Adama Ltd
Performance Evaluation for the Auditor of the Company
and the Supervisory Responsibilities by the Audit Committee
for the Year of 2023
The Company has engaged Deloitte Touche Tohmatsu Certified Public Accountants LLP
(hereinafter referred to as “Deloitte Huayong” or the “Auditor”) as the auditor for the Company's 2023
financial statements and internal control system. In accordance with the "Management Measures for
the Selection of Accounting Firms for State owned Enterprises and Listed Companies" (Caikuai [2023]
No. 4) issued by the Ministry of Finance, the State-owned Assets Supervision and Administration
Commission, and the China Securities Regulatory Commission, the Company has evaluated the
performance of Deloitte Huayong in the 2023 annual audit process. After evaluation, the Company
believes that Deloitte Huayong is compliant and effective in terms of qualifications and other aspects.
Its internal quality control system can ensure that it maintains independence and is diligent and
responsible in performing its duties, issues professional reports suitable for specific situations and fairly
expresses opinions. The specific situation is as follows.
I. Basic information of the 2023 annual auditor
1. Qualifications
Deloitte Huayong was established in February 1993 and known as Hujiang Deloitte Accounting
Limited. It was renamed Deloitte Huayong in September 2012 and was approved by the Ministry of
Finance and other authorities to convert its business property into a limited liability partnership. It is
registered on the 30th Floor, No. 222 East Yan’an Road, Huangpu District, Shanghai.
Deloitte Huayong has the required approval issued by the Ministry of Finance to render auditing
services. It is also permitted by both the Ministry of Finance and the CSRC to engage in the auditing
of H-share enterprises. Deloitte Huayong has put on record for the securities and futures related
businesses in accordance with the relevant documents such as the "Administrative Measures for the
Recordation of Securities Service Business by Accounting Firms" issued by the Ministry of Finance
and the CSRC. As such, the Auditor has accumulated extensive experience in securities services for
the past two decades. As of the end of 2023, Deloitte Huayong had 213 partners, 5,774 employees and
1,182 CPAs , of which more than 270 CPAs have signed audit report on securities services business.
Deloitte Huayong had a revenue of 4.2 billion RMB yuan for 2022, of which 3.2 billion RMB
were generated by auditing and 800 million RMB by securities business. Deloitte Huayong provides
audit services on the 2022 annual reports for 60 listed companies, with a total audit service fee of 275
million RMB. The main industries of the listed companies that the Deloitte Huayong provides services
are manufacturing, finance, real estate, transportation, storage and postal, telecommunication, software
and information technology industries. Among the listed companies Deloitte Huayong provides audit
services, there are 24 listed companies in the same industry as the Company.
2. Engagement Record
(1) Basic Information
Mr. Ji Yuting, the signing certified public accountant, joined Deloitte Huayong in 2020. Mr. Ji has
been focusing on auditing and providing services for the capital market for quite a long time. He is
currently a practicing member of the Chinese Institute of Certified Public Accountants. With his
experience in security-related services for more than 16 years and professional competence, Mr. Ji has
provided auditing services for many listed companies and served as the certified public accountant with
the signing right.
Ms. Zhao Jingyuan, the signing certified public accountant, joined Deloitte Huayong in 2015. Ms.
Zhao has been focusing on auditing and providing services for the capital market and she is currently
a practicing member of the Chinese Institute of Certified Public Accountants. Ms. Zhao is
professionally competent with more than 8 years’ experience in security-related services and has
provided auditing services to many listed companies.
Mr. Gu Yuping , a quality control reviewer, joined Deloitte Huayong in 2002 and has been devoted
to auditing and professional services related to the capital market. He is currently a practicing member
of the Chinese Institute of Certified Public Accountants. With his extensive experience for more than
15 years and professional competence, Mr. Gu has provided auditing services for many listed
companies and functioned as the project partner and certified public accountant with the signing right.
(2) Integrity Record
The abovementioned engagement partner, signing certified public accountants, and engagement
quality control reviewer from Deloitte Huayong have not been subject to criminal penalties,
administrative penalties, self-regulatory measures or any punishment due to the violation of self-
discipline requirements published by the authorities.
(3) Independence
Deloitte Huayong and abovementioned engagement partner, signing certified public accountants,
and engagement quality control reviewer have no circumstances that may affect independence.
3. Quality Control System
Deloitte Huayong has designed, implemented, and operated a quality control system for the audit
or review engagements of financial statements, other assurance services or relevant services in
accordance with the requirements of the < Quality Control Standards for Accounting Firms No. 5101-
Engagement Quality Control>. This ensures the accounting firm and its personnel has performed its
duties in accordance with laws, regulations and professional standards and conducted business in
accordance with these regulations; and also provides reasonable assurance in terms of issuing
professional reports suitable for specific situations.
