Internal Audit

The Group Internal Audit (“GIA”) was established under the board of directors to assist the board of directors and management in inspecting and evaluating the effectiveness of the internal control system, assessing the effectiveness and efficiency of the company's operations; the reliability, timeliness and transparency of reports; and the compliance with applicable laws and regulations, as well as making timely recommendations for improvements to reasonably ensure the continuous operating effectiveness of the internal control system and to serve as the basis to review and revise the internal control system.

GIA comprises an internal audit officer and appropriate number of qualified, dedicated internal auditors, as required by business scale, business condition, management needs, and the provisions of other applicable laws and regulations. Any appointment and dismissal of internal audit officer is subject to approval by the audit committee and is submitted to the board of directors for a resolution. The performance appraisal and salary and benefits of the internal audit officer are submitted by a director who is designated by the chairman of the board and are subject to approval by the chairman of the board. Except for the internal audit officer, any appointment, dismissal, performance appraisal, salary and benefits of internal auditors are subject to submission by the internal audit officer to the chairman of the board for approval. All the personnel policies and regulations mentioned above have been stipulated in the internal audit implementation rules.

GIA establishes a risk-based internal audit approach and performs internal audit activities in accordance with the annual audit plan approved by the board of directors, and the scope of internal audit includes internal control systems of the company and its subsidiaries. The internal control self-assessment reports, prepared by the company and its subsidiaries and reviewed by GIA on an annual basis, along with audit reports on findings of internal control system identified by GIA serve as the primary basis for the board of directors and general manager to assess the overall effectiveness of the internal control system and to produce internal control system statements.

GIA submits the audit reports and audit follow-up reports by e-mail to the Audit Committee on a monthly basis. The internal audit officer presents and communicates the audit results to the audit committee in the direct communication or other meetings, as well as reports internal audit activity report to the board of directors on a quarterly basis. A description of the communications between the independent directors, the internal auditors, and the independent auditors can be accessed here.