Zhejiang Busen Garments Co.Ltd(002569) : self evaluation report on internal control in 2021

Zhejiang Busen Garments Co.Ltd(002569)

Self evaluation report on internal control in 2021

Zhejiang Busen Garments Co.Ltd(002569) 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. Establish and implement the internal control of the board of supervisors. 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, there was one major defect in the company’s internal control over non-financial reports on the benchmark date of the internal control evaluation report.

There is no impact between the benchmark date of the internal control evaluation report and 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 Zhejiang Busen Garments Co.Ltd(002569) and its subsidiaries and branches. 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 included in the evaluation scope include: R & D, design, procurement and sales of BUSEN products.

The main operations and matters included in the scope of evaluation include:

1. Organizational structure

In accordance with the company law of the people’s Republic of China, the company has established the general meeting of shareholders, the board of directors and the board of supervisors to perform the functions of decision-making, management and supervision respectively. At the same time, it has a strategy committee, a salary and assessment committee, a nomination committee and an audit committee, which are directly responsible to the board of directors. According to the needs of business development and internal control, the company has set up five management lines: Marketing Center, supply chain center, operation center, support center and digital center. Among them, the operation center has four departments: finance, personnel administration, audit and file management; The support center has four departments: securities, office, legal affairs and internal audit; The digital center governs the cloud store and information departments of Beisheng province. It clearly stipulates the main responsibilities of each department and forms an internal control system that performs its own duties, assumes its own responsibilities, cooperates with each other, restricts each other and links each other, so as to optimize the resource allocation of the company and improve the work efficiency of the company.

2. Development strategy

The board of directors shall set up a strategy and Development Committee to study the company’s long-term strategy and operation plan, and put forward major suggestions on the company’s capital. The main responsibility of the strategy committee is to study the medium and long-term development strategy and major investment decisions of the company, put forward suggestions and submit them to the board of directors for deliberation and decision. The strategy committee is accountable to the board of directors.

3. Human resources

The company has established and implemented more scientific personnel management systems such as recruitment, employment, assessment, salary, reward and punishment and promotion, and hired enough personnel to complete the assigned tasks. The company has formulated the post and post description of BUSEN department and BUSEN labor and personnel management system to recruit talents with both political integrity and talent in strict accordance with the post requirements and the principles of fairness, equality, competition and merit. The company formulates the employee training management measures, and follows the principle of “what to do, what to learn, what to lack, what to make up, what to apply and what to learn”. It carries out induction training, pre job skill training, on-the-job centralized training, post qualification training and academic education training for on-the-job employees to improve their own business level and work skills.

4. Social responsibility

While pursuing economic benefits and protecting the interests of shareholders, the company actively performs social responsibilities and provides employees with a safe working environment, good welfare and the guarantee of continuing education; Provide customers with high-quality products and services; Based on the principles of fair competition, honesty and trustworthiness and mutual benefit, achieve win-win with suppliers and customers; Fulfill the obligations of the enterprise for the sustainable development of philanthropy, social public welfare and social environment, strive to realize the social value of the enterprise, and actively assume the social responsibility of the enterprise.

5. Corporate culture

The company takes “people-oriented, caring for customers and employees” as its corporate philosophy, and strives to provide high-quality clothing products and services to the public at a reasonable price to beautify people’s life with the spirit of continuous innovation and pursuit of excellence and the work style of being strict, pragmatic and vigorous; Always hold high the banner of revitalizing the national garment industry, take the development of the garment industry as the leader, take the innovation of traditional industries as the support, take the improvement of economic benefits and growth quality as the goal, focus on high value-added projects, and take the development idea of establishing core competitiveness and main image as the guidance to strive to be the first men’s wear brand in China.

6. Financial activities

The company has formulated financial management system, financial post setting and post responsibilities, bank deposit and ticket management measures, cash management system, financial audit system, expense reimbursement regulations and other systems, which have made more detailed provisions on the internal control of monetary fund income, expenditure and balance. The company has separated incompatible posts for handling monetary fund business, There is a mutual restriction between relevant departments and personnel, and strict authorization review procedures have been established to effectively prevent the risk of capital activities and improve capital efficiency.

7. Procurement business

The company has formulated the list of qualified suppliers, supplier quality assurance capability questionnaire, supplier evaluation form, procurement and payment management system, cost management system and other systems, established the main control processes of procurement, acceptance and payment, reasonably set up procurement and payment business posts, clarify responsibilities and authorities, and strengthen the management of procurement approval, supplier management, negotiation, acceptance, payment, accounting treatment Regularly check accounts with suppliers and other links to reduce procurement risks.

8. Asset management

The company has formulated the purchase and payment management system, warehouse management system and other systems, established management and control processes such as inventory measurement, inspection, warehousing, delivery, audit, inventory management, transportation management and inventory counting, clarified their respective responsibilities and mutual restriction measures for their relevant posts, and ensured the separation of incompatible responsibilities of inventory physical management and accounting, Strict management system and authorization review procedure have been established for each control process.

