GOVERNANCE

An audit firm has the public interest role to ensure the credibility of corporate financial information through the audits, seek to protect stakeholders such as participants in the capital market and thereby contribute to the sound development of the national economy. In order to accomplish this role, the audit firm should encourage its personnel to have frank and openminded dialogue, enhance mutual development, promote their full competence, and continuously enhance the audit quality on a firm-wide basis.

To ensure the quality of our audit services, our firm established quality control policies and procedures in accordance with professional standards and applicable legal and regulatory requirements. The CEO has ultimate responsibility for the quality control system, which is maintained and operated by an appointed quality control officer.

Engagement partners responsible for providing audit services to clients employ our quality control system. Engagement quality review partners are sufficiently experienced and qualified. They are selected outside the audit team for each audit task to objectively review audit procedures performed by the audit team, important audit judgments, and formation of the audit opinion.

Accounting quality control partners and audit quality control partners provide daily monitoring and periodic verification of individual audit operations, as well as support to ensure that the operations of the audit team and engagement quality review partners are carried out appropriately. The results of daily monitoring and periodic verification are reported at general meetings of partners. Discovered deficiencies and areas requiring improvement are made thoroughly known to all specialized personnel and members through training and other means.

External reviews and inspections of audit firms have included quality control reviews by the Japanese Institute of Certified Public Accountants (hereinafter “JICPA”) and inspections by the Certified Public Accountants and Audit Oversight Board. There have been no administrative actions by the Financial Services Agency and no deficiencies have been found based on the results of quality control reviews by the JICPA.

An audit firm should have effective management in order to develop its organizational operations as a whole for the continuous enhancement of the audit quality.

We provide support for each audit team’s audit operations with the aim of homogenizing audit operations within the firm. We organize specialized audit staff into three groups under the guidance of group leaders (partners) who manage audit staff assignment, provide training and personnel feedback, share various types of knowledge, and communicate decisions made at general meetings of partners.

Since the establishment of our firm, we have been introducing engagement software and automated audit tools, operating and managing these tools, and managing our own information security. Advances in cloud-based accounting systems and disclosure document preparation tools now allow direct access to accounting data, etc. So we can collect the information necessary for audits on our own. Furthermore, we formed a DX promotion team working on DX support, which is becoming increasingly necessary for the audit business.

To ensure professional confidentiality, we established an information security system that prevents leakage and unauthorized use of data obtained in the course of business. Our members receive continuous education and training to ensure proper handling of information based on a clear understanding of our information security policy and management procedures.

An audit firm should have a function to supervise and evaluate the effectiveness of its management from an independent viewpoint and thereby support the enhancement of management effectiveness.

Since our establishment, we have constantly expanded, improved our quality control and strengthened our governance system. In February 2022, 1 year and 8 months after our establishment, we became a limited liability audit corporation, moved to a new office, and started operating through a management committee. We appointed external governance committee members on April 1, 2022, received multifaceted guidance from various perspectives on managing our firm, and started fully applying The Audit Firm Governance Code from March 31, 2023.

An audit firm, based on the size and characteristics etc., should develop an operational structure to effectively manage its organizational operations. The audit firm should also strengthen its people retention and development and proactively engage in dialogue and discussion within the firm and with audited companies about the possible enhancement of audit quality.

All new employees receive initial training upon entering the firm and periodic on-the-job training. We also provide training by position, training for all specialized personnel and training for all members throughout the year.

We use audit manuals prepared based on audit standards, various audit document formats (for reviews, etc.) and monitoring forms. The audit team discusses work with engagement quality review partners throughout audit quality reviews conducted over the course of engagements. It also discusses and inspects important audit items during monitoring by accounting quality control partners and audit quality control partners.

We regularly communicate with management at client companies to gain a deeper understanding of their business models and the latest business environment. Such communication is mandatory, in accordance with our audit manual, during the audit planning and audit pre-closing phases. We also strive to maintain close communication in response to changes in the business environment.

To deepen cooperative relations between corporate auditors and internal auditors, we actively engage in discussions with both parties, such as by exchanging information on the results of corporate auditor audits and internal audits. We aim to conduct more in-depth audits by holding sufficient consultations on important issues in a timely manner.

An audit firm should ensure such transparency as to allow stakeholders in the capital market to appropriately assess its audit quality by explaining the status of the Code’s implementation. The audit firm should also effectively utilize the internal and external assessment of its initiatives for improvement in its management and operations.

Every year, we publish the “Audit Quality Report” on our website, which explains how our firm’s governance system ensures audit quality and publicizes details of our firm’s efforts.