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Joint Government & Private Mission to the U.S.
(Response to the U.S. Sarbanes-Oxley Act of 2002)

December 3, 2002
Financial Services Agency (FSA)

The Joint Government & Private Mission plans to visit the Securities and Exchange Commission (SEC), the New York Stock Exchange (NYSE), etc. on December 4 and 5.

In consideration of the impact of the application of the U.S. Sarbanes-Oxley Act on Japanese audit firms and publicly-listed Japanese companies in the U.S., the Mission aims to deepen the practical understanding of the parties concerned in the U.S. on the current status of relevant Japanese legal systems, the actual conditions in which they are applied and so forth.

(Reference 1) Participants to the Mission
(Reference 2) Major Issues on the U.S. Sarbanes-Oxley Act of 2002

Reference 1

Participants to the Mission

  • Japan Corporate Auditors Association (JCAA)
    • Mr. Yoshii, Chairperson of JCAA and Senior Corporate Auditor of Nippon Steel Corporation
  • Mitsubishi Tokyo Financial Group (MTFG)
    • Mr. Takagaki, Full-time Corporate Auditor of MTFG
    • Mr. Goto, Senior Manager of Corporate Policy Division of MTFG
  • Japanese Institute of Certified Public Accountants (JICPA)
    • Mr. Yamazaki, Executive Director of JICPA
  • Nippon Keidanren
    • Mr. Tanaka, Head of Washington Branch of Nippon Keidanren
  • Financial Services Agency (FSA)
    • Mr. Hosomi, Deputy Commissioner for International Affairs of FSA
    • Mr. Matsuo, Director for International Financial Markets of FSA
  • Ministry of Economy, Trade and Industry (METI)
    • Mr. Takahashi, Assistant Director of Americas Division of METI
  • Japanese Embassy in the U.S.

Reference 2

Major Issues on the U.S. Sarbanes-Oxley Act of 2002

  • (1)There are two major issues in the U.S. Sarbanes-Oxley Act enacted at the end of July 2002 for Japanese auditing firms and publicly-listed Japanese companies in the U.S.

    • a) Section 106: Foreign Public Accounting Firms

      Foreign audit firms are required to come under the oversight of the new organization in charge of supervising audit firms called the Public Company Accounting Oversight Board (PCAOB).

      --» The problem is that Japanese audit firms not operating in the U.S. are directly subject to the supervisory authority of the U.S. It overlaps with the Japanese supervisory system for audit firms.

    • b) Section 301: Public Company Audit Committees

      Foreign companies publicly listed in the U.S. are required to have ''audit committees'' (composed of ''independent directors''), which appoints and supervises the audit firm.

      --» This is in conflict with the Japanese commercial codes (to be enforced in April 2003), which allows the selection of the ''board of auditors system''or the ''committee system''at liberty. It is also in conflict in the sense that the audit firm is appointed at the shareholders' meeting in Japan. Moreover, the number of ''independent directors''is different.

  • (2)Therefore, requests are being made to exempt Japanese audit firms and companies from Sections 106 and 301.

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