To ensure the implementation of ethical business practices, Cayman Eurocharm has established an Audit Office in accordance with the “Regulations Governing Establishment of Internal Control Systems by Public Companies.” The internal audit unit reports directly to the Board of Directors and is responsible for auditing relevant regulations, ISO systems, and internal control systems. Before carrying out audit tasks, auditors must first determine the purpose and scope of the audit, conduct preliminary investigations to assess risks, and collect all relevant documents to formulate an audit plan. Based on this plan, audits are conducted on applicable regulations, ISO systems, and internal control systems. Auditors explain the audit purpose, scope, and procedures to the heads of the departments being audited, confirm their operational procedures, review relevant documents, interview personnel, and observe actual operations. If necessary, relevant staff may be asked to demonstrate operations on-site. If deficiencies are found, full communication and discussion with the audited departments are conducted, and recommendations for improvement are proposed. After organizing related discussion materials, an “Audit Report” is submitted to the director designated by the Board. Completed audit items must be submitted to each independent director for review by the end of the following month and serve as the basis for follow-up improvements. Auditors shall distribute the previous quarter’s audit findings to the audited departments in the first month of each new quarter. The audited departments must respond to the Audit Office by the second month with details of improvement measures taken or planned. Improvements should be completed within three months, unless special circumstances are reasonably explained. In 2024, a total of 134 audit reports were issued, with 142 improvement recommendations proposed. Audited departments were promptly notified to adopt appropriate corrective actions based on the recommendations. These measures were incorporated into the company’s audit management system to ensure ongoing monitoring and progress tracking.
The Company has established an Audit Office under the Board of Directors, staffed with one audit supervisor and an appropriate number of qualified full-time internal auditors. In addition to regularly reporting audit operations to the Audit Committee, the audit supervisor also attends Board meetings to deliver reports. The purpose of audit work is to assist the Board of Directors and management in examining and reviewing deficiencies in the internal control system, assessing the effectiveness and efficiency of operations, and providing timely recommendations for improvement. This ensures the continuous and effective implementation of internal controls and serves as a basis for reviewing and revising the internal control system. The appointment, evaluation, and compensation of internal audit personnel are handled in accordance with the “Internal Audit Implementation Rules,” “Salary Management Measures,” “Assessment Operation Measures,” and “Transfer and Resignation Operation Measures.” The appointment or dismissal of the internal audit supervisor must be approved by the Board of Directors. Performance evaluations are conducted twice a year, and evaluation results and compensation are submitted through the approval process to the Chairman for final approval. The aforementioned procedures have been disclosed in the Company’s internal regulations portal. The appointment of the internal audit supervisor and their acting proxy was approved by the Audit Committee on October 31, 2023, and subsequently ratified by the Board of Directors. Independent directors and the external auditors meet at least twice a year during Audit Committee meetings. During these meetings, the external auditors report on the audits of the Company and its domestic and overseas subsidiaries and communicate thoroughly regarding any material audit adjustments. At each Audit Committee meeting, the internal audit supervisor also reports to the independent directors on the implementation status of internal audits and the Company’s internal control operations.
Communication between the independent directors and the internal audit manager and the accountant
Communication policy between the independent directors and the internal audit manager and the accountant
- The independent directors and the accountants meet regularly at least twice a year at the Audit Committee meetings, and the accountants report to the independent directors on the audit of the Company and its domestic and overseas subsidiaries, and communicate adequately on any material adjustments to the records.
