JAPAN Law and Practice Contributed by: Hiroshi Mitoma, Tomohiko Iwasaki and Kosuke Hamaguchi, Nagashima Ohno & Tsunematsu
7. Audit, Risk and Internal Controls 7.1 Appointment of External Auditors The following categories of joint stock compa - nies must appoint an accounting auditor: • a large-sized company ( daigaisha ); • a company with an audit and supervisory committee; and • a company with nominating and other com - mittees. An accounting auditor must be appointed from among external auditing firms or licensed accountants. For publicly traded companies, the accounting auditor usually provides audit certi - fication on the financial statements filed under the FIEA. In order to ensure independence of an account - ing auditor, the Companies Act bars interested firms or persons with ties to the company from serving as an accounting auditor. Also, with the aim of shielding an accounting auditor from undue influence from the management, the board of statutory auditors (or their equivalent), rather than the board of directors, has the right to approve the appointment, removal and com - pensation of the accounting auditor. With respect to an accounting audit for a listed company, a statutory registration system is in place where the Japanese Institute of Certified Public Accountants assesses the appropri - ateness of an external auditing firm, etc, that engages in an accounting audit. 7.2 Requirements for Directors Concerning Management Risk and Internal Controls The Companies Act requires any large-sized company ( daigaisha ), any company with an audit
The Corporate Governance Code recommends that companies listed on the Prime Market pro - vide English-language versions of key disclosure documents. 6.3 Companies Registry Filings A joint stock company is required to file cer - tain matters in a commercial registry, which is administered by the legal affairs bureau, upon incorporation and whenever any change to such matters arises. Matters required to be so regis - tered include: • corporate name, business purposes, amount of paid-in capital, the class and number of shares; • the type and number of stock acquisition rights; • directors, statutory auditors, accounting auditor, branch manager and other statutory organs; • branches; • merger, demerger and other statutory reor - ganisations; and • dissolution and liquidation. Matters registered in the commercial registry are publicly available, while the filings made to the legal affairs bureau are not. The legal affairs bureau is tasked with review of the application to confirm if the filings comply with the statu - tory requirements for the matters required to be registered and it may reject the application if the statutory requirements are not satisfied. A failure to file a required commercial registry may result in a civil penalty not exceeding JPY1 million.
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