AZSA Quality
2021/22
Initiatives for Enhancing Audit Quality

October 2021
home.kpmg/jp/azsa

Message from Our CEO

P. 2

Our Initiatives for Audit Quality
Viewed from AQI

P. 4

Topics 1

Audit
transformation

P. 6

The transformation of audits
envisioned by our ﬁrmContents

Topics 2

6

Methodology transformation

8

Platform transformation

12

Talent transformation

14

P. 16
Initiatives toassure the reliabilityof non-ﬁnancial information
I Current status of
non-ﬁnancial disclosures

16

Ii Responding to enhanced
sustainability disclosures

18

Message from Our Head of
Quality Assurance

P. 22© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

Organizational Foundation

P. 24

1. Basic Principles and Corporate Culture

25

2. KPMG AZSA’ s Organization and
Governance Framework27

3. Quality Control Based on Our Four Defense Lines

36

System of Quality Control

Compliance with
the Audit Firm
Governance Code

P. 90

39

2. Audit Contracts41

3. Communication with Stakeholders

42

4. Audit Methodology and Audit Team Formation

43

5. Pursuing a High Level of Expertise andProviding High-quality Services

45

6. Audit Structure for Addressing
the Globalization of Clients49

7. Initiatives for Improving Transparencyof Audit Reports (KAM)

51

8. Actions to Address Fraud and Fraud Risk

53

9. Independence, Integrity, Ethics and Objectivity

54

10.Initiatives for Compliance andInformation Security

56

11.Review Structure60

12.Continual Improvement63

13.Addressing New Quality Control Standards
for Audits

65

P. 68

1. KPMG AZSA’ s Professionals

69

2. Human Resource Development at KPMG AZSA

70

3. Responsiveness to Change73

4. Creating a Friendly Working Environment

76

KPMG Network

P. 84

P. 38

1. Responsibility for Quality Control

Human Resource
Development

Corporate Overview

P. 79

1. KPMG International

80

2. KPMG in Japan

82© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

1

Everything We Do Is to
Inspire Confidence

T os h iya
M ori

The COVID-19 pandemic hasbrought about dramatic changes
in the social and economic
environment in which companies
operate, and the end of thepandemic is still not in sight. The
future is becoming increasingly
uncertain, and we have had to revisit
industrial structures and the way
we conduct global business. There
has also been a heightened need forcompanies to drive their digitalizationand sustainability agendas, while
work styles and values continue
to diversify. In these challenging
times, at KPMG AZSA we continue
to pursue our Vision to be the Clear
Choice. In other words, we aim to
be a firm that is trusted and chosen
by our clients, society, and all otherstakeholders, now and in the future,by providing outstanding services.
We acknowledge that we cannot
achieve our Vision without each andevery one of our people upholding
high ethical standards. Starting withtone at the top, we are committed
to ensuring that our people not only
maintain but continue to improvetheir awareness of ethics andcompliance. In response to rapidchanges in our environment, we areready to implement bold measuresand reforms that place trust at thecore of all conduct. We will provide
high-quality audit services thatmeet the expectations of our clientsand society in general, thereby
contributing to the growth ofthe economy.

KPMG AZSA LLC
CEO

2© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

Message
Message from Our CEO

Pursuing Audit Quality Is
Our Top Priority

Addressing HeightenedSocial Needs

At KPMG AZSA, we place theutmost priority on providing audit
results that can be relied upon by
our clients and by society. Audit
quality is the basis of the trust
placed in us as an audit firm. To
ensure that no matters arise thatsurprise the market, our pursuit ofenhancing audit quality is a mission
without end.

There has been a growing need inrecent years for organizations todrive sustainable enhancement ofaudit quality. Following the revisions
made to the Quality Control
Standards for Audit, the International
Standard on Quality Management(ISQM) will come into effect inJapan in stages from July 2023
as a way to ensure organizations
make further improvements in audit
quality. At KPMG AZSA, we havebeen working closely with our global
network to comply with the revised
quality control standards for audit inJapan prior to the adoption date.

Understanding the Changing
Business Environment
Changes are happening at a fastpace, and sector-specific issues
are coming to light as future risk
continues to increase in various
industries. We need to have a
deeper understanding of businesses
and communicate with our audit
clients more than ever before
in order to enhance our audit
quality. Many companies are now
facing unprecedented challenges,
especially pertaining to thepandemic and to climate change.
We will strengthen our system forcollecting specialized industry andsector information, and collaborate
as KPMG in Japan to provide timely
value-added insights regarding suchchallenges. We will also continue
to help our clients strengthen theirgovernance of overseas offices
by exploiting our strong global
network/KPMG's strong global
network and capabilities.
The COVID-19 pandemic has led
to an irreversible acceleration ofdigital transformation. As this trend
continues to progress, we will
be utilizing our KPMG Clara audit
platform to provide added value andimprove operational efficiency throughthe digitalization of audit work.

