Internal audit system of Zhejiang Jiuzhou Pharmaceutical Co., Ltd. (revised in October 2025)
Zhejiang Jiuzhou Pharmaceutical Co., Ltd. Internal Audit System
Zhejiang Jiuzhou Pharmaceutical Co., Ltd.
internal audit system
(Revised October 2025)
Chapter 1 General Provisions
Article 1 In order to standardize the internal audit work of Zhejiang Jiuzhou Pharmaceutical Co., Ltd. (hereinafter referred to as the "Company"), improve the quality of the internal audit work, and give full play to the role of internal audit in corporate governance, risk management and internal control, this system is formulated in accordance with the "Audit Law of the People's Republic of China", "Provisions of the National Audit Office on Internal Audit Work", "Self-Discipline Supervision Guidelines for Listed Companies of the Shanghai Stock Exchange No. 1 - Standardized Operation" and other laws and regulations, as well as the "Articles of Association of Zhejiang Jiuzhou Pharmaceutical Co., Ltd." (hereinafter referred to as the "Company's Articles of Association") and in combination with the actual situation of the company.
Article 2 This system applies to the company and its wholly-owned subsidiaries, holding subsidiaries and other joint-stock companies with significant influence within the scope of its consolidated statements. The company's audit department has the right to audit the above-mentioned units, and relevant units must cooperate unconditionally.
Article 3 The internal audit referred to in this system is an independent, objective confirmation and consulting activity that reviews and evaluates the adequacy and effectiveness of the business activities, internal controls and risk management of the company and its affiliated units through systematic and standardized methods to promote the company to improve its governance, add value and achieve its goals.
Article 4 Internal audit objectives include:
(1) Ensure the safety and integrity of the company’s assets and prevent financial and operational risks;
(2) Ensure the authenticity, accuracy and completeness of financial reports and information disclosure;
(3) Improve business management and increase economic benefits;
(4) Promote the realization of the company’s development strategy;
(5) Ensure the implementation of national laws, regulations and the company's rules and regulations.
Article 5 The company shall establish an organizational system and guarantee mechanism suitable for internal audit work to ensure the independence and authority of internal audit work. The funds required by the audit department are included in the company's annual budget and are guaranteed by the board of directors. The Board of Directors and the Audit Committee are responsible for supervising the implementation of this system.
Chapter 2 Audit Institutions and Auditors
Article 6 The company's board of directors shall establish an audit committee, which shall formulate and disclose the "Rules of Procedure of the Audit Committee". The majority of the audit committee members are independent directors who serve as convener, and at least one independent director is an accounting professional. Audit Committee Zhejiang Jiuzhou Pharmaceutical Co., Ltd. Internal Audit System
Meetings should be held at least once every quarter.
Article 7 The company shall establish an audit department to supervise and inspect the company's business activities, risk management, internal control, financial information and other matters. The Audit Department is responsible to the Board of Directors and reports its work to the Audit Committee of the Board of Directors. In the process of supervision and inspection, the audit department shall accept the supervision and guidance of the audit committee. If the audit department discovers major problems or clues about the company, it should immediately report them directly to the audit committee.
The audit department shall maintain its independence and shall not be placed under the leadership of the finance department, or work together with the finance department. The Audit Committee participates in the assessment of the person in charge of internal audit.
Article 8 The person in charge of the Audit Department is a full-time person who is nominated and appointed by the Audit Committee. The appointment and removal of the head of the audit department shall be reported to the board of directors in a timely manner. The audit department should be equipped with no less than three full-time internal auditors.
Article 9 Auditors perform their duties in accordance with the law and are protected by law. No unit or individual may interfere, obstruct or retaliate. Auditors handling audit matters who have an interest in the auditee or the audit matters shall take the initiative to recuse themselves. The audited unit has the right to require auditors it considers to be interested to recuse themselves.
Article 10 The Audit Department may temporarily transfer personnel from other departments to form an audit team based on work needs, and all departments shall actively cooperate. The company's internal agencies, holding subsidiaries and joint-stock companies with significant influence shall cooperate with the audit department in performing their duties in accordance with the law and shall not hinder the work of the audit department.
Chapter 3 Basic Principles of Internal Auditing
Article 11 Principles of authority and independence: The audit department exercises its audit powers independently without interference from other departments or individuals. The head of the audit department has the right to report directly to the Audit Committee of the Board of Directors. The audit conclusions and recommendations made by the Audit Department within the scope of their duties are internally binding and must be implemented by the audited unit.
Article 12 Principle of recusal: If an auditor has an interest in the audit object, he or she shall take the initiative to apply for recusal and shall not participate in relevant audit work.
