The Japanese Certified Public Accountants
and Auditing Oversight Board (CPAAOB) and Financial Services Agency
(FSA) have published a framework for information gathering and
inspections at foreign audit firms.
Under the framework, the Japanese regulators
will rely on oversight by regulators in the firms’ home
jurisdictions, assuming they meet certain criteria.
The criteria for reliance includes the audit
and public oversight systems in the firms’ home jurisdictions being
judged equivalent to those of Japan. Reciprocity is also
necessary.
Another prerequisite is that foreign
regulators’ staff are subject to professional confidentiality
obligations.
If these conditions cannot be met, the CPAAOB
and FSA will seek to conduct inspections and gather information
themselves. In these instances, the Japanese regulators will notify
the local regulators of intended inspections and attempt to
co-ordinate with them so inspections are conducted
simultaneously.
Inspections and information gathering at
foreign audit firms operating in Japan was mandated by the nation’s
revised Certified Public Accountants Act, which took effect in
April 2008.
Information required by Japan’s regulators
includes overviews of the firms and the results of inspections and
audit quality reviews conducted by their national regulators.
Firms that audit listed companies in Japan
must also provide information about their operation control systems
and quality control system.
