Kelin Environmental Protection Equipment Inc(002499) : self evaluation report on internal control in 2021

Kelin Environmental Protection Equipment Inc(002499)

Self evaluation report on internal control in 2021

Kelin Environmental Protection Equipment Inc(002499) all shareholders:

In accordance with 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 normative system”), combined with Kelin Environmental Protection Equipment Inc(002499) (hereinafter referred to as the “company”) 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

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, 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 company and its 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 businesses and matters included in the evaluation scope include: the corporate governance structure, organizational structure, internal audit, human resources policy, corporate culture and other aspects involved in the company’s internal control environment, and the daily operation management of procurement, production, sales and finance involved in the business level; The high-risk areas of focus mainly include the control of subsidiaries, related party transactions, external guarantees, major investments, information disclosure, storage and use of raised funds, 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.

(II) basis of internal control evaluation and identification standard of internal control defects

The company organizes and carries out internal control evaluation in accordance with the enterprise internal control standard system and the requirements of the guidelines for the application of enterprise internal control, the guidelines for the evaluation of enterprise internal control and the rules for the preparation and reporting of information disclosure of companies offering securities to the public No. 21 – General Provisions for the annual internal control evaluation report.

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 net assets as the measurement indicators. The losses that may be caused or caused by internal control defects are related to the profit statement, which shall be measured by the operating revenue index. If the amount of misstatement in the financial report caused by the defect alone or in combination with other defects is less than 0.2% of the operating revenue, it is recognized as a general defect; If it exceeds 0.2% but less than 1% of the operating revenue, it is recognized as an important defect; If it exceeds 1% 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 net assets index. If the amount of misstatement in the financial report caused by the defect alone or together with other defects is less than 1% of the net assets, it is recognized as a general defect; If it exceeds 1% but less than 2% of net assets, it is recognized as an important defect; If it exceeds 2% of net 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:

Major defects in internal control over financial reporting: ineffective control environment; Fraud of directors, supervisors and senior managers of the company; The external audit found that there were significant misstatements in the current financial report, and the company failed to find such misstatements in the process of operation; The supervision of internal control by the audit committee and the internal audit department is invalid.

Significant defects in internal control over financial reporting: failure to select and apply accounting policies in accordance with generally accepted accounting standards; Failure to establish anti fraud procedures and control measures; 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; 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 goal.

General defects of internal control over financial reporting: 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 standard takes the operating income and net assets as the measurement indicators. The losses that may be caused or caused by internal control defects are related to the profit statement, which shall be measured by the operating revenue index. If the amount of misstatement in the financial report caused by the defect alone or in combination with other defects is less than 0.2% of the operating revenue, it is recognized as a general defect; If it exceeds 0.2% but less than 1% of the operating revenue, it is recognized as an important defect; If it exceeds 1% 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 net assets index. If the amount of misstatement in the financial report caused by the defect alone or together with other defects is less than 1% of the net assets, it is recognized as a general defect; If it exceeds 1% but less than 2% of net assets, it is recognized as an important defect; If it exceeds 2% of net 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.

Major defects in internal control of non-financial reporting: the possibility of defects is high, which 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.

Important defects in internal control of non-financial reporting: the possibility of defects is high, which will significantly reduce the work efficiency or effect, or significantly increase the uncertainty of the effect, or significantly deviate from the expected goal.

General defects of internal control over non-financial reporting: the possibility of defects is small, which will reduce work efficiency or effect, increase the uncertainty of effect, or make it deviate from the expected goal.

(III) identification and rectification of internal control defects

1. Identification and rectification of internal control defects in financial reporting

According to the above identification standards of internal control defects in financial reporting, the company did not have major defects and important defects in internal control of financial reporting during the reporting period.

2. Identification and rectification of internal control defects in non-financial reports

According to the above identification standards of internal control defects in non-financial reports, no major defects and important defects in the company’s internal control over non-financial reports were found during the reporting period.

4、 Description of other major matters related to internal control

With the continuous development of the company’s business, the growth of the number of employees and the continuous optimization of the organizational structure, the company will continue to supplement and improve the internal control system, standardize the implementation of the internal control system, strengthen the supervision of the company and its subsidiaries, strengthen internal audit, strengthen the supervision and inspection of internal control, and promote the healthy and sustainable development of the company Kelin Environmental Protection Equipment Inc(002499) board of directors April 29, 2002