Citic Securities Company Limited(600030)
About Hangzhou Century Co.Ltd(300078)
Verification opinions of internal control evaluation report in 2021
Citic Securities Company Limited(600030) (hereinafter referred to as ” Citic Securities Company Limited(600030) “, “sponsor”) as the sponsor of Hangzhou Century Co.Ltd(300078) (hereinafter referred to as ” Hangzhou Century Co.Ltd(300078) “, “company”) issuing convertible corporate bonds to unspecified objects, In accordance with the measures for the administration of securities issuance and listing recommendation business, Shenzhen Stock Exchange GEM Listing Rules (revised in December 2020), Shenzhen Stock Exchange listed companies’ self regulatory guidelines No. 2 – standardized operation of GEM listed companies, Shenzhen Stock Exchange listed companies’ self regulatory guidelines No. 13 – recommendation business and other relevant provisions, Carefully checked the internal control evaluation report of 3 Guangdong Xinhui Meida Nylon Co.Ltd(000782) 021, and issued the following verification opinions:
1、 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 company’s headquarters, wholly-owned subsidiaries and holding subsidiaries. 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 operations and matters included in the scope of evaluation include:
1. Control environment
(1) Communication and implementation of integrity and moral values
The company has always adhered to the core concept of “creating value by thinking”, and has established a series of internal standard systems in the company to convey the company’s values and business principles to employees through multiple channels and in an all-round way.
(2) Emphasis on Competence
The management of the company attaches great importance to the setting of the ability level required for specific jobs and the requirements for the knowledge and ability necessary to achieve this level. The company regularly evaluates employees, carries out various forms of training and education for different positions, pays attention to improving employees’ quality and professional ability, and encourages employees to participate in professional title examination. (3) Participation of governance
According to the latest revised rules and regulations of China Securities Regulatory Commission and Shenzhen Stock Exchange. In combination with the actual operation and organizational structure, the company revised the articles of association, rules of procedure of the general meeting of shareholders, rules of procedure of the board of directors, rules of procedure of the board of supervisors and other system documents, and made clear and reasonable provisions on the composition, responsibilities and authorities, decision-making procedures and rules of procedure of the corporate governance. The general meeting of shareholders and the board of directors of the company shall reasonably arrange and formulate the annual business policy and business plan, and the audit committee of the board of directors and the board of supervisors of the company shall play a supervisory role to prevent fraud. At the same time, it shall continue to track whether the design and implementation of the internal control system are reasonable and effective.
(4) Management philosophy and business style
The management of the company adheres to the business philosophy of “innovation as the source, integrity-based and market first”, is responsible for the daily production and operation activities of the company, organizes the implementation of the resolutions of the board of directors, and is subject to the daily supervision of the board of directors, its audit committee and the board of supervisors. The management attaches great importance to internal control, including information technology control, information management personnel and employees’ business behavior, strictly prevent corruption and unfair competition, protect intellectual property rights and ensure information security.
(5) Organizational structure
The company has reasonably determined the form and nature of organizational units, implemented the principle of separation of incompatible positions, scientifically divided the responsibilities and authorities within each organizational unit, and formed a mutual check and balance mechanism. The company has designated special personnel to be specifically responsible for internal audit and ensure the implementation of relevant accounting control systems.
(6) Distribution of authority and responsibility
The company adopts the method of assigning control responsibilities to departments, establishes a set of authorization mechanism for performing specific functions (including transaction authorization), and ensures that everyone clearly understands the reporting relationship and responsibilities. In order to effectively control the authorized use and supervise the company’s activities, the company has gradually established a budget control system, which can modify the control policies of the accounting system in a timely manner according to the changes of the situation. The financial department reasonably ensures that business activities are carried out in accordance with appropriate authorization through various measures; Reasonably ensure that transactions and events can be recorded in appropriate accounts in a timely manner with the correct amount in the appropriate accounting period, so that the preparation of financial statements meets the relevant requirements of accounting standards.
(7) Human resources policy and Practice
The company pursues the concept of fairness, equality and merit based admission, provides fair, open and transparent employment opportunities, and attaches importance to the diversification of talents. The company has clear post responsibilities, clear working conditions, attaches importance to employee training, and carries out various forms of training and education from time to time according to the professional knowledge required by different posts, so as to ensure that all employees have corresponding competence.
