Important Statement
Internal control is a process implemented by the company's board of directors, audit committee, management, and all employees aimed at achieving control objectives. Under the supervision of the corporate governance structure, it is the responsibility of the board of directors to design, implement, and maintain effective internal controls, evaluate their effectiveness, and disclose the internal control evaluation report truthfully. The audit committee supervises the establishment and implementation of internal controls by the board. The management is responsible for organizing and leading the daily operation of internal controls. The board of directors, audit committee, and senior management ensure that this report contains no false records, misleading statements, or significant omissions, and they bear individual and joint responsibility for the truthfulness, accuracy, and completeness of the report.
The goal of establishing and implementing internal controls is to reasonably ensure that the company's operations are legal and compliant, assets are secure, financial reports and related information are true and complete, operational efficiency and effectiveness are improved, and the company achieves its development strategy. Due to inherent limitations in internal controls, they can only provide reasonable assurance of achieving these objectives. Additionally, changes in circumstances may render internal controls inappropriate or reduce adherence to control policies or procedures, posing risks in inferring the future effectiveness of internal controls based on evaluation results.
Organization of Internal Control Evaluation Work
The internal control evaluation work is led by the board of directors and its audit committee, forming an evaluation team primarily led by the audit department with participation from multiple departments to evaluate the main risk areas and units included in the evaluation scope.
Evaluation Procedures
- Establish an evaluation team and develop an evaluation plan.
- Conduct on-site inspections.
- The evaluation team studies and identifies internal control deficiencies.
- Discuss and review the rectification plan.
- Submit for board approval according to prescribed authority and procedures.
Evaluation Methods
The evaluation team employs various methods, including individual interviews, surveys, focused discussions, walkthrough tests, statistical sampling, and comparative analysis, to widely collect evidence of the design and effective operation of internal controls, identifying design and operational deficiencies.
Scope of Internal Control Evaluation
The company determines the main units, businesses, and high-risk areas included in the evaluation scope based on a risk-oriented principle. The main units included in the evaluation scope are: the company headquarters, Sichuan Jiuzhou Electronic Technology Co., Ltd., Shenzhen Jiuzhou Electric Co., Ltd., Sichuan Jiuzhou Air Traffic Control Technology Co., Ltd., Chengdu Jiuzhou Difei Technology Co., Ltd., Jiuzhou (Hong Kong) Multimedia Co., Ltd., and Mianyang Science and Technology City Low-altitude Equipment Inspection and Certification Co., Ltd. The total assets of the units included in the evaluation scope account for 99.99% of the company's consolidated financial statement assets, and the total operating income accounts for 99.99% of the company's consolidated financial statement operating income.
The main businesses and matters included in the evaluation scope encompass: corporate governance, organizational structure, development strategy, information disclosure, information and communication, internal audit at the company level; human resources, financial reporting, fund management, asset management, procurement, production processes and cost control, sales, research and development, external investment, related party transactions, guarantee business, and control over subsidiaries at the business level. The aforementioned units, businesses, and high-risk areas cover the main aspects of the company's operations and management, with no significant omissions.