Custom Tailor An Audit Program For Your Specific Needs​
  • Statutory Audit under Kaisha-ho (Japanese Corporate Law)
  • Reporting Package Audit (to satisfy parent company audit requirements)
  • Voluntary Audit (to assess validity of target financial statements)
  • Internal Control Audit (US SOX, J SOX)
  • Internal Audit (to assess risks of target)
  • English communication and reporting to the investor by the auditor

Does your subsidiary or investment in Japan need a financial statement audit?

If yes, you should start planning now to avoid any surprises at year end.

If you have a subsidiary/minority stake or investment in Japan, this concerns you.

What are the statutory audit requirements in Japan?

Broadly speaking, an entity that is either a

Public company (shares traded on a stock exchange)


Large Company (as defined under Kaisha-ho, (Japanese corporate law))

will require a financial statement audit by a CPA or CPA firm.

What is a Large Company under Kaisha-ho?

Capital Amount of 500 Million JPY or more

A Large Company (Daigaisha) under Japanese Corporate Law (Kaisha-ho) is defined as the following:

A Kabushiki Kaisha (an entity that is owned by shareholders, often called KK) that meets either of the following criteria:

  1. Shihonkin (Capital Stock) is 500 million JPY or more
  2. Total Liabilities is 20 billion JPY or more

(Corporate Law 2-6)

Whether or not the company meets the above criteria for audit is determined using the balance sheet as of the most recent fiscal year end.

So for example, if your subsidiary or investment in Japan has a Capital Stock amount of 5 million USD or more, that company will probably require a statutory audit.

Who can perform a statutory financial statement audit in Japan?

The law requires statutory audits to be performed by a CPA or a CPA entity (partnership of CPAs).

What are some other cases where audits are necessary?

Voluntary audits are an effective monitoring tool

Besides statutory audits, which are required by law, there are often cases where audits are necessary for different reasons.

The most common case is if the parent company of the Japanese subsidiary is itself subject to a financial statement audit.

In such cases, the parent company auditor is performing an audit over the consolidated financial statements of the parent company.

The financial statements of the Japanese subsidiary will be included in the consolidation and that is why an audit of the subsidiaries financials becomes necessary.

Such audits are usually performed over a reporting package and hence, called a Reporting Package Audit.

Even in cases where the subsidiary or investment is not part of the consolidated audit, the investor or parent company might want an audit to be performed due to the following reasons:

  • Assess the validity of the financial reporting from the entity
  • As part of internal controls and monitoring activities over the entity

Regardless of reason, voluntary audits are an effective way of monitoring and maintaining control over the quality of financial reporting from the subsidiary or investment.

Who in Japan can help me with this and other financial reporting challenges?

Japan Professional Alliance can offer immediate assistance with financial audit and other financial reporting needs that you may have.

  • Reporting framework: Japanese GAAP, US GAAP, IFRS

  • Audit working papers in Japanese and/or English

  • Reporting of audit matters to management in Japanese and English

  • Customize audit programs to suit the risk profile of your investment

Most of the audit team members at Japan Professional Alliance are former Big 4 accounting firm professionals.

We offer international grade audit quality and achieve efficiency through automation and analysis tools.

Reach out to us

Drop us a message using the form below and we can jump on a call to discuss your situation.

We look forward to hearing from you!

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