Pursuant to relevant legal and regulatory requirements with respect to the “Basic Standards of Internal Controls for Enterprises” issued by the Ministry of Finance, the Listing Rules of the Hong Kong Stock Exchange and the Shanghai Stock Exchange, the Company has taken the initiative in establishing a comprehensive internal control system and systemic mechanism in five aspects, namely internal environment, risk assessment, control activities, information and communication and internal supervision, and commenced the self-assessment for internal control. It also actively promoted the ratification of the internal control issues and enabled continuous regular review and persistently improved the implementation of the internal control system for the purpose of ensuring its effective implementation.
According to the requirements of the “Practice Guideline of Internal Controls for Enterprises” by the five PRC government departments and authorities, with reference to the practices of domestic and overseas advanced enterprises, the Company has compiled the “Internal Control Handbook” which standardizes the internal control requirements on 29 processes with 333 control points, which include corporate governance, overall budget, human resources, investment management, sales receipt, procurement payments, as well as the relevant segregation of job duties and respective requirements on authorization and approval. Meanwhile, the Company has promoted the “Internal Control Handbook” to various business units and their subordinate units in a focused and step-by-step manner in an effort to organize and improve the internal control system. The Company completed the promotion of the “Internal Control Handbook” to all of its 60 controlling units on the basis of preliminary pilot promotion in 2011, which effectively facilitate the establishment and improvement of the internal control system of the Company.
The Company’s Audit and Review Office is responsible for the daily inspection and monitoring work of the Company’s internal control, with separate personnel for inspecting and monitoring the internal control, who inspected and reviewed annually on the design of internal control system and the effectiveness of the implementation, and proposed advices on amendment and perfection, so as to persistently enhance the level of the Company’s internal control.
The Company has established an effective internal control assessment system. The Audit and Review Office draws up working plans for internal control reviews annually and set up an assessment team consisting of competent members transferred from various segments of businesses. The team conducts internal control assessment on units and businesses in a specified range, identifies any defects of internal controls and makes proposals on rectification. Reports on the assessment of internal controls are compiled and presented to the audit committee and the Board, so as to persistently enhance the level of the Company’s internal control.
The Board of the Company is responsible for the establishment and implementation of internal controls. The Audit Committee is responsible for monitoring the establishment and implementation of internal controls. The Company standardizes the requirements for internal controls and improves the internal control system mainly through the establishment and promotion of the “Internal Control Handbook”. Any defects in internal controls are identified in a timely manner through annual internal control reviews in which accounting firms are engaged to conduct financial internal control auditing. The Company would urge relevant business segments and units to implement rectification measures in a timely manner, so as to ensure effective operation of internal controls of the Company.