Changshan Pharmaceutical: Implementation Rules for the Audit Committee of the Board of Directors
Hebei Changshan Biochemical Pharmaceutical Co., Ltd.
Detailed Implementation Rules for the Work of the Audit Committee of the Board of Directors
Chapter 1 General Provisions
Article 1 In order to clarify the responsibilities and standardize the working procedures of the Audit Committee of the Board of Directors of Hebei Changshan Biochemical Pharmaceutical Co., Ltd. (hereinafter referred to as the company), in accordance with the "Company Law of the People's Republic of China" (hereinafter referred to as the "Company Law"), "Shenzhen Stock Exchange GEM Stock Listing Rules" and "Measures for the Administration of Independent Directors of Listed Companies" These detailed rules are formulated based on the relevant laws, administrative regulations, departmental rules, normative documents and other relevant laws, administrative regulations, departmental rules, normative documents, and the "Articles of Association of Hebei Changshan Biochemical Pharmaceutical Co., Ltd." (hereinafter referred to as the "Articles of Association"), including the "Shenzhen Stock Exchange Self-Regulatory Guidelines for Listed Companies No. 2 - Standardized Operation of Companies Listed on the GEM", and in light of the actual situation of the company.
Article 2 The Audit Committee of the Board of Directors is a specialized working organization established by the Board of Directors in accordance with corresponding laws and regulations. It is mainly responsible for the communication, supervision and verification of the company's internal and external audits.
The Audit Committee is responsible to the Board of Directors and performs its duties in accordance with the Articles of Association and the authorization of the Board of Directors. The proposals of the Audit Committee shall be submitted to the Board of Directors for review and decision.
Article 3 Members of the audit committee shall have the professional knowledge, work experience and good professional ethics to be competent for their work responsibilities. They must ensure sufficient time and energy to perform the committee's work responsibilities, be diligent and responsible, effectively supervise and evaluate the internal and external audit work of listed companies, promote the company to establish effective internal controls and provide true, accurate and complete financial reports.
Article 4 The company shall provide necessary working conditions for the audit committee, and allocate specialized personnel or institutions to undertake the daily work of the audit committee such as work liaison, meeting organization, material preparation, and file management. When the audit committee performs its duties, the management and relevant departments of the listed company must cooperate.
If the audit committee discovers that the company's operating conditions are abnormal, it can conduct an investigation; if necessary, it can hire an intermediary agency to assist in the work, and the company will bear the costs.
Chapter 2 Personnel Composition
Article 5 The members of the Audit Committee shall be composed of directors who do not serve as senior managers of the company, including two independent directors, and at least one independent director shall be an accounting professional. Employee representatives who are members of the company's board of directors can become members of the audit committee.
Members of the audit committee should have the professional knowledge and experience to perform the responsibilities of the audit committee. Accounting professionals refer to those who have rich accounting professional knowledge and experience and meet at least one of the following conditions:
(1) Having the qualification of certified public accountant;
(2) Have a senior professional title, associate professor or above, or a doctoral degree in accounting, auditing or financial management;
(3) Have a senior professional title in economic management, and have more than 5 years of full-time work experience in professional positions such as accounting, auditing or financial management.
Article 6 Members of the audit committee shall be nominated by the chairman of the board of directors, more than half of the independent directors, or one-third of all directors, and shall be elected by the board of directors.
Article 7 The Audit Committee shall have a chairman, who shall be an accounting professional among independent directors, and shall be responsible for presiding over the work of the committee.
Article 8 The term of office of the Audit Committee shall be consistent with that of the Board of Directors. Members may be re-elected upon expiration of their term. During this period, if any member no longer serves as a director of the company, he will automatically lose his membership qualifications. The board of directors shall add new members in accordance with the Articles of Association and these Bylaws.
The audit committee member may submit a written resignation application to the board of directors before the expiration of the term. If the resignation of the audit committee member results in the number of members of the audit committee falling below the legal minimum, or there is a shortage of accounting professionals, the audit committee member who intends to resign shall continue to perform his duties until the date of the new audit committee member.
Chapter 3 Responsibilities and Permissions
Article 9 The main responsibilities of the audit committee include:
(1) Supervise and evaluate external audit work, and propose to hire or replace external audit institutions;
(2) Supervise and evaluate internal audit work, and be responsible for the coordination between internal audit and external audit;
(3) Review the company’s financial information and its disclosure;
(4) Supervise and evaluate the company’s internal controls;
(5) Exercise the powers of the board of supervisors as stipulated in the Company Law;
(6) Responsible for laws and regulations, the Articles of Association and other matters authorized by the board of directors.