- The internal audit manager reports to the independent directors at each Audit Committee meeting on the performance of the Company’s internal audit and internal control operations.
| Type | Frequency | Communication Highlights |
|---|---|---|
| Internal Audit Performance Report | Every Quarter | Audit report on internal audit of business execution, self-assessment of internal control and improvement of audit findings. |
| Internal Audit Report | Every Year | The audit supervisor conducts an internal audit and reports the result to the independent director. |
| Audit Program | Every Year | The audit supervisor proposes an annual audit plan. |
Summary of Communication between Independent Directors and Accountants
| Date | Meeting Members | Communication Matters | Opinions and Suggestions |
|---|---|---|---|
| 2024.02.29 (Pre-meeting) | Independent Director Chen-Tien Yuan Independent Director Yi-Jen Kuo Independent Director Yen-Hsi Lin Accountants Chih-Ming Chang | ● Communication Matters with the Corporate Governance Unit and Management. ● Latest Developments in Sustainable Development. ● Introduction to the Revisions in the 11th Corporate Governance Evaluation System. | The above matters are well noted. |
| 2024.02.29 Audit Committee | Independent Director Chen-Tien Yuan Independent Director Yi-Jen Kuo Independent Director Yen-Hsi Lin Accountants Chih-Ming Chang | ● Audit Results of the 2023 Consolidated and Standalone Financial Statements by the External Auditor | Approved by the review committee and submitted to the Board of Directors for resolution. |
| 2024.08.07 (Pre-meeting) | Independent Director Chen-Tien Yuan Independent Director Yi-Jen Kuo Independent Director Yen-Hsi Lin Accountants Kuo-Shuai Chen | ● Audit Scope and Report for the First Half of 2024. ● Key Audit Matters (KAMs). ● Significant Accounting and Auditing Issues. | The above matters are well noted. |
| 2024.08.07 | Independent Director Chen-Tien Yuan Independent Director Yi-Jen Kuo Independent Director Yen-Hsi Lin Accountants Kuo-Shuai Chen | ● Auditor’s Review Results of the Q2 2024 Consolidated Financial Statements. | Approved by the review committee and submitted to the Board of Directors for resolution. |
| 2024.10.29 (Project Meeting) | Independent Director Chen-Tien Yuan Independent Director Yi-Jen Kuo Independent Director Yen-Hsi Lin Accountants Kuo-Shuai Chen | ● Proposed Audit Scope and Audit Report for 2025 ● Preliminary Key Audit Matters (KAMs) ● Comprehensive Risk Assessment ● Significant Accounting Items and Major Transaction Processes | The above matters are well noted. |
| 2024.10.29 | Independent Director Chen-Tien Yuan Independent Director Yi-Jen Kuo Independent Director Yen-Hsi Lin Accountants Kuo-Shuai Chen | ● Results of the Auditor’s Review of the Consolidated Financial Statements for the Third Quarter of 2024 | Approved by the review committee and submitted to the Board of Directors for resolution. |
Summary of the Communication between Independent Directors and the Internal Auditor at Separate Communication Meetings or other Meetings
| Date | Communication Matters | Opinions and Suggestions |
|---|---|---|
| 2024.02.29 | ● 2023 Declaration Regarding the Internal Control System ● 2023 Internal Control System Self-Assessment Implementation Report | Notified and understood Approved by the Audit Committee and submitted to the Board of Directors for resolution |
| 2024.05.02 | ● Internal Audit Performance Report for the first quarter of 2024 ● Follow-up report for performance improvement in 2024 | Notified and understood Notified and understood |
| 2024.08.07 | ● Internal Audit Performance Report for the second quarter of 2024 ● Follow-up report for performance improvement in 2024 | Notified and understood Notified and understood |
| 2024.10.29 | ● Internal Audit Performance Report for the third quarter of 2024 ● Follow-up report for performance improvement in 2024 | Notified and understood Notified and understood |
| 2024.12.27 | ● Summary of self-assessment for internal control ● Proposal for internal control plans in 2025 ● Internal Audit Performance Report for the fourth quarter of 2024 ● Follow-up report for performance improvement of in 2024 | Notified and understood Approved by the Audit Committee and submitted to the Board of Directors for resolution |
The above matters have all been either reported to or duly approved by the Audit Committee and subsequently submitted to the Board of Directors for their reporting or deliberation.