I. Internal Audit Operation
1. Purpose of Audit

Verify and assess internal control system errors and measure operation performance, verify financial reporting reliability and adherence to relevant laws and regulations, propose timely corrective measures to ensure the system can continue to be effectively implemented, use internal controls to assess and improve risk management and control and review the effectiveness of processes in order to assist the Board of Directors and management to carry out their responsibilities. Provide analysis, assessment, counseling and relevant data from auditing work to achieve effective controls at a reasonable cost in order to assist the organization’s management and members of the Board of Directors and perform stock affairs and counseling work in the organization.

2. Scope of Audit

Internal audit work includes inspection and assessment of the appropriateness and effectiveness of internal control systems of each department in the company and performance of operation activities which scope includes the following:

1. Review reliability and comprehensiveness of business and financial information and the methods used to identify, measure, classify and report this information.
   　

2. Check current system to ensure major policies, plans, procedures, laws and regulations are followed:
   　

3. Check asset security methods, verify existence of assets when necessary.
   　

4. Assess if resources are used in an economically efficient manner
   　

5. Check if operations or program goal are uniform and if they are being conducted according to the original plan.

3. Subject of Audit

All business that each department in the company organization is responsible for and all business of subsidiaries that the company holds a 50% or higher shareholding.

4. Audit Method

* Audit personnel shall in principle conduct the audit on-site at the audited section but also must request the audited section to provide documents, account books and receipts for auditing written information.
* Audits are divided into pre-notified and surprise audits. For pre-notified audits, an audit notification is given the audited section three days prior to the audit. The supervisors of the audited section are contacted in advance and asked to provide documents, account books, receipts and other relevant documents for auditing. When no advance notification is given, the established audit program is followed and the audited section is asked to submit relevant documents and receipts for auditing.

5. Audit Procedure:

1. Draft audit plan, verify and assess information, communicate and follow up on results.
   　

2. Draft audit program directed at individual cases and make work sheet based on the annual audit plan derived from control environment and risk evaluations.
   　

3. When auditing work is completed, the auditing results are reported to the supervisors of the audited section. When necessary, improvement plans and scheduled completion date are obtained from the audited section and improvements are followed up on each quarter.

6. Audit Frequency

1. Routine audit: Draft annual audit plan based on the work attributes of the nine major cycles, the previous audit results, potential loss risk level, major changes in operations, systems or controls and perform audit in accordance with the audit items and schedule in the audit plan.
   　

2. Project audit: Project audit schedules and programs for each item of auditing work are established as directed by senior management, the Board of Directors or Supervisors, requested by the audited section or required due to the professional sensitivity or risk level of the internal audit.

II. Internal Audit Organization

The company's Internal Audit Department is organized under the Board of Directors. Appointment and dismissal of the Internal Audit Supervisor must be approved by over half of the Board of Directors.