What's New (Jan, 2016)

January 27,2016

In light of the preliminary findings of the JICPA Audit Practice and Review Committee investigating the past audit engagements of the audit firm and CPAs concerning the certain listed company involved in the recent corporate scandal, JICPA Council resolved, on January 27, 2016, that the case be brought to further examination and subsequent monitoring by responsible committees for improvements at the concerned audit firm.

Given the gravity of the impact that the recent series of corporate scandals may have on the public trust in capital markets and confidence in audit, JICPA Council also endorsed the issuance of the Chairman and President Statement (“Statement”) to urge all members to rigorously address the specific issues and considerations that must be attended to during audit.

Key matters communicated in the Statement were the importance of the appropriate identification and analysis of risks when performing risk assessment procedures and paying particular care to the internal control and overall business environment of the entity without prejudice to the auditors past experience or the reputation of the entity in a society, and the significance of professional skepticism throughout the audit process with an attitude of a questioning mind, being alert to conditions that may indicate possible misstatement due to error or fraud, and a critical assessment of evidence or explanation by the entity.

The other considerations articulated in the Statement were the risks of management override of internal controls, appropriate discharge of auditor objectivity and judgement in the audit of accounting estimates, as well as the importance of proper sharing of the information within the engagement team, objective and through engagement quality control review at audit firms, and securing of adequate time and period for auditing.

In order to have all the members fully informed and understood about the Statement and ensure that the audit quality is further upheld, JICPA is scheduled to run a special training session for members, conduct extraordinary quality control reviews of firms registered under the listed company audit firms registration system and consider the need to revise related guidelines on audit.

The Chairman and President Statement can be obtained at:

http://www.hp.jicpa.or.jp/english/news/files/0-99-0-2ea-20160613.pdf

Recommendations on Audits (Special Edition) can be obtained at:

http://www.hp.jicpa.or.jp/english/news/files/0-32-0-2e-20160804.pdf