Chapter 1 General Principles
Article 1
To strengthen and standardize the internal control of Chongqing Zongshen Power Machinery Co., Ltd. (hereinafter referred to as "the Company"), improve management levels and risk prevention capabilities, promote standardized operations and sustainable development, and protect the legitimate rights and interests of the Company and all shareholders, this system is formulated based on the "Company Law of the People's Republic of China," "Securities Law of the People's Republic of China," "Basic Norms for Enterprise Internal Control" and its supporting guidelines, "Self-Regulatory Guidelines No. 1 for Listed Companies on the Shenzhen Stock Exchange - Standardized Operations of Main Board Listed Companies," and the provisions of the "Articles of Association of Chongqing Zongshen Power Machinery Co., Ltd." (hereinafter referred to as "the Articles of Association"), combined with the actual situation of the Company.
Article 2
The term "internal control" in this system refers to a series of control activities jointly implemented by the Company's board of directors, management, and all employees, aimed at reasonably ensuring the achievement of the following basic objectives:
- The Company's operations are legal and compliant;
- Asset safety is ensured;
- Financial reports and related information are true, accurate, and complete, in accordance with accounting standards;
- Operational efficiency and effectiveness are improved;
- The Company’s development strategy is promoted.
Article 3
The establishment and implementation of internal control by the Company shall adhere to the principles of comprehensiveness, materiality, checks and balances, adaptability, and cost-effectiveness.
Article 4
This system applies to the Company and its wholly-owned subsidiaries and holding subsidiaries.
Chapter 2 Internal Control Environment
Article 5
The Company continuously optimizes its governance structure, standardizes the operations of the shareholders' meeting, board of directors, and their specialized committees, and management, forming a scientific and effective division of responsibilities and checks and balances, providing a good environment for the effective operation of internal control.
Article 6
The board of directors is ultimately responsible for the establishment, improvement, effective implementation, and evaluation results of the Company's internal control system. The management is responsible for organizing and leading the daily operation of the Company's internal control.
Article 7
The board of directors has an audit committee responsible for supervising the effective implementation of the Company's internal control and the self-evaluation of internal control, coordinating internal control audits and other related matters. If the board secretary discovers financial information, internal control issues, or clues during the performance of duties, they shall promptly report to the audit committee.
Article 8
The Company establishes an independent audit department according to the "Internal Audit System," with dedicated internal auditors. The audit department, under the leadership of the board of directors and the audit committee, conducts independent and objective audit supervision work, monitoring the effectiveness of internal control. If the internal audit institution discovers significant issues or clues, it shall promptly report to the audit committee and inform the board secretary.