JICPA responds to a draft report issued by Business Accounting Council on the auditor's responsibilities relating to fraud in audit of financial statements
On October 18, 2012, JICPA submitted a letter to the Business Accounting Council of Japan (BAC) in regards to the draft report on the Auditing Standard on Fraud published on September 25, 2012.
Responding to a series of recent corporate scandals, BAC has been in discussion for the possibility of a new audit standard on fraud since this spring, and as a result, published the draft report on the auditor’s responsibilities relating to fraud in audit of financial statements.
In the letter to BAC, JICPA stated that, as an overall assessment of the draft, while it was disappointing to note that the recent corporate financial scandals had raised concerns about the effectiveness of external audit, imposing an excessive burden on companies or auditors that are conducting their work faithfully and appropriately without committing any fraud should be avoided. Nevertheless, when management attempts to commit company-wide fraud, it would be very challenging for auditors to become aware of fraud in their audit engagements, and therefore, JICPA noted that, the reforms of the securities market as a whole and the corporate governance mechanisms, including coordination between auditors and audit & supervisory board members of companies, should need to be taken into account as well, when considering the auditor’s responsibilities relating to fraud in audit of financial statements.
In addition, JICPA also commented on other specific issues that need further deliberation by BAC.
The draft report and the letter are available only in Japanese.