So often the enemy of enterprise,
regulation has thrown the Japanese accounting profession a much
needed lifeline amid the woes of the global financial crisis.

Three substantial regulatory changes look
certain to keep firms in high demand over the next few years.

The first is J-SOX – the unofficial name used
to describe Japanese audit oversight legislation similar to US
requirements in Section 302 and Section 404 of the Sarbanes-Oxley
Act.

Then there is quarterly reporting and the
likely introduction of IFRS.

The implementation of J-SOX and quarterly
reporting has boosted audit and overall revenues, particularly at
the larger end of the market. Japanese newspaper Nikkei
recently estimated audit fees had increased about 32 percent on
average because of the new regulations.

KPMG ASZA executive board member Tatsuhiko
Yano said the firm’s audit practice grew about 20 percent thanks to
J-SOX and quarterly reports.

These requirements, introduced in April 2008,
include the evaluation and audit of internal control over financial
reporting.

Japanese regulators introduced a quarterly
review for listed companies at about the same time as J-SOX.

This has doubled accountants’ financial review
work, which is now a year-round activity. Previously, all companies
prepared statements half yearly.

Looking to IFRS

While the material benefits of J-SOX
and quarterly reporting may fade, IFRS conversion and reporting
will provide Japanese firms with an increasing stream of work.

An initial IFRS road map was released by the
Japanese Business Accounting Council in June with mandatory
adoption of IFRS from 2016, subject to a final decision being made
by 2012.

Yano said although many Japanese companies
have taken a wait-and-see approach to the standards, the trend is
obvious.

“Just recently, many companies have begun
thinking it is high time for them to prepare for IFRS,” he
said.