Article 13 Principles of professional ethics: Auditors should abide by professional ethics, maintain professional prudence, and perform auditing business with a professional attitude.
Article 14: Principle of confidentiality: Auditors shall keep the business secrets and personal information they learn during the performance of their duties and shall not disclose relevant information or use it for purposes other than auditing.
Article 15: Principle of objectivity and impartiality: Audit work should be realistic, objective and fair, truthfully reflect the problems discovered in the audit, and ensure the accuracy of the audit conclusions.
Chapter 4 Scope and Time Limit of Internal Audit
Zhejiang Jiuzhou Pharmaceutical Co., Ltd. Internal Audit System
Article 16 The audit scope includes the company’s headquarters, branches, wholly-owned and controlled subsidiaries and other important branches. The Audit Department may conduct regular or irregular, comprehensive or special audits of the audited units based on the actual situation. The frequency of audits should be increased in high-risk areas.
Article 17 Audit frequency requirements:
(1) Regular audit: Conduct continuous inspection and supervision of the company’s internal control at least once a year;
(2) Special audit: conducted from time to time based on risk assessment results;
(3) Inspection and review matters required by regulatory authorities: issue reports according to the frequency required by regulatory authorities;
(4) Departure audit: carried out within one month before the departure of key management personnel.
Chapter 5 Responsibilities and Authority
Article 18 The Audit Committee shall perform the following main responsibilities when guiding and supervising the work of the Audit Department:
(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) To guide the effective operation of the audit department, the company's audit department shall report its work to the audit committee.
(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 audit department and external audit units such as accounting firms and national audit institutions.
Article 19 The audit department shall perform the following main responsibilities:
(1) Inspect and evaluate the integrity, rationality and effectiveness of the internal control systems of the company’s internal institutions, holding subsidiaries and joint-stock companies that have a significant impact on the company;
(2) Audit the accounting data and other relevant economic data of the company’s internal institutions, holding subsidiaries, and joint-stock companies that have a significant impact on the company, as well as the legality, compliance, authenticity and completeness of the reflected financial revenues and expenditures and related economic activities, including but not limited to financial reports, performance forecasts, performance bulletins, voluntary disclosure of predictive financial information, etc.;
(3) Assist in establishing and improving the anti-fraud mechanism, determine the key areas, key links and main contents of anti-fraud, and pay attention to and inspect possible fraud during the internal audit process;
(4) Report to the Audit Committee at least once every quarter, including but not limited to the implementation of the internal audit plan and problems discovered during the internal audit work;
(5) Submit an internal audit report to the Audit Committee after the end of each year;
(6) For the company’s internal control deficiencies and problems existing in its implementation, urge the relevant responsible departments to formulate rectification measures and rectify the internal audit system of Zhejiang Jiuzhou Pharmaceutical Co., Ltd.
time, and conduct follow-up reviews of internal controls, supervise the implementation of rectification measures, and report to the Audit Committee in a timely manner if major flaws or major risks are found in internal controls.
Article 20 The Audit Department has the following powers:
(1) Require the audited unit to provide information related to audit matters and access the information system;
(2) Participate in company-related meetings and conduct interviews and surveys;
(3) Temporarily stop illegal activities;
(4) Put forward suggestions for handling and follow up on rectification;
(5) Demand accountability for units and individuals that refuse to cooperate;
(6) With the approval of the board of directors, have the right to temporarily seal relevant accounting vouchers, account books, accounting statements and other information;
(7) The right to question and investigate relevant units and individuals.
Article 21 The Audit Department shall bear the following responsibilities:
(1) Ensure audit quality and be responsible for audit results;
(2) Keep secrets and observe integrity and discipline;
(3) Report major audit findings in a timely manner;
(4) Cooperate with external audit work.
Chapter 6 Audit Procedures
Article 22 Annual audit plan: The audit department shall formulate an annual audit plan based on the company's strategy, risk priorities, management and employee concerns. The audit plan shall include main contents such as financial audit, internal control evaluation, and special audit.
Article 23 Audit preparation: Determine the audit matters according to the audit plan and form an audit team, and deliver the audit notice to the audited unit 3 days in advance (except for special circumstances). The audit team should develop a specific audit work plan. The audit notice should specify the audit scope, time, method and members of the audit team.
Article 24 Audit implementation: Generally, more than two auditors are required to participate in the audit. They will conduct the audit by reviewing accounting vouchers, account books, statements, and reviewing documents, materials, and objects related to audit matters, investigating relevant departments or individuals, and obtaining certification materials and recording audit work papers. Auditors should ensure the quality of working papers through cross-checking and other methods.
