Shenzhen Changfang Group Co.Ltd(300301) : self evaluation report on internal control in 2021

Shenzhen Changfang Group Co.Ltd(300301)

Self evaluation report on internal control in 2021

Shenzhen Changfang Group Co.Ltd(300301) all shareholders:

According to the provisions of the basic norms of enterprise internal control and its supporting guidelines and other internal control regulatory requirements (hereinafter referred to as the enterprise internal control standard system), combined with the internal control system and evaluation methods of Shenzhen Changfang Group Co.Ltd(300301) (hereinafter referred to as the "company"), 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 and evaluation scope

During the reporting period, the company organized and carried out internal control evaluation around various elements of internal control, and continuously improved and optimized the company's internal control system in accordance with the provisions of the basic norms of enterprise internal control and its supporting guidelines and other internal control supervision requirements, combined with the company's internal control system and evaluation methods, on the basis of daily and special supervision of internal control.

The board of directors of the company shall establish, improve and effectively implement internal control in accordance with the provisions of the enterprise's internal control standard system, evaluate its effectiveness, and truthfully disclose the internal control evaluation report. The board of supervisors shall supervise the establishment and implementation of internal control by the board of directors. The company's management is responsible for organizing and leading the daily operation of the enterprise's internal control. The board of directors of the company has an audit committee, which supervises and reviews the company's periodic reports, internal control reports and other major matters, and reports to the board of directors. Under the audit committee of the board of directors, there is an independent internal audit department. Under the guidance of the audit committee of the board of directors, the internal audit department independently carries out audit work, is fully responsible for internal audit and internal inspection, and is equipped with full-time internal auditors to audit and supervise the establishment and implementation of the company's internal control system, the company's operation and financial situation, and independently exercise the power of audit and supervision.

During the reporting period, the company organized and carried out the internal control evaluation in 2021 according to the procedures specified in the enterprise internal control standard system and the company's internal control evaluation method.

The main units included in the evaluation scope include: Shenzhen Shenzhen Changfang Group Co.Ltd(300301) Holding Co., Ltd. and its wholly-owned subsidiaries, absolutely holding subsidiaries and branches.

The main businesses included in the evaluation scope include the R & D, design, production and sales of LED lighting light source devices and LED lighting products, as well as the R & D, design and sales of off grid lighting application products.

The main items included in the evaluation scope include: governance structure, organizational structure, corporate culture, human resources and salary management, fund management, sales and collection management, procurement and payment management, production management, asset management, seal management, information system management, investment management, external guarantee management, related party transaction management, information disclosure management, internal information transmission, internal supervision, management and control of holding subsidiaries, etc.

The high-risk areas of focus mainly include the control and management of subsidiaries, related party transactions, external guarantee, occupation of funds by related parties, major investment, information disclosure, market risk, sales risk, procurement risk, etc. 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.

3、 Internal control evaluation conclusion

According to the identification of major defects in the company's internal control over financial reporting, on the benchmark date of the internal control evaluation report, the internal control has the following major defects in the internal control over financial reporting:

1. The replacement of the subsidiary kangmingsheng information system did not properly save the data of the original system, resulting in the loss of module data such as personnel salary and cost accounting generated by the system. Although manual accounting can make up for the relevant impact to a certain extent, the internal control of the relevant financial report may still fail, affecting the reasonable guarantee of the authenticity and integrity of the financial report and relevant information;

2. The inventory management of the subsidiary kangmingsheng is not standardized. During the annual audit and supervision, the accountant found that kangmingsheng has a large number of Dead Inventory. As of the date of the audit report, kangmingsheng failed to provide a complete list of dead inventory and information on the formation process of Dead Inventory. Kangmingsheng's inventory is stored in multiple warehouses, and the warehouse in and warehouse out of each warehouse are recorded uniformly. It is only identified and distinguished according to materials, and no corresponding sub warehouse accounting management is established. As a result, kangmingsheng's inventory management cannot judge the integrity and accuracy of warehouse material differentiation;

3. The subsidiary kangmingsheng has the situation of third-party payment collection, and the amount of third-party payment collection accounts for a high proportion of the amount of tax included income in the reporting period. Kang Mingsheng failed to properly keep and provide complete relevant materials proving the source of the third-party payment. It caused the internal defects of kangmingsheng's sales and collection cycle, and the operation of internal control over financial reporting failed.

According to the identification standard of internal control defects in non-financial reports, the company found the following major defects in internal control of non-financial reports on the benchmark date of internal control evaluation report:

There are major defects in the control of subsidiary kangmingsheng. In order to ensure the safety of funds, Kang Mingsheng deposited its daily funds in the bank account of Shenzhen shiyongcheng Technology Co., Ltd. until the account of shiyongcheng company was closed on December 13, 2021. This matter violates the provisions of the company law and the articles of association that the company's funds shall not be deposited in its own name or in the name of others.

On April 22, 2022, Kang Mingsheng found that there were unrecorded rebates. The amount involved in this matter is significant and the company fails to find the above unrecorded situation in the daily supervision.

