Jiu Zun Digital Interactive Entertainment Group Holdings Limited

九 尊 數 字 互 娛 集 團 控 股 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1961)

Terms of Reference

of

Audit Committee

MEMBERSHIP

  1. The audit committee should be established by the board (the "Board") of Jiu Zun Digital Interactive Entertainment Group Holdings Limited (the "Company") and it should comprise a minimum of three members.
  2. The audit committee should comprise non-executive directors only. The majority of the audit committee members must be independent non-executive directors of the Company, and at least one of whom is an independent non-executive director with appropriate professional qualifications or accounting or related financial management expertise.
  3. The audit committee must be chaired by an independent non-executive director and the chairman must be appointed by the Board.
  4. A former partner of the Company's existing auditing firm should be prohibited from acting as a member of its audit committee for a period of two years from the date of his/her ceasing (a) to be a partner of the firm; or (b) to have any financial interest in the firm, whichever is the later.
  5. The terms of appointment of audit committee members are determined by the Board at the appointment date.

SECRETARY

  1. The company secretary of the Company shall act as the secretary of the audit committee.
  2. The audit committee may from time to time, appoint any other person with appropriate qualification and experience to act as the secretary of the audit committee.

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FREQUENCY AND PROCEEDINGS OF MEETINGS

  1. The audit committee should meet at least twice a year. The external auditors of the Company can call for a meeting if necessary.
  2. Notice of at least 14 days should be given for any meeting, unless such notification is waived by all members of the audit committee. Notwithstanding the notification period, the attendance of the member of the audit committee at the meeting would be deemed to be treated as the waiver of the required notification requirement. If the follow up meeting takes place within 14 days after the meeting, then no notification is required for such follow up meeting.
  3. The quorum necessary for the transaction of business of the audit committee shall be two members of the audit committee, one of whom must be an independent non-executive director.
  4. Meeting can be attended in person or via electronic means including telephonic or videoconferencing. The members of the audit committee can attend the meeting via telephonic or any similar communication device (all persons attending such meeting should be able to hear from such member via such communication device).
  5. The resolution of the audit committee should be passed by more than half of the members.
  6. The resolution passed and signed by all members of the audit committee is valid, and the validity is same as any resolution passed in the meeting held.
  7. Full minutes of audit committee meeting should be kept by a duly appointed secretary of the audit committee and should be open for inspection at any reasonable time on reasonable notice by any director of the Company. Minutes of the audit committee meeting should record in sufficient detail the matters considered and decisions reached, including any concerns raised by directors or dissenting views expressed. Draft and final versions of minutes of the meeting should be sent to all committee members for their comments and records, within a reasonable time after the meeting.

MEETING ATTENDANCE

15. The members of the audit committee should meet, at least twice a year, with the Company's auditors. At least one of the said meetings should be held in the absence of the management to discuss matters relating to the audit fees, any issues arising from the audit and any other matters the auditors wish to raise.

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  1. Upon the invitation from the audit committee, the following persons can attend the meeting: (i) Head of internal audit department or (if absence) the representative from internal audit department; (ii) Group financial controller (or equivalent); and (iii) the other Board members.
  2. Only the members of audit committee can vote in the meeting.

ANNUAL GENERAL MEETINGS

18. The chairman of an audit committee or (if absent) the other member of an audit committee (must be an independent non-executive director) should attend the annual general meeting of the Company and handle the shareholders' enquiry on the activities and responsibilities related to the audit committee.

RESPONSIBILITIES, DUTIES, POWERS AND FUNCTIONS

19. The audit committee is responsible for reviewing and monitoring the financial reporting, risk management and internal control systems of the Company, and assist the Board to fulfill its responsibility over the audit. The audit committee's duties and powers should include:

Relationship with the Company's auditors:

  1. to be primarily responsible for making recommendations to the Board on the appointment, reappointment and removal of the external auditor, and to approve the remuneration and terms of engagement of the external auditor, and any question of its resignation or dismissal;
  2. to review and monitor the external auditor's independence and objectivity and the effectiveness of the audit process in accordance with applicable standard; and the audit committee should discuss with the auditor the nature and scope of the audit and reporting obligations before the audit commences;
  3. to develop and implement policy on the engaging an external auditor to supply non-audit services. For this purpose, "external auditor" includes any entity that is under common control, ownership or management with the audit firm or any entity that a reasonable and informed third party knowing all relevant information would reasonably conclude to be part of the audit firm nationally or internationally; and to report to the Board, identifying and making recommendations on any matters where action or improvement is needed;
  4. to ensure that an external auditor's provision of non-audit services does not impair its independence or objectivity;

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Review of the Company's financial information

