Shenzhen Longsys Electronics Co., Ltd. (Longsys) has released a draft “Terms of Reference of the Audit Committee of the Board of Directors,” a document that will govern the committee once the company’s H shares are listed on the Main Board of The Stock Exchange of Hong Kong.

Key governance framework • Scope and authority: The Audit Committee will become a specialised arm of the Board, charged with reviewing financial statements and disclosures, overseeing both internal and external audit activities, monitoring risk-management and internal-control systems, and exercising supervisory functions stipulated by the PRC Company Law. • Composition: The committee will comprise three non-executive directors, of whom at least two must be independent. The chair must be an independent director with recognised accounting or financial expertise, in line with Hong Kong Listing Rules. • Nomination & tenure: Members will be nominated by the Board chair, a majority of independent directors, or at least one-third of all directors, then elected by the full Board. Their term coincides with the Board’s tenure, and re-election is permitted. • Meeting cadence: Regular meetings will be held at least quarterly, with extraordinary meetings convened when necessary. A quorum of two-thirds of members is required, and resolutions need majority approval of the full committee. • Voting & reporting: Each member has one vote; decisions are reported in writing to the Board. Minutes must be archived for a minimum of ten years.

Principal responsibilities 1. External audit oversight – Recommend appointment, re-appointment or dismissal of the external auditor and supervise audit quality, independence, and scope. – Develop policies on the auditor’s provision of non-audit services and act as the primary liaison between the company and the audit firm.

2. Internal audit and control – Ensure the internal audit function has sufficient resources and standing. – Review annual internal-audit plans, audit reports, and follow-up on rectification measures. – Coordinate interaction between internal and external auditors.

3. Financial reporting review – Examine annual, half-year and quarterly financial statements, focusing on accounting policy changes, significant judgements, audit adjustments, and compliance with PRC and Hong Kong regulatory standards.

4. Risk management – Evaluate the effectiveness of financial controls, risk-management frameworks, and internal-control systems. – Issue written assessments of internal-control effectiveness and require disclosure of any material deficiencies.

5. Supervisory committee functions – Inspect company finances, monitor director and senior-management conduct, recommend removals for legal or governance breaches, and, if necessary, convene shareholder meetings or initiate litigation.

6. Whistle-blower mechanism – Oversee arrangements enabling employees to raise concerns confidentially regarding financial reporting or internal-control misconduct.

Implementation timeline The new charter will supersede the company’s 2025 version and take effect on the date Longsys’s H shares commence trading on the Hong Kong exchange.

By detailing clear governance structures, responsibilities and reporting lines, Longsys positions its Audit Committee to meet both PRC regulatory standards and the Hong Kong Listing Rules as the company prepares for its forthcoming H-share debut.