Internal Audit Management Rules of ADAMA Ltd.
Contents
Chapter I General Provisions
Chapter II Organization and Personnel
Chapter III Duties and Authorization
Chapter IV Work Procedures
Chapter V Penalties
Chapter VI Supplementary Provisions
Chapter I General Provisions
Article 1 To strengthen the internal audit of ADAMA Ltd. (hereinafter referred to
as the ‘Company’), establish and improve the mechanism, enhance the effectiveness,
fully leverage the supervisory and service functions in the business management,
promote the implementation of the Company’s strategic planning and operation
workplans, ensure the effective operation of rules and the mechanism, and
continuously upgrade the efficiency and effectiveness of corporate operations, these
rules are hereby formulated in accordance with the Audit Law of the People's
Republic of China and other relevant laws, administrative regulations, departmental
rules, the Listing Rules of the Shenzhen Stock Exchange (hereinafter referred to as the
‘Listing Rules’), the Shenzhen Stock Exchange Listing Rules No. 1 – Standardized
Operation of Companies Listed on the Main Board, and in conjunction with the
Articles of Association of ADAMA Ltd. (hereinafter referred to as the ‘Articles of
Association’).
Article 2 The internal audit referred to in these Rules encompasses two core
functions, namely supervision and service. Guided by the Company’s strategic
development, transformation and innovation goals, the internal audit should be
conducted through independent and objective verification, evaluation, and
recommendations to promote the effective implementation of major decisions and
deployments made by the Party and the State as well as the Company’s strategic
development plans. It also fosters compliant operations and enhances management
effectiveness, thereby providing robust oversight guarantees and service support for
the achievement of the Company’s strategic targets and its high-quality development.
Article 3 These Rules apply to the company and its subsidiaries within the scope
of the consolidated financial statements (hereinafter referred to as “the Company’s
various departments and subsidiaries”). When applying these Rules, overseas
subsidiaries shall strictly comply with the laws and regulations of the respective
countries or regions.
Chapter II Organization and Personnel
Article 4 The Company establishes an internal audit department, which shall be
subject to the leadership and supervision of its Party Committee and accountable to
the Board of Directors.
The internal audit department shall report to the Audit Committee of the Board
and be subject to its supervision and guidance. In case that any significant issue or
lead concerning the Company is uncovered, the department shall immediately report
directly to the Audit Committee. The Audit Committee shall participate in the
assessment of the head of the internal audit department.
Article 5 The company shall appoint sufficient audit personnel as required to
ensure the smooth conduct of audit work. Internal auditors shall possess the
fundamental qualities required for the audit role, including relevant proficiencies,
strong organizational and coordination skills, research and investigation capabilities,
comprehensive analytical skills, professional judgement, and written communication
proficiency. They shall be familiar with the Company’s business operations and
internal controls and shall continuously maintain and enhance their professional
competence through continuous learning. They shall demonstrate sound professional
ethics, adhere to principles, maintain objectivity and impartiality, uphold integrity and
self-discipline, perform their duties diligently, and strictly observe confidentiality.
Article 6 Auditors shall perform their duties in accordance with the law and shall
be protected by law. No institution or individual may refuse or obstruct auditors in the
performance of their duties. No retaliation against auditors is permitted.
Article 7 To ensure the objectivity and impartiality of audits, any conflict of
interest between any auditor and the audited entity or the subject matter of the audit, if
there is any, shall be proactively disclosed to the internal audit department prior to the
commencement of the audit project. Participation in the project may only continue
after such disclosure has been reviewed and approved.
Auditors shall not participate in activities that may compromise their
independent performance of duties, nor shall they interfere with or intervene in the
regular production, operational, or management activities of the audited entity.
Chapter III Duties and Authorizations
Article 8 The internal audit department shall conduct its work in accordance with
the annual work plan and meet any unplanned requirements, including but not limited
to supervisory inspections such as economic responsibility audits, strategic and
operational execution audits, internal control audits, and specialized audit projects. It
shall issue audit reports, urge audited units to carry out audit recommendations, and
follow up on the completion of rectification measures for identified issues.