  1. to monitor integrity of the Company's financial statements and annual report and accounts, half-year report and, if prepared for publication, quarterly reports, and to review significant financial reporting judgments contained in them. In reviewing these reports before submission to the Board, the committee should focus particularly on:
    1. any changes in accounting policies and practices;
    2. major judgmental areas;
    3. significant adjustments resulting from audit;
    4. the going concern assumptions and any qualifications;
    5. compliance with accounting standards; and
    6. compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") and legal requirements in relation to financial reporting; and
  2. Regarding paragraph 19(e) above:
    1. members of the audit committee should liaise with the Board and senior management; and the audit committee must meet, at least twice a year, with the Company's auditors; and
    2. the audit committee should consider any significant or unusual items that are, or may need to be, reflected in the report and accounts, it should give due consideration to any matters that have been raised by the Company's staff responsible for the accounting and financial reporting function, compliance officer and auditors;

Oversight of the Company's financial reporting system, risk management and internal control systems

  1. to review the Company's financial controls, and unless expressly addressed by a separate board risk committee, or by the board itself, to review the Company's risk management and internal control systems;

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  1. to discuss the risk management and internal control systems with management to ensure that management has performed its duty to have effective systems; the discussion should include the adequacy of resources, staff qualifications and experience, training programmes and budget of the Company's accounting and financial reporting function;
  2. to consider major investigation findings on risk management and internal control matters as delegated by the Board or on its own initiative and management's response to such findings;
  3. where an internal audit function exists, to ensure co-ordination between the internal and external auditors, and to ensure that the internal audit function is adequately resourced and has appropriate standing within the Company, and to review and monitor its effectiveness;
  4. to review the group's financial and accounting policies and practices;
  5. to review the external auditors' management letter, any material queries raised by the auditor to management about accounting records, financial accounts or systems of control and management's response;
  6. to ensure that the Board will provide a timely response to the issues raised in the external auditor's management letter;
  7. to review arrangements that employees of the Company can use, in confidence, to raise concerns about possible improprieties in financial reporting, internal control or other matters, and to ensure that proper arrangements are in place for fair and independent investigation of these matters and for appropriate follow-up action;
  8. to act as the key representative body for overseeing the Company's relationship with the external auditor;
  9. to report to the Board on the matters in the code provision under Appendix 14 to the Listing Rules;
  10. to consider other topics, as defined by the Board;
  11. where the Board disagrees with the audit committee's view on the selection, appointment, resignation or dismissal of the external auditors, the Company should include in the Corporate Governance Report a statement from the audit committee explaining its recommendation and also the reason(s) why the Board has taken a different view; and

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  1. establish a whistleblowing policy and system for employees and those who deal with the Company (e.g. customers and suppliers) to raise concerns, in confidence, with the audit committee about possible improprieties in any matter related to the Company;

Performing the Company's corporate governance functions

  1. to develop and review the Company's policies and practices on corporate governance and make recommendations to the Board;
  2. to review and monitor the training and continuous professional development of Directors and senior management of the Company;
  3. to review and monitor the Company's policies and practices on compliance with legal and regulatory requirements;
  4. to develop, review and monitor the code of conduct and compliance manual (if any) applicable to employees and directors of the Company; and
  5. review the Company's compliance with the corporate governance code and disclosure in the Corporate Governance Report of the Company.

REPORTING RESPONSIBILITIES

20. The audit committee has to report to the Board after each meeting on its decisions or recommendations, unless there are legal or regulatory restrictions on its ability to do so (such as restriction on disclosure due to regulatory requirements).

AUTHORITY

  1. The Board should authorize the audit committee to inspect all accounts, reports and records of the Company.
  2. In order to fulfill its duties, the audit committee is eligible to request the management of the Company to provide any figures related to the financial status of the Company, its subsidiaries and associates.
  3. The audit committee member should have access to independent professional advice at the expense of the Company if necessary, in order to fulfill his responsibility of being a member of the audit committee.
  4. The audit committee should make available its terms of reference explaining its role and the authority delegated to it by the Board by including them on the website of The Stock Exchange of Hong Kong Limited (the "Stock Exchange") and the Company's website.

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25. The audit committee should be provided with sufficient resources to perform its duties.

Remark:

  1. "Senior management" refers to the directors and other members of senior management referred to in the Company's prospectus issued in connection with its initial listing on the Stock Exchange dated 27 February 2020 or in its most recent annual report and any such other officer of the Company determined by the Board from time to time as senior management of the Company. Senior management may include directors of subsidiaries, heads of divisions, departments or other operating units within the group as, in the opinion of the Company's directors, is appropriate.
  2. If there is any inconsistency between the English and Chinese versions of these terms of reference, the English version shall prevail.

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HKEx - Hong Kong Exchanges and Clearing Ltd. published this content on 16 March 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 March 2020 22:46:02 UTC