The Japan Audit & Supervisory Board Members Association
New Recommended English Translation of "Kansayaku" and "Kansayaku-kai"
The system of "Kansayaku" was developed uniquely in Japan and no similar system is found inother countries (other than in a few Asian countries). This uniqueness means that it can be difficultfor people outside Japan to correctly understand the structure of the corporate governance system inJapan and the function and role of "Kansayaku" and "Kansayaku-kai". As a result, "Kansayaku"
often find it difficult to carry out their activities outside Japan, such as auditing overseas subsidiaries
of Japanese companies. In addition, overseas investors are not able to understand how "Kansayaku"
contribute to corporate governance in Japan and, as a result, often have a negative impression of
corporate governance in Japan.
Many Japanese companies currently adopt the term “Corporate Auditor” as the English translationof "Kansayaku" and “Board of Corporate Auditors” for "Kansayaku-kai". However, there is aconcern that the word “Auditor” makes it more difficult for overseas people to correctly understandthe function and role of "Kansayaku" and "Kansayaku-kai" because the word “Auditor” brings tomind external auditors and internal auditors, which have a totally different role and function from"Kansayaku".
To deal with this situation, this Association conducted a review of its recommended English
translation of the terms "Kansayaku" and "Kansayaku-kai" to find terms which more appropriatelyreflect the function and role actually fulfilled by "Kansayaku" and "Kansayaku-kai". Following thereview process, the Association has finally decided to recommend the following translation:Kansayaku

Audit & Supervisory Board Member

Kansayaku-kai

Audit & Supervisory Board

When conducting our review, we kept in mind the following points:(1)The "Kansayaku" system was developed uniquely in Japan and no similar system is found inother countries (other than a few Asian countries). We should not therefore seek a perfect translation
which explains all aspects of the function and role of "Kansayaku" and "Kansayaku-kai". In thissense, it is more important to have supplementary materials which explain these terms in English.
(2) The most important point to bear in mind when considering the English translation is to show
how "Kansayaku" and "Kansayaku-kai" work within the overall scheme of corporate governance inJapan. In addition to the audit function, the importance of a "Kansayaku"'s function in supervising
the activities of management, which is performed in collaboration with the Board of Directors, hasbeen recently emphasised.

1Based upon the stance set out above, we have chosen the above new recommended translation for
the following reasons:(1) "Kansayaku" and "Kansayaku-kai", together with the Board of Directors, hold a significant
position in the overall scheme of corporate governance in Japan in terms of exercising a supervisory
function over management. Although there is no official term explaining the supervisory function of"Kansayaku", "Kansayaku-kai" and the Board of Directors as a package, the term “Supervisory
Board” seems appropriate to show their function as a package (please refer to the part surrounded by
the broken lines in the attachment).
(2) We decided to add the word “Audit” for the translation of "Kansayaku" and "Kansayaku-kai"
because the audit function is still one of the important functions of "Kansayaku", and one whichclearly distinguishes "Kansayaku-kai" from “Supervisory Board”. However, we believe that use of
the word “Audit” will not cause any confusion with external auditors or internal auditors because“Audit” does not mean any body or natural person.
Note: A "Company with Committees" as shown in the attachment is another structure available for acompany in Japan. As this memo focuses on Kansayaku and Kansayaku-kai, we have not included
an explanation regarding the "Company with Committees".

2A Company with Kansayaku

A Company with Committees

Shareholders

Shareholders

Selection

Selection

Selection

Selection

Supervisory Function
Supervisory Board

Board of Directors（Supervising Directors incharge of management）
Director

RepresentativeDirectors

Selection

Board of Directors= Supervisory Board

Collaboration(Attend/Report/Advice)

Committee on
Nomination ofDirectors

Audit &Supervisory Board

Committee on Feefor Management
MemberAudit Committee
Director
Director/Audit Committee Member(Selected by the Board of Directors)

Audit &Supervisory Board
MemberAudit as apart ofSupervisory
Function

RepresentativeDirectors

ReportReview of External
Auditor’s Performance

Audit as apart ofSupervisory
FunctionReport

Review of External
Auditor’s Performance

ManagementManagement

External Auditor（Preparation Submission ofAudit Report）

External Auditor（Preparation Submission ofAudit Report）