Article 9 The internal audit department shall specifically perform the following
functions:
(1) Formulate the annual audit work plan in accordance with the Company’s
development strategy and management requirements.
(2) Fulfill internal audit duties in accordance with regulatory requirements such
as the Shenzhen Stock Exchange's ‘Self-Regulatory Guidance No. 1 for Listed
Companies – Standardized Operations for Companies Listed on the Main Board’;
coordinate audit resources and organize audit projects based on the approved annual
audit plan, including but not limited to economic responsibility audits, strategic
execution and operational audits, internal control audits, and specialized audits; issue
audit reports, oversee the implementation of audit recommendations by audited
entities and monitor the completion of rectification for identified issues.
(3) Organize and implement internal control evaluations and track the
rectification of identified deficiencies.
(4) Oversee the establishment of the Company’s non-compliance accountability
system and conduct related accountability work.
(5) Coordinate and facilitate audit cooperation with SASAC, the National Audit
Office and the shareholding entity.
(6) Oversee the development of the Company’s audit management mechanism,
institutional frameworks, and team building.
(7) Handle other audit matters as required by the Company’s Party Committee,
Audit Committee, the management team and the shareholding entity.
(8) Actively cooperate and provide necessary support and collaboration when the
Audit Committee communicates with external audit entities such as accounting firms
and national audit authorities.
Article 10 In the course of performing its duties, the internal audit department
shall possess the following rights:
(1) To obtain relevant materials within the responsibility scope of each functional
department as the basis for formulating audit plans and conducting preliminary
research for audit projects.
(2) To attend relevant company meetings and convene meetings concerning audit
matters.
(3) To obtain query permissions for all company business systems to inspect
various digital data and materials in real time.
(4) Request audited entities to provide materials concerning development plans,
strategic decisions, major measures, internal controls, risk management, financial
management, etc., including digital data and relevant documentation. it shall have the
right to examine the security, reliability, and cost-effectiveness of the audited entity’s
information systems. Audited entities shall not refuse, delay, or misrepresent
information.
The responsible person of the audited entity shall be accountable for the
timeliness, authenticity, and completeness of the materials provided by their entity.
In case that the audit body requires verification of relevant circumstances from
the audited entity after conducting a comprehensive analysis of obtained electronic
data and other materials, the audited entity shall cooperate accordingly.
(5) Investigate relevant issues pertaining to audit matters with concerned entities
and individuals and obtain supporting evidence. Such entities and individuals shall
support and assist to truthfully reflect circumstances and furnish relevant supporting
materials.
(6) Promptly report, halt, and propose recommendations for ongoing activities
that constitute serious violation of national laws and regulations, company policies, or
harm the Company’s interests.
(7) During audits, the audited entity shall not transfer, conceal, alter, or destroy
financial and accounting records, nor business or management documents related to
financial receipts and expenditures. It shall not transfer, conceal, or intentionally
damage assets held that were acquired in violation of national regulations.
The auditor shall have the authority to halt any violation of this provision by the
audited entity and, upon approval, to temporarily seal such materials.
(8) To propose corrective measures and handling of illegal or non-compliant
conduct, as well as recommendations for management improvements and enhanced
performance.
(9) Issue public reprimands or recommend accountability measures against
audited entities and personnel responsible for illegal activities or causing losses and
wastage.
(10) Propose commendations to the Company’s Party Committee, Board of
Directors (or the principle and major leader) for audited entities and individuals
demonstrating strict compliance with financial regulations, significant economic
benefits and outstanding contributions.
(11) Exercise other rights prescribed by laws, regulations, and rules.
Chapter IV Work Procedures
Article 11 The internal audit department shall implement audit procedures in
accordance with the professional standards, including but not limited to the following
aspects:
(1) Formulate an annual audit plan and conduct internal audit work based on the
approved version. Resource allocation for the audit plan shall be clarified and
confirmed prior to the beginning of the year with clear arrangements for audit
personnel assigned to each project.
(2) Prior to the implementation of an audit project, conduct thorough pre-audit
investigations to comprehensively understand the basic information of the audited
entity and relevant laws and regulations, formulate an audit plan, and submit it for
approval.
