducted self-examination on relevant problems in strict accordance with the requirements of laws, regulations, normative documents, the articles of association and relevant systems of the company, and put forward rectification plans one by one. At the same time, the person responsible for rectification further clarified the follow-up arrangements and improvement and improvement measures in combination with the implementation of self-examination and rectification, The internal audit department of the company shall supervise and inspect, so as to effectively improve the internal control and governance level of the company and better ensure the compliant operation and standardized operation of the company. In addition, at the end of 2021, the company actively promoted the election of the board of directors and the board of supervisors in accordance with the requirements of relevant laws and regulations and the articles of association
