Status of Audits

Status of Audits by Audit & Supervisory Board Members

The Company's audits by Audit & Supervisory Board members are conducted mainly by the Audit & Supervisory Board which comprises four members: two standing Audit & Supervisory Board members from within the Company and two external Audit & Supervisory Board members.
The members of the Board of Directors conduct their auditing activities in accordance with the auditing policies set forth in the Audit and Supervisory Board Regulations and the Standards for Audits by Audit and Supervisory Board Members in order to express opinions as necessary at important meetings (Board of Directors, Management Council, Executive Board). And they make proposals to the Representative Director as appropriate (four times a year), based on the information gathered through exchanging opinions with outside directors (three times a year), conducting to visit audits at major business sites in Japan and overseas affiliates and the online, etc. With regard to accounting audits, the members conduct the required audits of monthly financial materials submitted by the Financial Division, and receive audit planning reports (at the beginning of the fiscal year) and regular accounting audit reports from the accounting auditor.
The Company has formulated the Regulations for Ensuring the Effectiveness of Audits by Audit & Supervisory Board Members. These regulations clearly state the reporting obligations and methods of directors and employees to Audit & Supervisory Board members, as well as their obligation to cooperate with audits by the Audit & Supervisory Board members. Under these regulations, the Company has a framework in place for effective audits by Audit & Supervisory Board members. In addition, the Audit & Supervisory Board Members Liaison Council (attended by members of the Audit & Supervisory Board, Internal Audit Division, General Administration Division, Legal Affairs Division, Corporate Management Division and Financial Division) meets monthly. As necessary, the Audit & Supervisory Board members also exchange information and conduct hearings with the accounting auditor, directors of affiliated companies, Internal Audit Division and heads of other departments to boost audit effectiveness and efficiency.
Masahiro Nishio, External Audit & Supervisory Board Member, is a certified public accountant, well-versed in finance and accounting.
During the current fiscal year, the Audit & Supervisory Board met 16 times, with attendance of each Audit & Supervisory Board member as shown below.

The Audit & Supervisory Board

The Audit & Supervisory Board mainly examines the audit policies/audit points of focus/audit plan of the current fiscal year, asset valuation method, allotment of audit activities, preparation of audit reports, and selection and dismissal of standing Audit & Supervisory Board members.
The Board also examines resolutions of the Audit & Supervisory Board, including evaluation and reappointment/non-reappointment of the accounting auditor, agreement on remuneration paid to the accounting auditor and revision of the provisions and standards related to the Audit and Supervisory Board.

The standing Audit & Supervisory Board

The standing Audit & Supervisory Board members continuously monitor the proper operation of the internal control system by attending the Sustainability Committee established under the compliance system to ensure sound management, and several committees such as Total Risk Management, ESG Execution, Quality Assurance, Occupational Health and Safety, and DX Promotion.They also regularly monitor the electronic approval system based on the Rules of Approval Authority to supervise and investigate directors' competing transactions, conflict-of-interest transactions, gratuitous benefits provided by the company, and unusual transactions.

Status of Internal Audits

Regarding internal audits, the Company has an Internal Audit Office (consisting of five members), an organization under the direct control of the President, which mainly audits the appropriateness of business processes, compliance with laws, regulations, and internal regulations, efficiency of organizational operations, effectiveness of internal controls, and appropriateness of accounting procedures in each division of the Company and its domestic and overseas affiliate companies.

Status of Accounting Audits

  1. Name of auditing corporation
    Deloitte Touche Tohmatsu LLC
  2. Period of duration of the audit
    37 years
  3. Certified public accountants assigned to audit operations
    Designated limited liability partner: Hisashi Ishii, Engagement Partner
    Designated limited liability partner: Tadatomo Node, Engagement Partner
  4. Structure of personnel assisting with accounting audit operations
    The Company's personnel assisting with accounting audit operations are 6 certified public accountants, 5 CPA examination passers, and 15 others.
  5. Policy and reason for auditing corporation selection
    The Company's Audit & Supervisory Board selects an auditing corporation, which is a member of a global accounting firm, with a certain number of certified public accountants, based on whether the audit corporation has a track record of auditing many listed companies (audit under the Companies Act and the Financial Instruments and Exchange Act). The Board evaluates the validity of the audit plan and method and the validity of the actual time spent and implementation system.
    Deloitte Touche Tohmatsu LLC has satisfied these conditions for selection and evaluation and ensures smooth communication with the Company's management (directors, etc.), the Audit & Supervisory Board and the Internal Audit Division.
  6. Auditing corporation evaluation by the Audit & Supervisory Board and its members
    The Company's Audit & Supervisory Board and its members cooperate with the Financial Division and the Internal Audit Division to determine whether to reappoint the auditing corporation by evaluating the auditing corporation for the following items: (1) the auditing corporation's quality control, (2) the audit team's independence, (3) level and validity of audit fees, (4) communication with Audit & Supervisory Board members, (5) communication with the management and the Internal Audit Division, (6) the group audit structures, and (7) consideration to risks of fraud.

Breakdown of Audit Fees

  1. Breakdown of remuneration paid to certified public accountants, etc. for auditing
    Classification Previous consolidated fiscal year Current consolidated fiscal year
    Remuneration for audit certification services
    (millions of yen)    		 Remuneration for non-audit services
    (millions of yen)    		 Remuneration for audit certification services
    (millions of yen)    		 Remuneration for non-audit services
    (millions of yen)
    Submitting company 42 4 45 3
    Consolidated subsidiary - - - -
    Total 42 4 45 3

    Non-audit services provided by the Company mainly consisted of advice and guidance on the establishment of group accounting infrastructure in the previous fiscal year.

    Non-audit services provided by the Company mainly consisted of advisory services related to the internal control reporting system in the current fiscal year.

  2. Remuneration paid to audit team members who belong to the same network (Deloitte) as certified public accountants, etc. for auditing (excluding 1.)
    Classification Previous consolidated fiscal year Current consolidated fiscal year
    Remuneration for audit certification services
    (millions of yen)    		 Remuneration for non-audit services
    (millions of yen)    		 Remuneration for audit certification services
    (millions of yen)    		 Remuneration for non-audit services
    (millions of yen)
    Submitting company 16 0 17 0
    Consolidated subsidiary 20 5 22 5
    Total 36 5 39 5

    Non-audit services at the Company include tax-related services for the previous/current consolidated fiscal year.
    Non-audit services at consolidated subsidies include tax-related services for the previous/current consolidated fiscal year.

  3. Breakdown of other remuneration
    N/A
  4. Policies for determining audit fees
    Remuneration paid to certified public accountants, etc. for auditing is determined upon agreement by the Audit & Supervisory Board and resolution by the Board of Directors, through validation of work volume (hours) and audit team members with reference to the auditing corporation's audit fee estimation based on the audit plan developed from its past audit performance record.
  5. Reason for the Audit & Supervisory Board's agreement on remuneration to accounting auditors
    The Company's Audit & Supervisory Board agrees on remuneration to accounting auditors through discussion by comparing with their past audit performance records based on the validation of the audit plan, work volume (hours) and audit members to ensure that the accounting auditors perform a high-quality audit.