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Operation of Internal Audit

(1) Internal audit must disclose the following items:
  • Prepare internal audit working manuals and working papers and whether the internal controls are carried out in a reasonably effective manner, and from time to time provide recommendations for improvement.
  • The internal audit department shall monitor the rules and procedures for self-inspection and assessments of the internal control system by business and management units, and the implementation of periodic self-inspection by each unit.
  • Formulate annual audit plans and, based on the business risk profile of and implementation of internal audits by each subsidiary or department, determine audit plans targeted at each individual subsidiary or department.
(2)The internal audit department shall draft a written audit plan for the coming year at the end of each year to get the audit committee and the board's approval.
 
(3)The internal audit department presents an audit plan for the coming year to the supervisory authority via the internet in the prescribed format the end of every year, as will as a review of the previous year's audit operations by the end of February and a report on improvements made to the previous year's internal control issues by the end of May.
 
(4)The internal audit department shall conduct a routine business audit at least annually, and a special business audit on CDF's subsidiaries' finance, risk management and legal compliance with applicable acts and regulations at least semiannually. Other audit activities that cover the derivatives business should be conducted on a monthly basis.
 
(5)The internal audit report shall delivered to audit committee for review after is reported to the chairman and president & CEO within two months of completion and filed with the competent authority for recordation via an internet-based information system.
 
(6)A written report on the continued improvements as required by the supervisory authority, the CPA, the audit office and the compliance department is sent to the board and supervisors and is used as a key reference material for performance appraisal.
 
(7)The internal audit department shall supervise CDF's domestic and overseas subsidiaries in accordance with relevant regulations.
 
(8)The internal audit department assesses internal audit operations at subsidiaries once a year, submits an assessment report to the board and sends the same report to the boards of CDF subsidiaries as reference materials for performance appraisal.
 
(9)The CDF internal audit office oversees the annual self-assessment of internal controls of each department and subsidiary and reviews the subsequent reports. The reports, along with the opinions of the financial examination authority, CPA and internal audit department, are submitted to the chairman, president & CEO, chief audit officer and legal compliance officer as reference materials for evaluation of the internal control system and the drafting of an internal control compliance declaration.
 
(10)The internal audit department shall organize self-inspection programs for every year and continue proper training courses for auditors in accordance with the nature of each department.
 
(11)In case of fraud and other major legal infractions, the internal audit department shall inspect all business activities, including appropriate policies and procedures as follow:
  • Report to the Chairman of the Board and the independent directors and inform the competent authority when significant deficiency or malpractice in compliance matters occurred. All relevant material that has been submitted to the competent authority shall be reported to the audit committee for approval.
  • Prepare a written report for submission, with a notice to the Chairman of the Board and get the audit committee approval and report to the competent authority, when their recommendations for improvements regarding significant deficiencies or noncompliance identified in internal controls are not accepted by management and as a result CDF or its subsidiaries might incur a material loss.
  • Request the respective departments where significant deficiency or malpractice occurred to take immediate and adequate countermeasures and shall continually conduct follow-up reviews on matters specified as requiring stronger improvement efforts. The written report on the implementation of improvement of deficiencies shall be submitted to the audit committee and the board of directors for approval.
(12)In order to improve audit quality and enhance auditing staffs' professional developments, auditing staff are required to take internal or external training courses of at least 30 hours per year to enhance their expertise. Since 2007, CDF internal audit department has organized an annual one-day training event for all auditors, as well as occasional study groups to enhance their expertise. Auditing staff also participate in domestic and international conferences to improve their knowledge of advanced auditing concepts and methods to boost workplace efficiency.
 
(13)Other auditing activities
  • Items requested by the supervisory authority.
  • Supervision of procurement at CDF and its subsidiaries.
  • Participation in internal and external symposiums and conferences.