Annual Report 2012

Corporate Governance
CORPORATE GOVERNANCE (CONTINUED)
5 IMPROVEMENT AND IMPLEMENTATION OF INTERNAL CONTROL SYSTEM
Overall scheme of internal control construction Centering on the implementation of “Comprehensive Risk Management Guidance for Central
Enterprises”, “Basic Standard for Enterprise Internal Control”, “Guidelines for Application of Enterprise
Internal Control and Guidelines for Evaluation of Enterprise Internal Control”, the Company revised and
improved various internal control systems in a comprehensive and systematic manner and achieved the
overall internal control. Firstly, the company sorted out various internal and external risk factors the
Company faces. After re-identifying, recording and evaluating such risk factors, they were extended and
subdivided into second-and-third-level risks based on five first-level risks such as strategic, financial,
market operational and compliance risks, and the corresponding relation between risk and internal
control has been established. Secondly. The Company supplemented and improved its internal control
at corporate level, including internal environment, risk assessment, information and communication and
internal supervision to meet the requirements for corporate governance and social responsibilities; and
subdivided internal control procedure and responsibilities of control points to enhance the businesslevel
control. Thirdly, according to its core concept of management institutionalization, standardized
and process-oriented system and process informationization, the internal control management
information system would be developed to improve the efficiency and effectiveness of internal control
and management, promote the normalization and standardization of internal control and establish
permanent mechanism for internal control and management.
Working plans for establishment and improvement
of internal control system
and their implementation
Setup of internal control examination
and supervision department
Implementation of self-evaluation relating
to internal supervision and internal control
Arrangement for internal control made
by the Board of Directors
Establishment and operation of internal control
system related to financial statements
Defects existing in the internal control
and their correction
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Annual Report 2012 CHINA PETROLEUM & CHEMICAL CORPORATION
Each year, the Headquarter prepares the goals and working plans with regard to internal control, and
conducts comprehensive trainings, and daily management and evaluation. Each branch (subsidiary),
under the unified arrangement of the headquarters, further revised and refined its detailed rules for the
implementation of its internal control. The Company established three defensive mechanisms, namely
the periodic testing of responsible departments (units), daily management of internal control department
and constant supervision of audit and supervision department over internal control, accordingly creating
a supervision and evaluation system of internal control.
The Business Reform Administration Department, which is assigned to administer overall supervision of
internal control, is responsible for daily supervision of internal control and the organization of individual
inspection. The Audit Department is in charge of internal control evaluation, conducting independent,
comprehensive inspection and evaluation of internal control. The Company has established a twolevel
(i.e., headquarters and Branches (subsidiaries) internal control inspection and evaluation system.
Branches (subsidiaries) conduct a self-inspection and evaluation of internal control every year and the
Audit Department comprehensively inspects the evaluation of internal control every year.
The Company conducted an overall inspection and evaluation on the effectiveness of internal control
design and operation. For details, please refer to the “Company’s Self-Assessment Report on Internal
Control for the year 2012”. The Business Reform Administration Department carried out the individual
examination of the correction of problems found in the internal control inspection.
The Board of Directors will review amended Internal Control Manual and annual report on Internal
Control and Self-Assessment submitted by the management team, take charge of the communication,
supervision and inspection of internal and external auditors through the Audit Committee, as well as the
inspection and supervision of effective implementation self-assessment with regard to internal control
through its audit committee on a yearly basis.
The Internal Control Manual specifies the internal control requirements with regard to the financial
statements and establishes connection with the professional management system. Fund and assets
management, costs and expenses accounting and management, invoice management, financial analysis
and budget, connected transactions and the preparation of financial statements are respectively
included in the related work flow, control procedures and control points. At the same time, the financial
statement planning matrix has been prepared to connect items and matters in accounting statements
with control measures, so that internal control can reasonably ensure the financial statements disclosed
are authentic and reliable.
No significant defects have been discovered in 2012. For other defects in respect of internal
control discovered in the inspection, the Company has formulated various corrective measures and
communicated with external auditors. After follow-up examination, all defects relating to financial
reports have been corrected prior to 31 December 2012, and other management defects have also been
corrected or corrective measures have been prepared. All correction activities met the requirements.