Outdoor Lighting,Led Bollard Light,Landscape Spot Light,Led Garden Light JIANGMEN MICHEN LIGHTING CO.,LTD , https://www.jmmission.com
**Abstract**
In accordance with the "Company Law," "Securities Law," and the "Basic Standards for Internal Control of Enterprises" along with their supporting guidelines, the company has established a comprehensive internal control system to meet regulatory requirements. This internal control framework is integrated with the company's own internal control mechanisms and evaluation methods. The assessment of the company’s internal control effectiveness was conducted as of December 31, 2013, to ensure compliance and operational integrity.
**Important Statement**
Under the provisions of the enterprise internal control system, the board of directors is responsible for establishing and improving internal controls, evaluating their effectiveness, and ensuring accurate disclosure of the internal control evaluation report. The board of supervisors oversees the implementation of internal controls by the board of directors, while the management team is tasked with organizing and managing the daily operations of internal controls. All members of the board, supervisors, and senior management are accountable for the accuracy, completeness, and truthfulness of the report's content, bearing legal responsibility for any misrepresentation or omission.
The primary objective of the company’s internal control system is to ensure the legality and compliance of business operations, safeguard asset security, ensure the accuracy and completeness of financial reporting, enhance operational efficiency, and support the achievement of long-term strategic goals. However, due to inherent limitations in internal control systems, they can only provide reasonable assurance toward these objectives. Additionally, changes in external conditions may affect the relevance or effectiveness of existing controls, making it challenging to predict future performance based solely on past evaluations.
**Conclusion of Internal Control Evaluation**
During the evaluation period, no significant deficiencies were identified in the company’s financial reporting internal control as of the evaluation benchmark date. The board of directors concluded that the company maintained effective internal controls over its financial reporting processes in line with the requirements of the internal control system and relevant regulations. Similarly, no major defects were found in the non-financial reporting internal control during the same period. No factors affecting the evaluation conclusion were identified between the benchmark date and the evaluation date.
**Internal Control Evaluation Work**
(1) **Scope of Internal Control Evaluation**
The company applied a risk-based approach to determine the key units, business activities, and high-risk areas included in the evaluation. The headquarters was the main unit under review, with data from the 2013 consolidated financial statements used as reference. The evaluation covered business processes such as organizational structure, human resources, corporate culture, fund management, procurement and payment, fixed asset management, fundraising, major investment decisions, related-party transactions, and information disclosure. High-risk areas focused on fund management, major investments, related-party transactions, and information disclosure.
**Organizational Structure**
The company maintains well-established internal control systems, including the "Rules of Shareholders’ Meetings" and "Board of Directors Rules." These ensure that the shareholders’ meeting, board of directors, and board of supervisors operate efficiently and fulfill their roles in decision-making, execution, and supervision. Departments and branches are structured with clear responsibilities and operate effectively, supported by comprehensive operating systems.
**Human Resources**
A dedicated HR department manages labor and personnel policies, ensuring standardized practices in recruitment, training, performance appraisal, and incentives. The department also develops and implements training programs and improves salary management to motivate employees.
**Corporate Culture**
The company emphasizes a people-oriented, systematic, and technology-driven culture. It organizes cultural and recreational activities to foster a harmonious work environment, enhancing employee cohesion and overall performance.
**Fund Management**
Strict procedures are in place for the receipt, payment, and custody of monetary funds. Incompatible duties are separated, and mutual checks are implemented to prevent errors and fraud.
**Procurement and Payment**
The procurement process includes defined roles and responsibilities, with standardized controls over application, approval, and inquiry stages. This ensures transparency and minimizes risks in procurement and payment activities.
**Fixed Asset Management**
A complete system is in place for the registration, management, and maintenance of fixed assets. Clear procedures govern their purchase, registration, and disposal, ensuring asset security.
**Fundraising Management**
The company follows strict guidelines for the use and management of raised funds, prohibiting investments in trading securities or other unauthorized activities. This ensures the safety of investor funds.
**Major Investment and Trading Decisions**
The company has established a clear decision-making process for major investments, with approval authority clearly defined. Major projects require shareholder approval if they exceed the board’s limits.
**Related Party Transactions**
The company has a decision-making system to regulate related-party transactions, ensuring fairness, transparency, and compliance with legal requirements.
**Information Disclosure**
All disclosures strictly follow the Shenzhen Stock Exchange listing rules and internal policies, ensuring timely, accurate, and complete information sharing with stakeholders.
**Basis for Internal Control Evaluation and Defect Identification**
The company utilizes the "Basic Standards for Internal Control of Enterprises," "Guidelines for Application of Internal Control," and "Guidelines for Evaluation of Internal Control" issued by the Ministry of Finance. Internal control manuals and evaluation guides are also used. The company defines internal control defects into major, important, and general categories, with criteria consistent across years.
**Financial Reporting Internal Control Defect Identification Criteria**
Quantitative and qualitative standards are used to identify defects. Major defects include fraudulent behavior by executives, material misstatements, and ineffective oversight. Important defects involve improper accounting policies or flawed financial reporting processes. General defects cover minor issues not classified as major or important.
**Non-Financial Reporting Internal Control Defect Identification Criteria**
Similar criteria apply, with major defects including governance failures, loss of key personnel, and violations of laws or regulations. Important defects involve inefficient decision-making or flawed systems, while general defects include minor inefficiencies or uncorrected issues.
**Identification and Rectification of Internal Control Defects**
No major or important defects were identified in either financial or non-financial reporting during the evaluation period. The company has no other significant internal control-related events.
Chairman (authorized by the board of directors): Guo Liuxi
Zhengzhou Huajing Diamond Co., Ltd.
March 24, 2014