Leading to significant defects in the company's internal control related to the management of subsidiaries during the reporting period;

According to the identification standard of major defects in the company's internal control, on the benchmark date of the internal control evaluation report, kangmingsheng, a subsidiary of the company, has major defects in the internal control of financial and non-financial reports. The board of Directors believes that the company has basically maintained effective internal control over financial reports and non-financial reports in accordance with the requirements of the enterprise's internal control standard system and relevant regulations, except that the subsidiary kangmingsheng has major defects in internal control.

4、 Internal control defect identification standard

The company organizes and carries out internal control evaluation according to the enterprise internal control standard system and the basic norms of enterprise internal control jointly issued by five national ministries and commissions and the guidelines for internal control of listed companies.

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 of the enterprise internal control standard system for major defects, important defects and general defects, combined with the company's development strategy, scale, industry characteristics, risk preference, risk tolerance and other factors, and re 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:

(I) identification criteria for defects in internal control over financial reporting

According to the importance of financial reporting errors that may be caused by defects, the company uses a combination of qualitative and quantitative methods to divide defects into major defects, important defects and general defects.

Major defect: refers to the combination of one or more control defects, which may lead to serious defects, affect the effectiveness of the enterprise's internal control, and then cause the enterprise to be unable to prevent or find serious deviations from the control objectives in time; Important defect: refers to the combination of one or more control defects. Although its severity is lower than that of major defects, it is still likely to cause the enterprise to be unable to prevent or find deviations from the control objectives in time, which must attract the attention and attention of the board of directors and management of the enterprise;

General defects: refer to other defects except major defects and important defects.

1. Quantitative standard

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 1% of the operating revenue and the amount does not exceed 20 million yuan, it is recognized as a general defect; If it exceeds 1% but less than 2% of the operating revenue and the amount does not exceed 30 million yuan, it is recognized as an important defect; If it exceeds 2% of the operating revenue and the amount exceeds 30 million yuan, 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 and the amount does not exceed 20 million yuan, it is recognized as a general defect; If more than 0.5% of the total assets is less than 1% and the amount does not exceed 30 million yuan, it is recognized as an important defect; If it exceeds 1% of the total assets and the amount exceeds 30 million yuan, it is recognized as a major defect.

2. Qualitative criteria

The following situations (including but not limited to) shall generally be identified as major defects in the internal control of financial reporting: ① fraud of directors, supervisors and senior managers of the company;

② The company corrects the published annual financial report;

③ Material misstatement in the current financial report found by the certified public accountant but not identified by the company's internal control;

The following circumstances (including but not limited to) shall generally be recognized as important defects in the internal control of financial reporting: ① the company's main accounting policies, accounting estimates or accounting error correction items are not disclosed as required;

② Failure to establish anti fraud procedures and control measures;

③ Related parties and related transactions are not disclosed as required;

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 true and complete objectives;

Control defects other than those that do not constitute major defects and important defects are recognized as general defects.

(II) identification criteria of internal control defects in non-financial reports

The identification of non-financial report defects of the company is mainly based on the severity of the business nature involved, the nature of direct or potential negative impact, the scope of impact and other factors.

1. Quantitative standard

General defects: direct property loss less than or equal to 5 million yuan;

Important defects: direct property loss is more than 5 million yuan and less than or equal to 10 million yuan;

Major defects: direct property loss is greater than or equal to more than 10 million yuan.

2. Qualitative criteria

Under the following circumstances (including but not limited to), it shall generally be recognized as a major defect in the internal control of non-financial reporting:

① The decision-making of major matters is not implemented in accordance with the company's policies, resulting in decision-making mistakes and major economic losses; ② Violation of relevant provisions of international laws and regulations;

③ The disclosure of important technical data and confidential inside information of the company leads to significant losses or adverse social impact of the company;

④ The company's important business lacks control system or the system fails;

⑤ Other circumstances that have a significant impact on the company.

Circumstances identified as significant defects in internal control over non-financial reporting:

If it does not constitute a major defect, its severity is lower than that of a major defect, and may cause the company to suffer a certain degree of loss or impact, it is recognized as a major defect.

Cases identified as general defects of internal control over non-financial reporting:

Control defects other than those that do not constitute major defects and important defects are recognized as general defects.

5、 Identification and rectification of internal control defects

Specific description of the time when the sequence defect occurs. The full time when the defect has implemented or plans to implement the financial report

No. 1 potential impact modification measures

The relevant financial reports of the subsidiary kangmingsheng's letter intend to negotiate and use the company's information system on May 1, 2022 and January 1, 2021 to replace the SAP system that may fail to be properly controlled

Save the data of the original system

Used by subsidiary kangmingsheng December 2021

The account of shiyongcheng company has been cancelled on December 31

March 16, 2020 against the company law and the company law

2. The articles of association of the company controls kangmingsheng

The subsidiary kangmingsheng has major defects in self inspection. Strengthen the control of subsidiaries. On May 22, 2022, it was found that there was an unrecorded return of 5 days

Profit situation.

3. On December 31, 2021, the inventory of subsidiary kangmingsheng may affect the relevant inventory. It is proposed to negotiate and use the SAP system of the company to manage the accuracy of non-standard goods data on May 31, 2022

4 on January 1, 2021, the company kangmingsheng has a sales and collection cycle deposit, and plans to negotiate the unified use of the company 20