Non-financial information is also
becoming important in line with thegrowing urgency of global climatechange and ESG initiatives. The
time has come when companies
can only fulfill their accountability
by addressing stakeholder needs
relating to non-financial informationin addition to financial information.
We will continue to provide highvalue-added audit services basedon a thorough understanding of
the accountability expected of ourclients. We will also utilize KPMG’s
global network of member firms andvarious international organizations to
obtain a deep understanding of thetrue necessity of the information inquestion, upon the basis of which
we will utilize the know-how ofcountries leading in this field andprovide high-quality information andservices to meet society’s needs.

Fostering Talent
Audit quality is made possible by ourtalent. We will promote diversity in
a comfortable working environment
under the new normal, and fostera corporate culture in which people
with diverse values can speak
freely and attain their full potential.
We will continue to strengthen our
ongoing initiative to foster global
talent by further utilizing KPMG’s
global network. We will focus on
the AZSA Digital Academy (ADA)
again this year to promote digitaltransformation at audit sites andachieve “thinking audits using digitaltechnology.” The ADA is a talentdevelopment program dedicatedto improving the digital skills of all
firm members. And we will alsocollaborate with KPMG in Japan
colleagues to gain sector insights
and respond to the expectations andneeds of our clients and society inrelation to digitalization.

Our Purpose
Our purpose at KPMG AZSA is toinspire confidence and empowerchange in all we do. We value ourrelationships with our clients asthey seek sound growth while
acting with integrity, and we fulfill
our responsibilities by providing
services that live up to the trust
placed in us by our clients andsociety. At the same time, it is ourgoal to remain trusted by our clientsand members of society. At KPMG
AZSA we believe that staying true
to our purpose will contribute to asustainable society.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

3

People on
external
secondments

People transferred
within KPMG AZSA

67.3

4.5 5

Year ended June 2021

Year ended June 2021

P.70

Management403 67 13.4 27.2%

Year ended June 2021

Year ended June 2021

P.70

P.71

with overseas experience(one in four)

Total people

565

2,136

as of June 30, 2021

as of June 30, 2021

Unsatisfactory
Mainly deﬁciencies
in audit procedures
11%

Performance
Improvement
Necessary*“Global Talent” is deﬁned as thosewith a TOEIC score over 730, thosewith experience working abroad,foreign nationals and those proﬁcientin other foreign languages

P.74

P.77

Approx.
Approx.

85％

Mainly deﬁciencies
in documentation
20% Year ended June 2021

P.73

%

Year ended June 2021

None of the review results included cases that requireda revision of the audit opinion.
*All partners are subject to a quality performance
review at least every three years.

4

P.63

AsPac

Americas

Approx.

Approx.

420

300*Local Japanese-speaking
professionals including secondees
from KPMG in Japan

P.50

In the past ﬁve years

100

Satisfactory805

as of June 30, 2021

No deﬁciencies, or
clearly immaterialdeﬁciencies only69%

as of July 31, 2021 as of June 30, 2021

Partners and managers*Total of six secondees tothe IFRS Foundation (P.47)

Professionals

P.54

・Administrative penalties by the Financial
Services Agency relating to audit services
・Administrative penalties by the JICPA
relating to audit services
・Measures based on JICPA review results
regarding audit quality
Other penalties**The ﬁrm received a one month membership
suspension from March 9, 2021 from the
JICPA regarding the inappropriate
completion of e-Learning training.

0
1
P.64

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

KPMG AZSA continually strives to enhance audit quality. As a part of our effort to establish policies
and measure outcomes, we refer to certain Audit Quality Indicators (AQI), quantitative information
related to factors that are thought to have an impact on audit quality.

Year ended June 2021

Total for FY’sended June 2021
Approx.

7.6

KPMG Clara client
Collaboration

Digital Meisters*

Used by over80

companies use
audit support tools% are listed739

of which

10.1

2,500

billionyen

OverlistedUsed by over

Used for*Talent at the core of ourdigital transformation

100

300

%of statutory audits

companies
P.9 P.11 P.12

P.14 P.75

2,032

hours

Year ended June 2021
*Audit hours calculated
based on audit members
belonging to the ﬁrm forthe entire year

