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Article 7
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The internal control systems of a public company shall cover all its operational activities and comply with the laws and regulations governing the industry to which the company belongs, and control activities shall be prescribed for the cycles listed below, classified by operating cycles according to the characteristics of the industry to which the enterprise belongs:
- Sale and receipt cycle: This cycle includes policies and procedures such as for processing customer orders, credit management, delivery of goods or provision of services, issuance of sales invoices, issuance of bills, recording of revenues and accounts receivable, sales allowances and returns, customer complaints, destruction of products, and execution and recording of receipts of negotiable instruments and cash payments.
- Purchase and payment cycle: This cycle includes policies and procedures such as for managing suppliers; managing contractors; requisitioning, comparing or negotiating prices; contracting; purchasing or procuring goods, materials, supplies, assets, and services; processing purchase lists; accepting goods; quality inspection; preparing inspection reports or returning goods; recording suppliers’ liabilities; approving payments; purchase allowances; and execution and recording of negotiable instruments handed over and cash payments.
- Production cycle: This cycle includes policies and procedures such as for managing environment safety; managing occupational safety and health; production scheduling; creating bills of materials; storing materials and supplies; requisitioning materials; putting materials into production; managing process safety; controlling the quality of finished goods; managing scrap and refuse; product composition labeling; calculating inventory and production costs, and calculating sales costs.
- Labor and wage cycle: This cycle includes policies and procedures such as for hiring, job rotation, leave-taking, shift planning, overtime work, dismissal, training, retirement, determining wage rates, calculating working time, calculating salaries and benefits, calculating payroll taxes and withholdings, creating payroll records, salary payment, and review of attendance and performance.
- Finance cycle: This cycle includes policies and procedures such as for authorization, execution, and record-keeping with regard to finance and financing matters such as borrowing of funds, granting of guarantees, acceptance of checks, renting/leasing, and issuance of corporate bonds and/or other securities.
- Property, plant and equipment cycle: This cycle includes policies and procedures such as for acquisition, disposition, maintenance, safeguarding, and recording of property, plant and equipment.
- Investment cycle: This cycle includes policies and procedures such as for decision-making, trading, safekeeping, and recording with respect to securities, investment property, derivatives, and other investments.
- Research and development (R&D) cycle: This cycle includes policies and procedures such as for fundamental research, product design, technology development, prototype manufacturing and product testing, recording of R&D operations, safekeeping of documents, and acquisition, maintenance, and utilization of intellectual property.
A public company may tailor its control activities to meet the needs of its actual business activities according to the characteristics of the industry to which the enterprise belongs.
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