KINGDEE K/3’S INTERNAL CONTROL FUNCTIONS IN ACCORDANCE WITH SARBANES-OXLEY SECTION 404

KINGDEE K/3’S INTERNAL CONTROL FUNCTIONSIN ACCORDANCE WITHSARBANES-OXLEY SECTION 404

CONTENTS WORKFLOW CONTROLS FOLLOW-UP ON EVENTS LIMITATION OF ACCESS TO INFORMATION PRENUMBERED DOCUMENTS RECONCILIATION & CYCLE COUNTING INPUT CONTROLS

WORKFLOW CONTROLS RISKS TO BE ADDRESSED INTERNAL CONTROL RULES Credit Memos/customer refunds are reviewed and approved by sales management. Fictitious or duplicate returns/credit memos/refunds may go undetected. Management reviews and approves prices at least annually and approves any additions or changes to the system price tables. Customers may be chargedinappropriate prices for itemspurchased and gross revenues arenot accurately stated.

K/3’S SOLUTIONS SEGREGATION OF DUTIES APPROVAL REQUIRED MULTI-LEVEL APPROVAL

WORKFLOW CONTROLS RISKS TO BE ADDRESSED INTERNAL CONTROL RULES Credit memos for returned goods are issued before returned material is received. Returned goods are isolated and timely inspected before credit is granted. Can set in the system that credit memo can only be generated from goods return receipt slip.

K/3’S SOLUTION “Red ink” invoice corresponds to credit memo REQUIRED SEQUENCE OF EVENTS

FOLLOW-UP ON EVENTS RISKS TO BE ADDRESSED INTERNAL CONTROL RULES Increase in bad debt riskassociated with potential customercash flow problems. Customers with past due account balances are notified timely. Un-invoiced receipts may notbe resolved in a timely manner,leading to failure to payinvoices/freight bills inaccordance with payment terms. Received Not Billed financial ledger account reconciliations are prepared and reviewed according to company policy

K/3’S SOLUTIONS PREWARNING FOR OVERDUE A/R EXECUTION REPORT ON ORDERS

LIMITATION OF ACCESS TO INFORMATION RISKS TO BE ADDRESSED INTERNAL CONTROL RULES Only authorized users have access to maintain material specific or customer specific prices and the list of users with access is periodically reviewed for accuracy. Employees may perpetuateand conceal errors or irregularitieswhile performing their duties iftheir roles involve conflictinginterests or when there is a highdependence on one individual.

K/3’S SOLUTIONS AUTHORITY CONTROL ON FUNCTOINS AUTHORITY CONTROL ON FIELDS AUTHORITY CONTROL ON DATA

PRENUMBERED DOCUMENTS RISKS TO BE ADDRESSED INTERNAL CONTROL RULES Customer orders are consecutively numbered, logged into the system, utilize valid order types and periodically monitored for accuracy and completeness (e.g. price, quantity, delivery date) Orders may be incomplete, lost, or delayed, resulting in lost sales and/or excessive returns.

K/3’S SOLUTIONS CUSTOMIZABLE CODING CONSECUTIVE DOC NUMBERS

RECONCILIATION & CYCLE COUNTING RISKES TO BE ADDRESSED INTERNAL CONTROL RULES Fixed Asset detail records recorded in the sub-ledger are agreed to the General Ledger when initially entered into the detail system. Asset sub-ledger does notagree with the Asset generalledger control account on a totalor by category basis. All balance sheets accounts are reconciled in accordance with the Corporate Account Reconciliation Policy. Materials transactions are not recorded in the material ledger or general ledger.

K/3’S SOLUTIONS DATA TRANSMISSION BETWEEN MODULES RECONCILIATION BETWEEN SUBSYSTEMS

RECONCILIATION & CYCLE COUNTING RISKES TO BE ADDRESSED INTERNAL CONTROL RULES When cycle counting is used,inventory adjustments are recordedwithin one day after completion of rootcause analysis. Financial records areadjusted in the current month or no laterthan the second month. Incomplete inventory postings may impact financial reports

K/3’S SOLUTIONS REMIND OF PHYSICAL CYCLE COUNTING

INPUT CONTROLS RISKES TO BE ADDRESSED INTERNAL CONTROL RULES Additions or changes inpersonnel data may not berecorded completely, accurately ortimely. System edit checks prevent records from being entered without all required fields being completed. System edit checks perform relational validations (search on employee number, position number, name and address, etc.) to prevent duplicate entries.

K/3’S SOLUTIONS AUTO CHECK FOR INCOMPLETE FIELDS AUTO CHECK FOR DUPLICATE RECORDS

INPUT CONTROLS RISKES TO BE ADDRESSED INTERNAL CONTROL RULES System does not permit posting of an unbalanced journal entry. Duplicate, unauthorized, or incorrect journal entries are posted.

K/3’S SOLUTIONS AUTO CHECK FOR UNBALANCED JOURNAL ENTRIES

KINGDEE K/3’S INTERNAL CONTROL FUNCTIONS IN ACCORDANCE WITH SARBANES-OXLEY SECTION 404