March 7, 2008
Financial Services Agency
Certified Public Accountants and Auditing Oversight Board

FSA and CPAAOB issue comments on the proposed policy statement ''Guidance Regarding Implementation of PCAOB Rule 4012''

  1. On March 4, the Financial Services Agency (FSA) and the Certified Public Accountants and Auditing Oversight Board (CPAAOB) issued a comment letter to the Public Company Accounting Oversight Board (PCAOB) regarding the proposed policy statement ''Guidance Regarding Implementation of PCAOB Rule 4012''.
  2. The PCAOB Rule 4012 sets out principles to determine the level of reliance on the inspection by foreign authorities, which consists of (i)adequacy and integrity of the non-U.S. oversight system, (ii)independence of the system's operation from the auditing profession, (iii)independence of the system's source of funding, (iv)transparency of the system, and (v)the system's historical performance.
  3. The proposed guidance sets out detailed criteria for consideration in respect of each principle.
  4. The comment letter includes, among other things, the following points:
  • We remain committed to ensuring that the Japanese audit oversight regime is effective and comprehensive in maintaining public trust in the capital markets.
  • We consider the sliding-scale approach to be a sensible approach to the end of achieving public interest while minimizing administrative duplication.
  • We believe it essential to develop an effective cooperative arrangement between the FSA/CPAAOB and the PCAOB in conducting public oversight activities. In doing so, we are strongly in favor of exchanging inspection reports among regulators rather than obtaining them from audit firms, when it is necessary. We look forward to further discussion in regards to this issue in the future.
  • Considering the global outlook where many jurisdictions are adopting the home-country based approach, we suggest that the PCAOB consider taking the same approach to the extent that the home-country's regulatory framework can be considered robust.

(Contact)

Financial Services Agency
Corporate Accounting and Disclosure Division, Planning and Coordination Bureau
(Tel: +81-(0)3-3506-6000 Ext:3663)

Certified Public Accountants and Auditing Oversight Board
(Tel: +81-(0)3-3506-6000 Ext:2432)

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