Deloitte Huayong has developed corresponding internal management policies and procedures in
accordance with the Code of Ethics and Auditing Standards, as well as the relevant provisions of the
Quality Control Standards for Accounting Firms. Deloitte Huayong has also identified quality
objectives, quality risks, and responsive procedures. These policies and procedures constitute Deloitte
Huayong's complete and comprehensive quality control system.
(1) Execution of Engagement
Deloitte Huayong has developed specific policies and procedures at the engagement execution
level to promote an audit quality-oriented firm culture and ensured that engagement team members
understand and fulfill their responsibility for achieving engagement quality. Deloitte Huayong
implements effective integrated management, implementing unified systems and controls in
engagement risk assessment and classification, engagement acceptance and renewal, supervision of
audit engagements, audit methodology and quality control standards and other aspects of engagement
execution. Deloitte Huayong implements a partner-led audit delivery model, fully leveraging the core
and leading role of partners to lead professionals in high-quality engagement delivery.
(2) Consultation
Deloitte Huayong has established relevant policies and procedures to support partners and
professionals in consulting with the head of the firm's quality control department or their designated
personnel on important professional, audit, and financial reporting issues during the audit process. For
risk related matters, they also need to consult with the audit risk management leader to promptly address
difficulties or disputes encountered during the audit process.
(3) Resolving Difference of Opinion
Deloitte Huayong has developed and implemented a clear mechanism for resolving differences of
opinion among partners and professionals (hereinafter collectively referred to as "relevant parties").
When the relevant parties are unable to reach a consensus on the opinions and decisions related to
accounting, auditing or other matters, an audit review team meeting should be convened to discuss. The
decision of the audit review team is the final decision and represents the firm's position. No audit report
or other report shall be signed before the audit review team approves the format and content of the
report.
(4) Engagement Quality Control Review
Deloitte Huayong has developed and implemented comprehensive policies and procedures related
to internal review, mainly including engagement team internal review, engagement quality control
review and technical review.
The engagement partner is responsible for providing guidance and supervision to the engagement
team members and conducting a review of their work. The internal review of the engagement team
mainly includes detailed review and secondary review of all working papers. The detailed review is
carried out by engagement team members who is more experienced than the preparer, and the secondary
review is carried out by the engagement manager, engagement partner or other appropriately qualified
personnel.
The engagement quality reviewers are uniformly appointed under the guidance of the head of the
quality control department to ensure the appropriate appointment of the quality reviewer who are
independent of the audit engagement, equipped with appropriate experience, knowledge, and
competence. In addition, for specific types of reports, the technical department needs to review the
reports to be issued to evaluate the compliance with relevant guidelines and regulations.
(5) Inspection for Engagement Quality
Deloitte Huayong has developed and implemented unified monitoring and rectification policies
and procedure, including testing and evaluation of the firm's quality control system, and inspection and
evaluation of the execution of specific engagements. Monitoring for specific engagements includes in-
process checks during engagement execution and periodic checks for completed engagements. Evaluate
and analyze the problems identified during inspections, investigate the root cause of the problem, assess
its impact and develop risk mitigation and corrective measures to continuously monitor the progress
and effectiveness of the rectification.
(6) Code of Ethics and Independence
Deloitte Huayong has developed and implemented strict independence policies, including detailed
measures and accountability mechanisms related to the financial, employment, consulting, and business
relationships between firms and individuals with restricted entities, providing audit and non assurance
services to restricted entities, as well as rotating and cooling off periods for audit engagement partners,
signing CPAs, and other key partners.
(7) Quality Control Deficiencies and Rectifications
Deloitte Huayong has developed and implemented unified monitoring and rectification policies
and procedures to supervise and evaluate the operation of the firm's quality control system and the
execution of audit engagements. In response to the findings in supervisory activities, Deloitte Huayong
conducts root cause analysis, evaluates the severity of the findings, develops rectification plans, and
evaluates the completion of the rectification.
In summary, Deloitte Huayong's quality control system established in accordance with relevant
requirements of laws, regulations, professional standards and relevant internal management policies
and procedures formulated and implemented. It can support the effective operation of the firm's quality
control system and the high-quality delivery of audit projects.
4. Information Safety Management
The Company has set up separate clauses in the audit engagement letter to clearly stipulate the
information safety responsibilities and requirements of Deloitte Huayong, and strengthened the control
of sensitive confidential information when providing documents and materials to Deloitte Huayong.
Deloitte Huayong fulfilled its information safety obligations in accordance with laws, regulations and
the engagement letter, and standardized data processing activities. Deloitte Huayong also strictly abided
by national laws and regulations on information safety and conscientiously implemented regulatory
requirements for information safety.