The company adheres to the concept of “setting posts, responsibilities and salaries, promotion and demotion, and value orientation” to ensure the information openness, opportunity fairness and value fairness of employees’ personal development. At the same time, strictly abide by various labor laws and regulations, provide competitive salary and welfare for employees in combination with the industry situation, actively protect the legitimate rights and interests of employees, and always share the development achievements of the company with hard-working employees.
2. Risk assessment process
The company has formulated the long-term strategic goal of “connecting things and changing life”, supplemented by specific strategies and business process plans to clearly convey the enterprise’s business objectives to employees. The company has established an effective risk assessment process to identify and respond to major and generally influential changes such as business risks, environmental risks and financial risks that the company may encounter. During the actual implementation of internal control, the company continuously and effectively identifies and evaluates the risks that may arise from possible changes in the regulatory and business environment, the addition of new employees, the use of new information systems, or the upgrading of the original systems, rapid business development, new technologies, new accounting standards, etc., and timely formulates corresponding risk response measures.
3. Information system and communication
In order to timely and effectively feed back important information to the management, the company has established an effective information system, including relevant internal and external information. The company has established an information system to promote the modernization of the enterprise. Smooth communication channels and mechanisms enable employees to timely obtain and exchange the information they need in the process of implementing, managing and controlling the operation of the enterprise, and improve the decision-making and response speed of the management. At the same time, effective communication with customers, suppliers, regulators and other outsiders enables the company’s management to take further actions in time in the face of various changes.
4. Control activities
The company has established the division of responsibilities and control procedures for the company’s transaction records, authorization and use of information, including the independent control of the company’s transaction records and vouchers.
(1) Transaction authorization control: it defines the scope, authority, procedures, responsibilities and other relevant contents of authorization and approval. The management at all levels within the unit must exercise corresponding functions and powers within the scope of authorization, and the handling personnel must also handle economic business within the scope of authorization.
(2) Control of responsibility division: reasonably set the division of labor, scientifically divide the responsibilities and authorities, implement the principle of separation of incompatible positions and each person’s work can automatically check the work of another person or more people, and form a mutual check and balance mechanism. Incompatible positions mainly include: authorization approval and business handling, business handling and accounting records, accounting records and property custody, business handling and business audit, authorization approval and supervision and inspection, etc.
(3) Voucher and record control: the voucher circulation procedure has been reasonably formulated. The operating personnel can prepare relevant vouchers in time when executing transactions. The prepared vouchers are sent to the accounting department in time for recording, and the registered vouchers are filed in order. Various transactions must be recorded (e.g. employee salary records, sales invoices, etc.), and the records must be compared with the corresponding entries independently.
(4) Control of asset contact and use of records: strictly restrict the direct contact of unauthorized personnel with property, and take measures such as regular inventory, property records, account verification and property insurance to ensure the safety and integrity of all kinds of property.
(5) Independent inspection and control: the company sets up a special internal audit department to review and assess monetary funds, securities, vouchers and account books, material procurement, payment, investment management and other aspects.
(6) Electronic information system control: the company has formulated a relatively strict electronic information system control system, and has done more work in the development and maintenance of electronic information system, data input and output, document storage and safekeeping, etc.
5. Supervision of control
The company regularly evaluates various internal controls. On the one hand, it establishes various mechanisms to enable relevant personnel to obtain evidence of the effective operation of internal control to a considerable extent when performing their normal post responsibilities; On the other hand, confirm the internal information or point out the existing problems through external communication. The management of the company attaches great importance to the reports and suggestions of various functional departments and regulatory bodies of internal control, and takes various measures to correct the deviations in the control operation in time.
(II) implementation of the company’s main internal control
1. The company has conducted self-assessment on the effectiveness of the design and implementation of the internal control system. The implementation and existing problems of the company’s main internal control systems are described as follows:
(1) The company has established a relatively strict authorization and approval procedure for the revenue and expenditure and custody of monetary funds. Incompatible positions for handling monetary funds business have been separated, and there are mutual constraints between relevant institutions and personnel. The company has formulated the monetary fund management system in accordance with the Interim Regulations on cash management of the State Council, the payment and settlement measures of the people’s Bank of China and the guidelines for the application of enterprise internal control No. 6 – capital activities of the Ministry of finance, which stipulates that the company shall reasonably verify the cash inventory limit according to the actual needs, and it is strictly prohibited to arrive at the warehouse with IOUS and arbitrarily misappropriate cash All cash receipts and payments must have legal original vouchers and other cash management systems and bank account signatures, and implement the bank deposit management system such as the system of division and use, and it is not allowed to issue blank checks. Therefore, the company has no major inadequacies affecting the safety of monetary funds.