Article 25 Audit report: After the audit team performs the audit, it shall prepare an audit report and solicit the opinions of the audited unit. The audited unit shall provide written opinions within 3 working days after receiving the audit report, and the audit report shall be objective and fair. The audit report should clearly state the audit findings, conclusions and recommendations, and be accompanied by necessary supporting materials.
Article 26 Audit conclusions and decisions: The audit department reviews the audit report and makes an audit opinion or audit conclusion and decision Zhejiang Jiuzhou Pharmaceutical Co., Ltd. Internal Audit System
Determine and issue to relevant departments for implementation. Significant audit opinions or audit conclusions and decisions should be reported to the company's audit committee and board of directors.
Article 27 Rectification and feedback: The audited unit shall formulate a rectification plan in a timely manner after receiving the audit decision, and submit the rectification plan and rectification report to the audit department within the specified time. The audit department should establish a rectification ledger and track it to a closed loop. For matters that are not rectified on time or are not in place, the audit department should report to the audit committee and the board of directors in a timely manner and make suggestions for handling.
Article 28 Review procedures: If the audited unit has objections to the audit decision, it may apply for review within 7 days after receiving the audit decision. During the review period, the original decision will be suspended. The review shall be conducted by a designated person or group designated by the Audit Committee, and a review decision shall be made within 30 days after receiving the review application.
Article 29 The audit department shall establish a working paper system and, in accordance with relevant laws and regulations, establish a corresponding file management system and clarify the retention time of internal audit work reports, working papers and related materials.
Chapter 7 Audit Quality Control and File Management
Article 30 The audit evidence obtained by internal auditors shall be sufficient, relevant and reliable. Internal auditors should clearly and completely record the name, source, content, time and other information of obtaining audit evidence in working papers. The audit department should establish a working paper system and establish a corresponding file management system in accordance with relevant laws and regulations to clarify the storage time of internal audit work reports, working papers and related materials.
Article 31 The audit evidence obtained by internal auditors shall be sufficient, relevant and reliable. Internal auditors should clearly and completely record the name, source, content, time and other information of obtaining audit evidence in working papers. The audit department should establish a working paper system and establish a corresponding file management system in accordance with relevant laws and regulations to clarify the storage time of internal audit work reports, working papers and related materials.
Article 32 The audit department shall establish a working paper system and, in accordance with relevant laws and regulations, establish a corresponding file management system and clarify the retention time of internal audit work reports, working papers and related materials.
Article 33 The Audit Department shall regularly conduct internal assessments and continuous improvements on the quality of audit work, and continuously improve the efficiency and effectiveness of audit work. The Audit Department shall submit an audit work summary report to the Audit Committee every year, including audit findings, rectification status, quality assessment results and improvement measures.
Chapter 8 Rewards and Punishments
Article 34 The company should praise or reward those who have outstanding performance in internal audit work or expose violations, and use this as an important basis for performance appraisal. Reward methods include but are not limited to notifications, bonuses, promotions, etc.
Article 35: Departments and individuals who commit any of the following acts shall be subject to administrative sanctions and financial investigation according to the seriousness of the case. Zhejiang Jiuzhou Pharmaceutical Co., Ltd. Internal Audit System
Responsibilities:
(1) Refuse or delay in providing documents, accounting information and other supporting materials related to audit matters;
(2) Obstructing audit staff from exercising their powers, resisting, or undermining supervision and inspection;
(3) Committing fraud and concealing the truth;
(4) Refusing to implement audit opinions or audit conclusions and decisions;
(5) Retaliation against audit staff and whistleblowers.
If the above-mentioned behavior is serious and constitutes a crime, it should be transferred to the judicial authorities for investigation of criminal responsibility in accordance with the law.
Article 36 If an internal auditor commits any of the following acts, he or she shall be given administrative sanctions and be held financially responsible according to the seriousness of the case:
(1) Taking advantage of one’s authority to seek personal gain;
(2) Engage in fraud and malpractice for personal gain;
(3) Neglecting duties and causing economic losses to the company;
(4) Leaking company secrets.
If the above-mentioned behavior is serious and constitutes a crime, it should be transferred to the judicial authorities for investigation of criminal responsibility in accordance with the law.
Chapter 9 Supplementary Provisions
Article 37 Matters not covered by this system shall be implemented in accordance with relevant national laws, regulations and the Articles of Association. If this system conflicts with laws, regulations or regulatory provisions, the laws, regulations and regulatory provisions shall prevail.
Article 38 This system is interpreted and revised by the company’s board of directors.
Article 39 This system shall come into effect from the date of review and approval by the board of directors.