The company has formulated the fixed assets management system and other systems, established relevant control processes such as the definition, classification, valuation, purchase, requisition, scrapping, maintenance and inventory of fixed assets, and established strict management systems and authorization review procedures for each control process.

9. Sales business

The company has formulated the sales and collection management system, export contract approval and execution procedure, foreign trade document operation and approval process, contract management system and other systems, established the post division and separation of functions and powers, sales plan, sales pricing, sales contract formulation and approval, sales organization, shipment organization, sales return, collection and supervision and other related control processes, and reasonably set up sales related posts, Clear responsibilities and authorities, and formed a strict management system and authorization audit procedures.

10. Guarantee business

In the Zhejiang Busen Garments Co.Ltd(002569) external guarantee management system formulated by the company, strict provisions are made on the guarantee object, guarantee approval, amount and approval authority. The board of directors was unaware of several guarantee matters that occurred during the period when Xu Maodong, the former actual controller, controlled the company, and the relevant guarantee matters were not considered and approved by the general meeting of shareholders of the company.

11. Financial Report

The company has formulated the financial report preparation system. In order to standardize the company’s accounting and information disclosure, improve the quality of accounting information, ensure the legal compliance, authenticity and integrity of financial reports, and protect the legitimate rights and interests of investors, creditors and other stakeholders, the company has established major control processes such as related transaction approval, accounting business processing, changes in accounting policies and accounting estimates, and preparation and review of financial reports, Reasonably set up departments and posts related to financial reports, clarify responsibilities and authorities, and clarify the control procedures and division of responsibilities for accounting, report preparation, review and approval.

12. Contract management

The company’s contract management mainly includes the control procedures of contract signing, contract review and approval, contract performance, contract change and cancellation, dispute handling, contract management and other aspects, involving contract approval, contract performance inspection, dispute handling and other control activities. The company has established a standardized and unified authorization system to standardize and control the behavior of personnel at all levels in negotiating, signing and executing contracts on behalf of the company.

13. Internal information transmission

The company has established perfect internal information transmission and communication channels, including communication between governance and management, release of business objectives, release of management and internal control, transmission of main business process information, etc. At the same time, the company has established communication with external consulting institutions, auditors and external auditors, actively accepted their beneficial opinions on the company’s internal governance and internal control, and improved information transmission and communication channels to ensure the efficiency and health of the company’s business activities.

14. Information system

The company has established an information system related to financial accounting, including procedures and records for generating, recording, processing and reporting transactions, events and situations, and performing operation and management responsibilities for relevant assets, liabilities and owner’s equity. The information system related to financial report shall adapt to the business process.

The high-risk areas of focus mainly include market competition risk, raw material price fluctuation risk, demand decline risk and asset management risk.

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.

The board of directors of the company reviews major defects, important defects and general defects according to the standard system of internal control of the enterprise

According to the recognition requirements, the company’s scale, industry characteristics, risk preference, risk tolerance and other factors shall be combined to distinguish financial risks

Report internal control and non-financial Report internal control, and study and determine the defects of internal control applicable to the company

The specific recognition standard shall be consistent with that of 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:

Project importance major defect important defect general defect

2% of total operating revenue ≤ 1% of total operating revenue ≤ misstatement ＜ misstatement ＜ potential misstatement of total operating revenue

Misrepresentation of 2% of total operating revenue and 1% of total operating revenue

1% of total assets ≤ misstatement ＜ asset misstatement ＜ total assets of total assets potential misstatement 2% of total assets ≤ misstatement

2% 1% of total

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

(1) Signs of significant deficiencies in financial reporting include:

① Fraud by directors, supervisors and senior managers of the company;

② Major internal control deficiencies that have been found and reported to the management have not been added after a reasonable time

To correct;

③ The certified public accountant found that there were significant misstatements in the current financial report, while the internal control was not implemented in the operation process

The false alarm can be found;

④ Make misstatement correction for major errors in the announced financial report;

⑤ Other defects that may affect the correct judgment of report users.

(2) Signs of significant deficiencies in financial reporting include:

① Failure to select and apply accounting policies in accordance with GAAP;

② Failure to establish anti fraud procedures and control measures;

③ For the accounting treatment of unconventional or special transactions, no corresponding control mechanism has been established or no corresponding compensatory measures have been implemented;

④ For one or more defects existing in the process of financial reporting at the end of the period, and there is no reasonable guarantee that the prepared financial report can achieve the goal of authenticity and accuracy.

(3) General defects in financial reports refer to other control defects other than the above major defects and important defects.

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 for the evaluation of internal control defects in non-financial reports shall be implemented with reference to the quantitative standard for the evaluation of internal control defects in financial reports.

Evaluation of internal control defects in non-financial reporting determined by the company