Deloitte Huayong has established information safety, privacy, and confidentiality policies and
incident responsive guidelines, and has obtained ISO27001 certification for its information safety
management system which is audited annually by third parties. At the same time, Deloitte Huayong
has established a strict management system for audit working papers to ensure that the audit working
papers formed in Chinese Mainland are kept in China as required and no audit data is provided to any
overseas institution, organization or individual without the permission of the relevant competent
authorities of the Chinese government.
5. Investor protection
The cumulative compensation limit of occupational insurance purchased by Deloitte Huayong
exceeds 200 million RMB, which is in compliance with relevant regulations.
II. Performance of the 2023 annual auditor
During this year's audit, Deloitte Huayong developed a comprehensive, reasonable, and highly
operational audit work plan based on the Company's needs and the actual situation of the audited
entities, based on the engagement letter and was in accordance with audit standards and other regulatory
requirements. The audit work was performed around the audit focus of the audited entity including
revenue recognition deadlines, impairment of goodwill, etc.
Deloitte Huayong is equipped with a dedicated audit team, with the core team members possessing
years of experience in auditing listed companies and possessing professional qualifications as Chinese
Certified Public Accountants. The engagement partners are all senior audit partners. Deloitte Huayong
invloved the work of its internal experts during this year's audit, including experts in various fields such
as taxation, information system audit, valuation and actuarial, etc. The accounting and auditing experts
of the firm fully participated in supporting the audit engagement.
During the audit process of this year, Deloitte Huayong fully cooperated with the Company's
annual reporting work to meet the timing requirements for the disclosure of the Company. Deloitte
Huayong has developed a detailed audit plan and effectively communicated with the Audit Committee
regarding the audit plan and completion status, fully listened to and considered the opinions of the
Audit Committee and completed all work on time. In addition, Deloitte Huayong has developed a
detailed communication and work plan with the Company's component auditors which was effectively
implemented. When Deloitte Huayong encountered important accounting, auditing or other matters
during the audit process, the audit team promptly consulted the relevant person in the firm, properly
handled and solved the Company's key and difficult issues, reached a consensus on all major accounting
and auditing matters of the Company and there was no unresolved difference of opinion.
III. Supervisory Responsibilities by the Audit Committee in 2023
The Audit Committee's supervisory responsibilities over the annual auditor are as follows:
1. The Audit Committee has conducted a strict verification and evaluation of Deloitte Huayong's
professional qualifications and competence, integrity and independence, past experience and
quality of audit work. It is believed that Deloitte Huayong has the qualifications and professional
competence to provide audit services to the Company and can meet the requirements of the
Company's audit needs. On March 15, 2023, during the second meeting of the Audit Committee in
2023, the proposal of appointing Deloitte Huayong as the auditor for the Company's financial
statements and internal control for the year 2023 at its second meeting was reviewed and approved,
and it was agreed to submit it to the Board of Directors for review.
2. On January 25, 2024, members of the Audit Committee listened to Deloitte Huayong's report on
the company's 2023 audit plan, key audit matters, other important audit matters, internal control
audit and the overall audit progress. They also had a preliminary communication with the auditor
on the committee's concerns and the 2023 audit situation.
3. On March 20, 2024, the Audit Committee held its first meeting in 2024 and the members heard a
report from Deloitte Huayong on the audit status, findings, and conclusions for the year 2023. The
proposal on the 2023 financial reports, the proposal on the appointment of the 2024 financial
statements and internal control auditor, and the proposal on the 2023 internal control self-
assessment report were reviewed and approved. The proposal on the performance evaluation of the
auditor and the report on the supervisory responsibilities by the Audit Committee for the year 2023
is agreed to be submitted to the board of directors for review.
IV. Overall Evaluation
The Audit Committee of the Company strictly abided by relevant rules and regulations including
the Articles of Association and those issued by the China Securities Regulatory Commission and
Shenzhen Stock Exchange. The Audit Committee fully played the role of the professional committee
to review the qualifications and competence of the annual auditor, and has had sufficient discussions
and communication with the auditor during the annual reporting process. The Audit Committee also
oversaw the auditor to issue audit reports in a timely, accurate, objective, and fair manner. The Audit
Committee have effectively fulfilled the supervisory responsibilities over the auditors.
The Audit Committee of the Company believes that Deloitte has adhered to a fair and objective
attitude in conducting independent audits during the audit process of the Company, demonstrating good
professional ethics and business quality. The audit work related to the 2023 annual reporting was
completed on time, and the audit behavior was standardized and orderly. The audit report issued was
objective, complete, clear, and timely.
Adama Ltd
Board of Directors
March 25, 2024
