Huajing: 2012 internal control assurance report
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**Abstract**
Zhengzhou Huajing Diamond Co., Ltd. 2012 Internal Control Assurance Report – AIA Trial (2013) No. 122
To all shareholders of Zhengzhou Huajing Diamond Co., Ltd.:
We have accepted the commission to review and evaluate the internal control system related to the financial statements as of December 31, 2012, which was included in the company’s "2012 Internal Control Self-Evaluation Report." This report aims to provide assurance on the effectiveness of the internal controls during that period.
**I. Description of Significant Inherent Limitations**
Internal control systems, while essential, are not without limitations. They cannot completely eliminate the risk of errors or fraud going undetected. Additionally, due to changing business environments, internal controls may become less effective over time if not properly maintained. Therefore, there is a risk that future internal controls may not perform as expected.
**II. Restrictions on the Use of the Report**
This report is intended solely for use in the disclosure of Zhengzhou Huajing Diamond Co., Ltd.’s 2012 Annual Report and should not be used for any other purpose. We agree that this attestation report will serve as an essential document for the company’s annual report submission.
**III. Management Responsibility**
The responsibility of the company's management is to establish, maintain, and improve the internal control system. Based on the "Basic Standards for Internal Control of Enterprises" issued by the Ministry of Finance and other relevant authorities, they are responsible for assessing the effectiveness of the internal control system related to the financial statements as of December 31, 2012.
**IV. CPA Responsibility**
Our responsibility is to issue an opinion on the effectiveness of the internal control system based on our evaluation and audit procedures.
**V. Overview of the Work Performed**
We conducted the attestation work in accordance with the "China Certified Public Accountant Other Assurance Business Standards No. 3101 – Attestation Services Beyond Review or Review of Historical Financial Information" and the "Guidelines for Internal Control Audit." Our procedures included understanding, testing, and evaluating the design and implementation of internal controls. We believe our work provides a solid foundation for our conclusion.
**VI. Conclusion of the Assurance**
Based on our evaluation, we believe that Zhengzhou Huajing Diamond Co., Ltd. maintained effective internal control over its financial reporting as of December 31, 2012, in accordance with the "Basic Standards for Internal Control of Enterprises."
**Asia Pacific (Group) Certified Public Accountants Co., Ltd.**
Chinese CPA: Geng Hui
Chinese CPA: Xie Yumin
March 22, 2013
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**Zhengzhou Huajing Diamond Co., Ltd. 2012 Annual Internal Control Self-Evaluation Report**
In order to strengthen and standardize enterprise internal control, enhance management efficiency, improve risk prevention capabilities, promote sustainable development, and safeguard shareholder interests, Zhengzhou Huajing Diamond Co., Ltd. has reviewed its internal control situation in 2012 in compliance with relevant laws and regulations such as the Company Law, the Securities Law, the Guidelines for Standardized Operations of Listed Companies on the Growth Enterprise Market of Shenzhen Stock Exchange, and the Basic Rules for Internal Control of Enterprises (Caihui [2008] No. 7).
**I. Company Overview**
Established on March 26, 2010, after approval from the China Securities Regulatory Commission (CSRC), the company issued 38 million shares of RMB ordinary stock and increased its registered capital to RMB 152 million. The company continued to grow through capital increases in 2011 and 2012, reaching a total share capital of RMB 608 million. Its business scope includes the production and sales of synthetic diamonds, related technologies, and import/export operations.
**II. Objectives and Principles of Internal Control**
The company established an internal control system aimed at improving decision-making, risk management, operational efficiency, asset protection, accounting accuracy, and legal compliance. Key principles include legality, comprehensiveness, focus on high-risk areas, independence, flexibility, and cost-benefit balance.
**III. Evaluation of Internal Control Effectiveness**
The company assessed its internal environment, risk identification, key business controls, information communication, and internal supervision. It found that the internal control system was generally sound and effective, though continuous improvement is needed to adapt to changing conditions.
**IV. Existing Issues and Improvement Measures**
While the internal control system is well-established, the company acknowledges the need for further refinement, especially in system execution, staff training, and process optimization. Plans include developing an internal control manual, strengthening oversight, and enhancing employee awareness.
**V. Self-Evaluation of Internal Control Effectiveness**
The board of directors believes that the internal control system was effectively implemented during the reporting period, providing reasonable assurance for accurate financial reporting and operational stability. However, due to inherent limitations, the system must remain adaptable to evolving business needs.
**Zhengzhou Huajing Diamond Co., Ltd.**
Board of Directors
March 22, 2013
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