I. Internal audit organization and operation

1. In order to strengthen corporate governance and improve internal control and audit system, the Company has set up the Auditing Office, which is subordinate to the Board of Directors and has a chief auditor and several auditors according to the demands of business scale expansion.
2. The appointment and dismissal of the chief audit of the Company shall be approved by the Audit Committee and submitted to the Board of Directors for approval. The appointment and dismissal, evaluation and review, salary and compensation of internal auditors shall be handled in accordance with the provisions of the Company’s “Measures for Staff Compensation Management” and “Hierarchical Authorization Review Form”, and “the evaluation, appointment (including compensation), transfer, promotion (including compensation) and resignation of internal auditors shall be reported to the President”.
3. In order to achieve effective supervision of subsidiaries, all important subsidiaries have full-time auditors. All subsidiaries have drawn up an annual audit plan and implement it accordingly.

II. Operation of internal audit

1. Scope of audit
   Includes the audit of the implementation of the internal control system at the enterprise level and the operation level, and the review of the self-assessment of the internal control system.
2. Audit object
   Includes all units, branches and subsidiaries of the Company.
3. Audit responsibility
   The purpose of carrying out internal audits is to assist the Board of Directors and mangers in inspecting and reviewing defects in the internal control systems as well as measuring operational effectiveness and efficiency, and make timely recommendations for improvements, so as to ensure the continuous and effective implementation of the internal control system and to provide a basis for reviewing and revising the internal control system.
4. Audit method
   • Before the end of each year, annual audit plans of the next year shall be formulated based on the results of the risk assessment of the current year, submitted to the Board of Directors for approval, and the inspection operations shall be conducted according to it.
   • The audit is divided into two kinds, namely, scheduled audits and project audits. Scheduled audits refer to periodic and regular audits. Project audit refers to case audits that are unscheduled and carried out for a special purpose.
   • To conduct internal audit, it is necessary to make detailed listing of audit procedures and prepare audit procedures, including audit items, times, procedures, and methods.
   • When auditors perform the audit operations, the unit to be audited shall fully cooperate and provide assistance, and shall provide the relevant documents and data as required in a timely manner, without delay or refusal.
5. Audit report
   • After the audit, the relevant information of the audit process shall be made into the audit working paper, and the audit results shall be presented with the audit report.
   • The audit report shall be as objective, clear, concise, constructive and timely as possible.
   • After submission and approval of the audit report, follow-up shall be carried out at least quarterly to ensure that the relevant units have taken appropriate measures in a timely manner until complete improvement.