1. Operation of Internal Audit

Aside from conducting annual audits mandated by governmental regulations, the audit staff evaluates operational risks and develops the annual audit plan for the coming year with details listed. The plan is implemented upon the approval of the Audit Committee and the Board.

Once completed, the audit report is forwarded to the Audit Committee for review prior to the end of the subsequent month. Quarterly progress reports on improvements made are presented to the Audit Committee and the Board for review. Major violations or potential damages to the Company are immediately reported to the President of each Business, the Audit Committee and the Board.

2. 2024 Implementation

FENC conducted 52 audit projects in 2024 and identified minor internal control risks. The majority of the improvement projects have been completed. As of the end of December 2024, deficiencies identified in 10 audit projects remained outstanding with improvement measures in progress. 

3. 2024 Priority Tasks

• Internal Control Self-Evaluation
  A total of 60 corporations on the consolidated statement self-evaluate the internal control practice through an electronic platform, which optimizes the flow, efficiency and performance of all FENC units and subsidiaries. The results, once reviewed by the audit units, are presented to the Board and Presidents along with the deficiencies identified and improvement progress, which serve as the basis for evaluating the effectiveness of the internal control system and issuing the Internal Control System Statement. The outcome is also disclosed in the annual report and on the Market Observation Post System to show FENC’s commitment to implementing effective internal control.
• Auditing With Digital Tools
  The effectiveness and efficiency of audit operations are enhanced through continuous optimization of the audit data platform, mapping of risky hotspots and identification of operational risks with recommendations provided by monitoring unusual activities through the risk indicator dashboard.  
  Digital technologies are applied throughout the business operation to elevate management efficiency. Specific approaches are listed below:
  A.  A web crawler program has been developed to automatically browse and collect data on the Internet to facilitate real-time monitoring of market dynamics and improve information gathering.
  B.  The digital tools automatically generate financial statements, including the  statement of operations, for subsidiaries. With augmented scope and strength of data analysis, the technology facilitates more timely and precise supervisory measures for the subsidiaries.
  C.  FENC has automated the regular audits, using RPA to verify data and prepare working papers for audits on loans, endorsement guarantees and derivative transactions, which significantly improves efficiency.
  D. The audit management system is fully established. The system integrates project progress and data resources to improve the overall effectiveness of audit operations.

4.Subsidiary Supervision

FENC conducts regular reviews over subsidiary operations and management, examining documents such as the financial report, inventory status and credit recovery. When anomalies are detected, the subsidiary is notified in the form of a work report to facilitate immediate adjustments and improvements.

5.Training for Audit Personnel

Each year, the audit staff undergo internal audit training held by organizations certified by the Financial Supervisory Commission and complete the hours in accordance with regulatory requirements. They are also required to attend training and seminars from internal and external sources such as consulting firms or academic institutions. In addition, staff take part in the annual meeting of the Institute of Internal Auditors-Chinese Taiwan to polish their professional skills and knowledge of risk control. Before the end of each January, the Company files the names of internal auditors and the training they have received on the Market Observation Post System.
 

Internal Audit Organization and Internal Control Approaches