Publication of the finalized „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“ after public consultation

The FSA has recently published the final version of the „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“. This action came after a period of public consultation. The reason behind this order was the revision of the „Standards and Practice Standards for Management Assessment and Audit concerning Internal Control over Financial Reporting,“ conducted by the Business Accounting Council on 7 April 2023, which aimed to enhance the effectiveness of internal control over financial reporting.
The revision process was led by the Business Accounting Council, a body consisting of external experts and stakeholders, with the FSA serving as the secretariat. This collaborative effort aimed to improve internal control over financial reporting, thereby promoting transparency and reliability in financial operations.
As a result of this revision, certain key changes have been made to the internal control standards and implementation standards. Companies will now be required to include additional items in their reports. For instance, if there was a material deficiency that needed to be disclosed and it was reported in the previous fiscal year, the internal control report must now include the status of how that deficiency has been corrected, added as an appendix.
Furthermore, if there are corrections made to the evaluation of the effectiveness of internal control after the fact, the amended internal control report must provide specific background information and reasons for these corrections.
Additionally, if a company states that its internal control is not effective in the internal control evaluation results of the internal control report, the auditor is now obligated to include this information in their opinion in the internal control audit report.
All of these revisions, in conjunction with the relevant laws and regulations, are scheduled to be enforced from 1 April 2024. Companies must adhere to these updated standards and practices to ensure the accuracy and sufficiency of financial calculations and related information in their reports.