Publication of the draft „Cabinet Office Order to Amend the Cabinet Office Order on the System for Ensuring the Adequacy of Documents on Financial Calculation and of Other Information“ for public consultation

The FSA proposed a draft Cabinet Office Order to Amend the Cabinet Office Order on the System for Ensuring the Adequacy of Documents on Financial Calculation and of Other Information for public consultation.
The Business Accounting Council established standards for evaluation and auditing of internal control over financial reporting to improve the effectiveness of internal control over financial reporting. Due to the revision of the internal control standards and implementation standards, additional items have been added to the internal control report, the corrected internal control report, and the internal control audit report.
If material deficiencies that should be disclosed were reported in the previous fiscal year, the status of correcting the material deficiencies should be included in the internal control report. Furthermore, if the company states that the internal control is not effective in the internal control evaluation results of the internal control report, the auditor must include that fact in the auditor’s opinion in the internal control audit report.
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As a reminder, The Cabinet Office Ordinance on the System for Ensuring the Adequacy of Documents on Financial Calculation and of Other Information is a set of regulations enacted by the Japanese government to ensure the accuracy and adequacy of financial documents and information submitted by companies. The ordinance is based on the provisions of the Financial Instruments and Exchange Act and is aimed at enforcing the Act.
The Cabinet Office Ordinance on the System for Ensuring the Adequacy of Documents on Financial Calculation and of Other Information is a comprehensive set of regulations aimed at ensuring the accuracy and adequacy of financial documents and information submitted by companies. The ordinance provides detailed guidelines for companies to follow when preparing and submitting financial documents, and it also establishes a system for auditing and evaluating the internal controls over financial reports.
The ordinance is divided into five chapters, each dealing with different aspects of the system for ensuring the adequacy of financial documents. Chapter I provides general provisions, including the terminology, forms, and preparation methods for internal control reports to be submitted by companies. Chapter II deals with the evaluation of internal controls over financial reports, including the matters to be stated in the internal control report. Chapter III covers the auditing of internal controls over financial reports, including the preparation of an internal control audit report by a certified public accountant or an auditing firm. Chapter IV deals with the internal controls over the financial reports of a foreign company, including the appointment of an agent domiciled in Japan to represent the company in performing acts related to the submission of documents. Finally, Chapter V provides miscellaneous provisions, including the submission requirements for the foreign company amendment report.
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If individuals or organizations have opinions about the proposed plan, they can provide feedback by postal mail or the e-Gov website until 17:00 on Friday, 12 May 2023. The proposed plan is expected to be promulgated and enforced on 1 April 2024, after the completion of the necessary procedures.