(3) Deliver audit notifications to the relevant audited entities in advance. In
exceptional circumstances, with approval from the Company’s Party Committee,
Board of Directors (or the major responsible leader), the notification may be delivered
upon commencement of the audit.
(4) Pursuant to the audit plan, appropriate procedures shall be duly executed to
carry out the audit, gather evidence, secure documentation, prepare working papers
and fulfill all requisite sign-off steps. a.
(5) Prepare the audit report based on the working papers and form a draft for
consultation; seek feedback from the audited entity where necessary. Upon
completion of the above process, submit the audit report for approval and issuance by
the Company’s major responsible person.
(6) Issue the Audit Rectification Notice in accordance with management
directives and monitor the audited entity’s implementation of corrective measures.
The rectification work shall be executed in compliance with the requirements outlined
in the Audit Rectification Procedures of Sinochem Holdings.
(7) Feedback audit findings to relevant business management departments which
shall serve as the crucial basis for performance evaluation, rewards, penalties and
standardized management to enhance the use of audit outcomes.
Article 12 Audit documents shall be promptly filed, assigned to designated
personnel to ensure proper management and regular handover.
Article 13 Unless otherwise stipulated by laws and regulations, the internal audit
department shall conduct inspections at least once every six months on the following
matters, issue inspection reports, and submit them to the Audit Committee:
(1) Implementation of major events including the use of raised funds, provision
of guarantees, related party transactions, securities investments and derivatives
trading, provision of financial assistance, purchase or disposal of assets, and external
investments.
(2) Significant fund flows within the Company and fund flows involving board
directors, senior management, controlling shareholders, actual controllers and their
related parties.
Article 14 The internal audit department shall report to the Audit Committee at
least quarterly, covering matters including but not limited to the implementation of the
internal audit plan and issues identified during internal audit. An annual internal audit
report shall be submitted to the Audit Committee at the close of each financial year.
Chapter V Penalties
Article 15 Where an audited entity violates these Rules by refusing or delaying
the provision of materials relevant to the audit matters, or by providing materials that
are untrue or incomplete, or by refusing or obstructing the inspection, investigation, or
verification of relevant circumstances, the Company shall order rectification and may
issue a public reprimand or warning. Where rectification is refused, responsibility
shall be pursued in accordance with the Company’s management policies.
Article 16 Where an audited entity violates these Rules by transferring,
concealing, falsifying, or destroying financial, accounting, or other materials
pertaining to financial receipts and expenditures. or by transferring, concealing, or
intentionally damaging assets held in violation of national or company regulations,
the internal audit department may, in accordance with the Company’s management
policies, propose disciplinary actions against directly responsible supervisors and
other directly liable personnel to the audited entity, or refer the matter to the
disciplinary inspection department and relevant competent authorities for handling.
Where such acts constitute a criminal offence, criminal liability shall be pursued in
accordance with the law.
Article 17 Where the audited entity’s financial receipts and expenditures violate
laws, administrative regulations, or company provisions, the internal audit department
may, in accordance with the Company’s management policies, propose disciplinary
actions against the directly responsible supervisors and other directly liable personnel
to the audited entity, or refer the matter to the disciplinary inspection department and
relevant competent authorities for handling. Where such acts constitute a criminal
offence, criminal liability shall be pursued in accordance with the law.
Article 18 Any retaliation or malicious framing of audit personnel shall be
subject to disciplinary action in accordance with the Company’s management policies.
Where such acts constitute a criminal offence, criminal liability shall be pursued in
accordance with the law.
Article 19 Where audit personnel abuse their authority, engage in malpractice for
personal gain, neglect their duties, or disclose state secrets, work secrets, commercial
secrets, or personal privacy that have come to their knowledge, they shall be subject
to disciplinary action in accordance with the Company’s management policies. Where
such acts constitute a criminal offence, criminal liability shall be pursued in
accordance with the law.
Chapter VI Supplementary Provisions
Article 20 The internal audit department shall be responsible for interpreting
these Rules.
Article 21 These Rules shall come into effect on the date of the approval by the
Board of Directors.
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