December 21, 2012
Financial Services Agency

Public Consultation on the Exposure Draft “Standard to Address Risks of Fraud in an Audit (Provisional Translation)”

The Audit Committee of the Business Accounting Council (Chairman: Mr. Yoshikazu Wakita, Professor at Nagoya Keizai University) has published the Exposure Draft “Standard to Address Risks of Fraud in an Audit (Provisional Translation) .”

In recent years, inappropriate disclosure cases, including fraudulent financial reporting were identified on filing documents under the Financial Instruments and Exchange Act in Japan. In these cases, it turned out that financial statement audits were not effectively conducted and stakeholders pointed out that more effective audit procedures should be taken.

Accordingly, the Audit Committee of the Business Accounting Council has deliberated on the effective audit procedures to address fraud causing material misstatements on financial statements and has determined to establish the new standards addressing risks of fraud so that financial statement audits would be more effective.

Please refer to the attachments* for more detailed information.

Comments should reach us by 5:00 PM on January 25, 2013 (JST). Comments may be submitted via mail, fax or e-mail and should be accompanied by the name and postal address of the person and/or organization. Comments should be written in either English or Japanese, and the reasons/basis for the comments should be stated. Comments by phone are not acceptable. Please note that the received comments, including the name of the person and/or organization, may be published. Furthermore, the Financial Services Agency will not respond to any individual respondent in person.

* These are an unofficial translations. The translations are to be used solely as reference material to aid in the understanding of the Japanese proposal. In addition to the release of an Exposure Draft “Standard to Address Risks of Fraud in an Audit”, the Audit Committee of the Business Accounting Council has also published an Exposure Draft to partially amend Japanese auditing standards in relation to the proposed issuance of the “Standard to Address Risks of Fraud in an Audit”, however there is no plan to provide English translation for the proposed amendment to the auditing standards.

(Attachment) PDFExposure Draft: Standard to Address Risks of Fraud in an Audit (Provisional Translation) (PDF:120KB)

(Reference)PDFAudit process reflecting the proposal (PDF:71KB)

Comment period was closed.

Final standard is available on the following link:

http://www.fsa.go.jp/en/news/2013/20130411-1.html