WEIQIAO TEXTILE COMPANY LIMITED -
CONSTITUTION
The Committee is established by the Board with its responsibilities:
to assist the Board in fulfilling its responsibilities by providing an independent review and supervision of financial reporting, by satisfying themselves as to the effectiveness of the internal controls of the Company and its subsidiaries (the "Group"), and as to the adequacy of the external and internal audits;
to assure that appropriate accounting principles and reporting practices are followed;
to be primarily responsible for making recommendations to the Board on the appointment, re-appointment and removal of the authorized independent auditors (the "External Auditors"), and to approve the remuneration and terms of engagement of the External Auditors, and any questions of its resignation or dismissal;
to serve as a focal point for communication between other directors, the External Auditors and the internal auditors or any person responsible for internal audit function (the "IA People") as regards their duties relating to financial and other reporting, internal controls, external and the IA People and such other matters as the Board determines from time to time;
to review and monitor the External Auditors' independence and objectivity and the effectiveness of the audit process in accordance with applicable standards. The Committee should discuss with the External Auditors the nature and scope of the audit and reporting obligations before the audit commences, and ensure co- ordination where more than one audit firm is involved. Procedures to review and monitor the independence of the External Auditors may include:
consider all relationships between the Group and the External Auditors (including non-audit services);
obtain from the External Auditors annually, information about policies and processes for maintaining independence and monitoring compliance with relevant requirements, including those for rotation of audit partners and staff; and
meet with the External Auditors, at least annually, in the absence of management, to discuss matters relating to its audit fees, any issues arising from the audit and any other matters the External Auditors may wish to raise.
to develop and implement policy on engaging the External Auditors to supply non- audit services. For the purpose of this clause, "External Auditors" include any entity that is under common control, ownership or management with the audit firm or any entity that a reasonable and informed third party knowing all relevant information would reasonably conclude to be part of the audit firm nationally or internationally. The Committee should report to the Board, identifying and making recommendations on any matters where action or improvement is needed. The Committee should ensure that the External Auditors' provision of non-audit services does not impair its independence or objectivity. When assessing the External Auditors' independence or objectivity in relation to the provision of non-audit services, the Committee may wish to consider:
whether the skills and experience of the External Auditors make it a suitable supplier of non-audit services;
whether there are safeguards in place to ensure that there is no threat to the objectivity and independence of the audit because the External Auditors provide non-audit services;
the nature of the non-audit services, the related fee levels and fee levels individually and in total relative to the External Auditors; and
criteria for compensation of the individuals performing the audit;
to monitor integrity of the Company's financial statements and annual report and accounts, half-year report and, if prepared for publication, quarterly reports (including Directors' Report, Chairman's Statement and management discussion and analysis), and to review significant financial reporting judgments contained in them. In reviewing these reports before submission to the Board, the Committee should focus particularly on:
any changes in accounting policies and practices;
major judgmental areas;
significant adjustments resulting from the audit;
the going concern assumptions and any qualifications;
compliance with accounting and auditing standards;
compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") and legal requirements in relation to financial reporting; and
reviewing the fairness of connected transactions and ensuring that the Company shall make disclosures in accordance with the Listing Rules and accounting standards;
regarding (f) above:
members of the Committee should liaise with the Board and senior management and the Committee must meet, at least twice a year, with the External Auditors; and
the Committee should consider any significant or unusual items that are, or may need to be, reflected in the report and accounts, it should give due consideration to any matters that have been raised by the Company's staff responsible for accounting and financial reporting function, the compliance officer of the Company or External Auditors;
to review audit and control related corporate representations made to External Auditors, IA People and to the shareholders of the Company;
to review with External Auditors and IA People, the Group's management, the adequacy of the Group's policies and procedures regarding internal controls (including financial, operational and compliance controls) and any statement by the directors to be included in the annual accounts prior to endorsement by the Board;
to review and monitor the effectiveness of the Company's financial controls, and unless expressly addressed by a separate board risk committee, or by the Board itself, to review the Company's risk management and internal control systems;
to discuss the risk management and internal control systems with management to ensure that management has performed its duty to have effective systems. This discussion should include the adequacy of resources, staff qualifications and experience, training programmes and budget of the Group's accounting and financial reporting function;
to consider major investigation findings on risk management and internal control matters as delegated by the Board or on its own initiative and management's response to these findings;
where an internal audit function exists, to ensure co-ordination between the IA People and External Auditors, and to ensure that the internal audit function is adequately resourced and has appropriate standing within the Company, and to review and monitor its effectiveness;
to review the Group's financial and accounting policies and practices;
to review the External Auditors' management letter, any material queries raised by the External Auditors to management about accounting records, financial accounts or systems of control and management's response;
to ensure that the Board will provide a timely response to the issues raised in the External Auditors' management letter;
to report to the Board on the matters set out in Code Provision C.3.3 of Appendix 14 (Corporate Governance Code and Corporate Governance Report) to the Listing Rules;
to consider other topics, as defined by the Board;
to consider agreeing with the Board the Company's policies on hiring employees or former employees of the External Auditors and monitoring the application of these policies. The Committee should then be in a position to consider whether there has been or appears to be any impairment of the External Auditors' judgment or independence for the audit;
where the Board disagrees with the Committee's view on the selection, appointment, resignation or dismissal of the External Auditors, to ensure that the Company includes in the Corporate Governance Report a statement explaining the Committee's recommendation and the reason(s) why the Board has taken a different view;
to review arrangements employees of the Company can use, in confidence, to raise concerns about possible improprieties in financial reporting, internal control or other matters. The Committee should ensure that proper arrangements are in place for fair and independent investigation of these matters and for appropriate follow-up action; and
to act as the key representative body for overseeing the Company's relations with the External Auditors.
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