Internal Audit
Organization and
Operation

Internal Audit Organization and Operation
The charter of Internal Audit is to review the internal controls in the company's processes and to report on those controls with respect to the adequacy, effectiveness, and efficiency of their design as well as their actual functioning on day-to-day basis. All parts of the company and its subsidiaries are open for review by Internal Audit.

   I.Work items

  1. 1. The preparation of annual audit plan
     Before the end of the year, we began preparing next year's audit plan, first of all in need of risk assessment, risk-level decisions are subject to investigation in accordance with the objects and the priority of audit projects. Audit plan after the adoption by the board of directors, according to the FSC Securities and Futures Bureau as provided through the Internet information system.
  1. 2. The annual audit plan in accordance with the implementation of internal audit work
     The majority of the audit work is executed according to an annual plan, which needs to be approved by the Board of Directors. The combination of the regular audits and the special projects provide management with feedback on the functioning of the internal control system; it gives management an additional channel to learn about existing or possible future weaknesses in the system, and addresses them in a timely manner.
  1. 3. Submit the audit reports and follow the improvements

     Audit reports approved by the Chairman and sent a letter to inform the investigation unit after the deadline to improve, and submit the audit reports to the Supervisors before the end of next month.

     Audit tracking reports after auditing the project are completed after approval by the chairman of the Internet information system to declare Securities and Futures Bureau for future reference.

 4.  Review the Company's internal control system self-assessment report
      The Division audits the self-examinations done by the various units, including checking how self-examination is executed, reviewing the documents to ensure implementation quality, and compiling the self-examinations results. Then the internal audit system reports to the Board of Directors as the basis to evaluate the effectiveness of the overall internal control system, and issue the internal control system statement.
      There are 3 full time employees dedicated to Internal Audit, including 1 director and 3 staffs. KNH's Internal Audit function reports directly to the Board of Directors.

   II.Appointment, Dissmal, Evaluation and Salary of Internal Auditors

    The Company's Internal Audit function reports directly to the Board of Directors. The appointment and dismissal of the audit director must be approved by the Audit Committee. Relevant regulations on the appointment, dismissal, evaluation and salary of internal auditors has formulated the “Procedures of Remuneration to Directors, Functional Committees' Members, Managers and Internal Auditors” and “Regulations Governing Management of Employee Performance”, The internal auditors' performance evaluation is carried out once a year, and is signed to the chairman of the board for approval.

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