On November 21, Guanglong Hui announced that China Oil & Gas (00603.HK) has engaged an international professional firm ("Consultant") to conduct a comprehensive and independent assessment of the previous year's adjustment matters ("the matter") and related internal control systems and processes, which will start in August 2024. The Consultant focuses on five key internal processes: (i) revenue recognition for henry hub natural gas pipeline connections and construction services; (ii) construction project management; (iii) project cost management; (iv) funding and related cost management; and (v) preparation of financial statements to identify any recognized internal control deficiencies as the root cause of the matter and provide improvement recommendations.
In the first phase of work, the Consultant found certain internal control issues. Although the confirmation of these findings with process owners and group management is still in the final completion stage, the group management has committed to putting in efforts and sufficient resources to work with the designated responsible parties to implement any necessary rectification plans, actions, and expected timelines.
Following the matter, group management has also conducted self-reviews at the headquarters and subsidiary levels, increased financial reporting and internal control supervision personnel, and maintained close communication with auditors.
Group management has developed plans to enhance relevant personnel's understanding of management requirements and hold a series of training courses on related topics. In November 2024, the first internal training was provided to the core business team, and the next training session is scheduled to take place around the end of November 2024 through an internal financial summary meeting.
The group will also carry out rectifications based on the Consultant's internal control assessment results. Group management will closely supervise the rectification process, striving to complete the necessary rectifications by December 31, 2024. The Consultant plans to submit the final work report to group management by the end of March 2025.
