Internal audit

Organization and operation of internal audit

Purpose

The internal audit procedures specify that the Internal Audit assists the board of directors and managers in checking and reviewing the deficiencies of the internal control system, measuring the effectiveness and efficiency of operations, and providing timely suggestions for improvement to ensure the continuous and effective implementation of the internal control system. These serve as a basis for reviewing and amending the internal control so that corporate resources can be fully utilized and operational integration effectiveness can be enhanced.

Establishment of auditing units and appointment of personnel

The Company's internal audit unit is subordinate to the Board of Directors and is staffed with the appropriate number of full-time internal auditors based on the Company's size, business conditions, management needs and other relevant laws and regulations. The Internal auditing unit has appointed one auditing supervisor. The appointment or dismissal of the auditing supervisor shall be approved by the Audit Committee and submitted to the Board of Directors for resolution. The appointment, dismissal, evaluation, and salary and enumeration of internal auditors shall be submitted by the audit supervisor to the chairman of the board of directors for approval.

Auditing Scope

The auditing work covers all units and subsidiaries of the Company. The aforementioned subsidiaries shall be recognized in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”. Unless otherwise specified by laws and regulations, the Company's audits are mainly based on the framework of control environment, risk assessment, control operations, information and communication, and supervision operations, and include control operations of 8 major business cycle: sales and receipts, purchases and payments, production, payroll, financing, real estate, plant and equipment, and investments, as well as the control operations of other operating activities involving management control operations and computerized information systems.

Auditing Method

The audit is performed in accordance with the audit plan approved by the board of directors. The annual audit plan is proposed based on the provisions of the law and the results of the risk assessment, including the items to be audited on a monthly basis, as well as audit projects or reviews as necessary.

Operating Procedures

The auditors shall prepare an audit report after inspecting and evaluating the internal control system of the Company and its subsidiaries according to each cycle of audit, and follow up to confirm that each unit inspected has taken appropriate improvement measures in a timely manner. The report will be submitted or informed to each independent director for review by the end of the month following the completion of the audi item. The internal audit unit reviews the self-assessment reports created by each unit and subsidiary of the Company to serve as a basis for the Board of Directors and Managers to evaluate the effectiveness of the overall internal control system and to issue a statement on the internal control system.