Article 10 The following matters shall be submitted to the board of directors for review after being approved by more than half of all members of the audit committee of the board of directors:
(1) Disclose financial information and internal control evaluation reports in financial accounting reports and periodic reports;
(2) Employ or dismiss accounting firms that undertake the audit business of listed companies;
(3) Appointment or dismissal of financial officers of listed companies;
(4) Changes in accounting policies, accounting estimates or correction of major accounting errors due to reasons other than changes in accounting standards;
(5) Other matters stipulated in laws, administrative regulations, provisions of the China Securities Regulatory Commission and the Articles of Association.
Article 11 The Audit Committee of the Board of Directors shall review the company's financial accounting reports, provide opinions on the authenticity, accuracy and completeness of the financial accounting reports, focus on major accounting and auditing issues in the company's financial accounting reports, pay special attention to the possibility of fraud, malpractice and major misstatements related to the financial accounting reports, and supervise the rectification of issues in the financial accounting reports.
The audit committee shall make recommendations to the board of directors on hiring or replacing external audit institutions, and review the external audit institution's audit fees and employment terms. It shall not be unduly influenced by the company's major shareholders, actual controllers, directors, or senior managers.
The audit committee should urge the external audit institution to be honest and diligent, strictly abide by business rules and industry self-discipline standards, strictly implement the internal control system, verify the company's financial accounting reports, perform special attention obligations, and prudently express professional opinions.
Article 12 If the financial accounting report released by the company contains false records, misleading statements or major omissions, the audit committee shall urge the company's relevant responsible departments to formulate rectification measures and rectification time, conduct follow-up reviews, supervise the implementation of rectification measures, and promptly disclose the completion of rectification.
Article 13 The Audit Committee shall establish an internal audit institution. The internal control audit institution shall carry out internal audit work under the guidance and supervision of the Audit Committee, and shall supervise and inspect the company's business activities, risk management, internal control and implementation, and financial information. The internal audit organization is responsible to the Audit Committee and reports its work to the Audit Committee. The head of the internal audit organization is nominated by the audit committee and appointed and removed by the board of directors.
Article 14 The audit committee of the board of directors supervises and evaluates the internal audit work and shall perform the following responsibilities:
(1) Guide and supervise the establishment and implementation of the internal audit system;
(2) Review the company’s annual internal audit work plan;
(3) Supervise the implementation of the company’s internal audit plan;
(4) Guide the effective operation of the internal audit institution. The company's internal audit institution shall report its work to the audit committee. Various audit reports submitted by the internal audit institution to the management, rectification plans for audit issues, and rectification status shall be submitted to the audit committee at the same time;
(5) Report to the board of directors the progress and quality of internal audit work and major problems discovered;
(6) Coordinate the relationship between the internal audit institution and external audit units such as accounting firms and national audit institutions.
Article 15 The Audit Committee of the Board of Directors shall supervise the internal audit institution to inspect the following matters at least once every six months, issue an inspection report and submit it to the Audit Committee. If the inspection finds that a listed company has any violations of laws or regulations, irregular operations, etc., it shall report to the stock exchange in a timely manner:
(1) The implementation of major events such as the use of funds raised by the company, provision of guarantees, related transactions, securities investments and derivatives transactions, provision of financial assistance, purchase or sale of assets, external investments, etc.;
(2) The company's large capital transactions and capital transactions with directors, senior managers, controlling shareholders, actual controllers and their related parties.
The audit committee shall issue written evaluation opinions on the effectiveness of the company's internal controls based on the internal audit report and relevant materials submitted by the internal audit institution, and report to the board of directors. If the board of directors or the audit committee believes that there are major flaws or major risks in the company's internal control, or if the sponsor or accounting firm points out that there are major flaws in the effectiveness of the company's internal control, the board of directors shall report to the exchange in a timely manner and disclose it. The company shall disclose in the announcement any major deficiencies or major risks in internal control, the consequences that have occurred or may result, and the measures that have been taken or planned to be taken.
Article 16 The board of directors and the audit committee shall evaluate the establishment and implementation of the company's internal control based on the evaluation report and relevant materials issued by the internal audit department, and review and form an annual internal control evaluation report.
Article 17 The Audit Committee of the Board of Directors shall inspect the company's finances in accordance with the law, supervise the legality and compliance of directors and senior managers in performing their duties, exercise other powers stipulated in the Articles of Association, and safeguard the legitimate rights and interests of the company and shareholders.