(2) The company has reasonably planned and established institutions and posts for procurement and payment business. The purchase requisition, approval, purchase and acceptance procedures of inventory are clarified. The payment of accounts payable and prepayments can only be handled after the relevant procedures are complete. In terms of authority, within the authorization scope of the headquarters of the company, subordinate enterprises can independently handle procurement and payment business.
(3) The company has established a post responsibility system for physical asset management, which can control the key links such as acceptance and warehousing, receiving and issuing, storage and disposal of physical assets, and has taken measures such as division of responsibilities, regular physical inventory, property records, account verification and property insurance, which can effectively prevent the theft, theft, damage and major loss of various physical assets.
(4) The company has established a relatively complete cost control system, which can basically do all the basic work of cost management, clarify the expense standard and scope, establish a relatively perfect assessment system and a relatively perfect comprehensive budget control system. The company has no major loopholes in the control of cost management.
(5) The company has formulated a relatively feasible sales policy, and has made clear provisions on the pricing principle, credit standards and conditions, collection method, responsibilities and authorities of institutions and personnel involved in sales business. It has made clear provisions on post setting and division of labor, sales and collection management, etc. The company has no major loopholes in the control of sales and payment collection and sales audit management.
(6) The company has established a more scientific fixed assets management procedure and engineering project decision-making procedure, defined the procurement authority of fixed assets at all levels, and formulated a more perfect purchase requisition, approval, procurement and acceptance report procedure. The company has no major loopholes in the control of fixed assets and engineering projects.
(7) In order to strictly control the investment risk, the company has established a more scientific decision-making procedure for foreign investment and formulated the management system for foreign investment. The approval authority of foreign investment is determined by the power organs at different levels of the company according to different investment amounts, so as to strictly control the investment risk. The company has not seriously deviated from the company’s investment policies and procedures.
(8) The company can strictly control the guarantee behavior, formulated the external guarantee management system, made it clear that the external guarantee business should be subject to risk assessment, and stipulated the specific process and daily management of the board of directors or the general meeting of shareholders to consider the guarantee matters, so as to prevent potential risks and avoid and reduce possible losses.
(9) The company establishes an audit committee under the board of directors, which is composed of three directors, including two independent directors, and at least one independent director is a professional accountant. According to the Audit Law of the people’s Republic of China, the provisions of the National Audit Office on internal audit and other laws and regulations, as well as the company’s internal audit system, the internal audit department of the company conducts regular and irregular audits on the management, foreign investment, foreign guarantee, related party transactions, fund use and other aspects of its holding subsidiaries, performs audit or audit procedures in strict accordance with relevant laws, regulations and the company’s regulations, and is responsible to the audit committee, Report to the audit committee.
(10) By appointing directors, supervisors and senior managers to control and manage the holding subsidiaries and branches, the company has incorporated the standardized operation, personnel management, financial management and investment management of the subsidiaries and branches into the unified management system, and formulated the internal control system such as the management system of holding subsidiaries. The company is in accordance with relevant laws and regulations and the standardized operation requirements of listed companies, To exercise the management of major events of the holding subsidiaries and branches, all functional departments shall timely and effectively manage, guide and supervise the holding subsidiaries and branches in accordance with the management system of holding subsidiaries and relevant internal control systems.
(III) identification and internal control standards
According to the identification requirements of the enterprise internal control standard system for major defects, important defects and general defects, and in combination with the company’s scale, industry characteristics, risk preference, risk tolerance and other factors, the board of directors of the company distinguished the internal control of financial reports from the internal control of non-financial reports, and studied and determined the specific identification standards of internal control defects applicable to the company. 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) The quantitative criteria for the evaluation of internal control defects in financial reporting determined by the company are as follows:
The loss that may be caused or caused by the defect of internal control is related to the income statement, which is measured by the total income. 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 revenue, it is recognized as a general defect; If it exceeds 0.5% but less than 1% of the total revenue, it is an important defect; If it exceeds 1% of the total revenue, it is recognized as a major defect.
Lack of internal control