If the audit committee discovers that directors or senior managers have violated laws, regulations, exchange-related regulations or the Articles of Association, it shall notify the board of directors or report to the shareholders' meeting, and disclose it in a timely manner, or it may report directly to the regulatory agency.
In the process of performing its supervisory duties, the audit committee may make recommendations for removal of directors and senior managers who violate laws and regulations, these Guidelines, other provisions of the exchange, the Articles of Association or resolutions of the shareholders' meeting.
Article 18 If a company’s directors or senior managers discover that the company’s financial accounting report contains false records, misleading statements or major omissions and report it to the board of directors or the audit committee, or if an intermediary agency points out to the board of directors or the audit committee that the company’s financial accounting report contains false records, misleading statements or major omissions, the board of directors shall promptly report to the exchange and disclose it.
If a company discloses relevant information in accordance with the provisions of the preceding paragraph, it shall disclose in the announcement the major problems existing in the financial accounting report, the consequences that have or may result, and the measures that have been taken or planned to be taken.
The audit committee should urge the company's relevant responsible departments to formulate rectification measures and rectification schedules, conduct follow-up reviews, supervise the implementation of rectification measures, and promptly disclose the completion of rectifications.
Chapter 4 Rules of Procedure
Article 19 The meeting of the Audit Committee shall be convened and chaired by the Chairman.
In principle, the audit committee should notify all members three days before the meeting and provide relevant materials and information.
Article 20 The notice of the audit committee meeting shall at least include the following contents:
(1) Time and place of the meeting;
(2) Topics to be discussed at the meeting;
(3) Meeting contact person and contact information;
(4) Date of meeting notice.
Article 21 In principle, meetings of the Audit Committee shall be held on-site. In order to ensure that all participating directors can fully communicate and express their opinions, the meeting can be held by video, telephone or other means in accordance with the procedures when necessary.
Article 22 The Audit Committee is divided into regular meetings and temporary meetings. The Audit Committee shall hold at least one meeting every quarter. Extraordinary meetings may be convened upon the proposal of two or more members or when the convener deems it necessary. Meetings of the Audit Committee must be attended by more than two-thirds of the members, and each member has one vote; resolutions made at the meeting must be approved by more than half of all members.
Article 23 Members of the Audit Committee shall attend meetings in person, or may authorize other members in writing to attend meetings and exercise voting rights on their behalf. Each member of the Audit Committee can only entrust one other member to exercise voting rights on his behalf at a time. If he entrusts two or more people to exercise voting rights on his behalf, the entrustment will be invalid.
If a member of the Audit Committee neither attends the meeting in person nor entrusts another member to attend the meeting on his behalf, he will be deemed to be absent from the meeting. If a member of the Audit Committee is absent from two consecutive meetings, he will be deemed to be unable to properly perform his duties. The board of directors may revoke his or her qualifications as a member.
Article 24 Minutes of the audit committee meeting shall be prepared, and the members attending the meeting shall sign on the minutes.
Meeting minutes shall be kept by the person or institution responsible for daily work, and shall be kept for no less than ten years.
Article 25 The minutes of the audit committee meeting shall at least include the following contents:
(1) Date, place, format and name of the convener of the meeting;
(2) Names of persons attending the meeting, among whom those attending the meeting entrusted by others should be specially noted;
(3) Meeting agenda and topics;
(4) Key points of speeches by participants;
(5) The voting methods and results of each resolution matter or motion;
(6) The name of the person who recorded the meeting;
(7) Other matters that should be explained and recorded in the meeting minutes.
Article 26 Members of the Audit Committee who are related to matters discussed at the meeting must recuse themselves.
Article 27 When a company discloses its annual report, it shall also disclose on the exchange website the annual performance of its duties by the audit committee of the board of directors, which mainly includes its performance of duties and the convening of audit committee meetings. The audit committee proposes deliberation opinions to the company's board of directors on matters within its scope of responsibilities. If the board of directors fails to adopt them, the company shall disclose the matter and fully explain the reasons.
Chapter 5 Supplementary Provisions
Article 28 Matters not covered by this system shall be implemented in accordance with relevant national laws, regulations, normative documents, the "Articles of Association" and relevant internal regulations of the company. If this system is inconsistent with the relevant laws, regulations, normative documents and the Articles of Association, the provisions of the relevant laws, regulations, normative documents and the Articles of Association shall prevail.
Article 29 The company’s board of directors is responsible for interpreting this system.
Article 30 This system will take effect from the date it is reviewed and approved by the board of directors.
Board of Directors of Hebei Changshan Biochemical Pharmaceutical Co., Ltd.
October 29, 2025