7,000

Group Company Analytics

eAudIT/KPMG Clara workﬂow

Digital Meisters
in the short term

*Figures are for KPMG in Japan andinclude IT system-related costs

cases processedcompanies*Including usage of initial framework

Aiming to foster over

DisclosureBot_ai

listed1,000

as of September 30, 2021

Budget for FY
ended June 2021

680

Usage Rate

723

billionyen

companies use
data analysis tools

79.3

Partners and Directors
%

1 3.0

Year ended June 2021

P.44

%

695 21.3

P.44

Managers

23.2 1,259 13.5%

As a percent of total professionals

281

74

as of June 30, 2021

Other Professionals

63.8 3,459 4.7%%

as of June 30, 2021

P.46

Percentage of respondents
who answered positively

Year ended June 2021

P.78

P.69

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

5

Topics
AX envisioned by our ﬁrm

1
Audit
transformation

High-quality audits that meet society’s
expectations and earn trust Audit
Transformation for Trust (AX for Trust)
Our purpose at KPMG AZSA is to inspire conﬁdence
and to empower change. In other words, we want tohelp create a more equitable society and contribute to
the sound development of the economy. We
acknowledge that we must continue to earn the trust
placed in us by members of society in order to achieve
this purpose.
A number of signiﬁcant changes are underway which
affect audit stakeholders. As the digitalization of society
and companies accelerates and the sustainability of ourenvironment becomes more and more urgent,companies are required to respond to new regulations
one after another.
This has led to major changes in the expectations thatsociety and stakeholders have for audits. They nolonger expect audits to solely focus on not overlooking
material misstatements due to fraud or error. They
expect auditors to detect fraud at an early stage,
contribute to governance, and reduce audit costs
including through remote work.
Under the concept AX for Trust, KPMG AZSA iscommitted to a continuous transformation of our audits
in order to meet the changing expectations of society.

Realizing 3C x I in our audits based on
three resources
Through AX for Trust, we will continuously transform
our three resources of methodology, platform, andtalent using digital technologies including AI as major
drivers of transformation and our global capabilities
including our KPMG global network and insights.
We will work with our audit clients to implement anaudit approach based on the 3Cs — Comprehensive,
Centralized and Continuous. We want to have an
impact on society and our audit clients by making theaudit process more advanced, efﬁcient and visualized,
in addition to providing insights relating to the detectionof fraud and error risk, strengthening of governance(compliance) and business improvement.

6© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

Topics 1

What we pursue as ourunwavering mission

Trust

What we provide tosociety and stakeholders
to gain trust

Impacts &Insights

3C x I
3C

After

Sampling

Comprehensive Audit

Audit for individualcompanies

Centralized Audit

Headquarters

After the year end

Continuous Audit

Real time

Our audit
approach vision

Transformationof auditresources

Audit Approach

Before3 Resources

Audit Resources

BeforeAfter

Experience and insights

Consistent methodologies

P. 8

Analog andindividual company based

Integrated platforms

P. 12

Centered on accountants

Diverse talent

P. 14

Main drivers of transformation
Digital

Methodology

All cases

P. 8

GlobalOthers

P.10

Centralized Audit
Automation andCentralization

Platform
P. 12

P. 13

P. 13
Diversity

Talent
P. 14

P. 14

Comprehensive Audit
An audit that draws conclusions based on an analysis of the total data
population using advanced technologies.
It also analyzes consistency with relevant data, including non-ﬁnancial data.
This allows for comprehensive and accurate identiﬁcation of anomalies thatcan be focused on as high-risk areas.

P. 15

Where a parent company or shared service company centrally manages thedata of domestic and overseas subsidiaries by standardizing core systems
and data, and that data is analyzed and utilized for the audit by the parent
company audit team. This makes it possible to gain a central understandingof risk and improve efﬁciency by aggregating audit procedures.

Continuous Audit
An audit in which data is analyzed and processed after data is extracted
from the audit client’ s system each time there is a transaction using a data
extraction program for auditing. This enables the early detection of
anomalies and completion of audit procedures.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

7

Methodology transformation

Methodology

Digital(1) Utilizing data and technologies such as AI

As DX progresses in society and business, the scopeand volume of data that needs to be obtained andutilized in the auditing process is increasing day by day.
Advanced technologies have made new audit methods
such as AI data learning and future forecasting possible.
As audits become more sophisticated, all data, rather
than sample data, can be analyzed and scrutinized. AI
will enable the early detection of anomalies and risks,and shed light on areas requiring governance. A
day-to-day analysis of real-time data will speed up theaudit process and allow the timely provision of
information. In addition, simple tasks that do not involve
judgment will be automated.

Detection of fraud and error risk

Strengthening governanceGroup Company Analytics

8

P.10

Fraud Risk Scoring_ai

Journal Entry Analytics_Lift Value

We have developed a tool to quantify the risk of corporate
accounting fraud based on past fraud cases and restatements.
Audit teams utilize this tool to help identify fraud risk.

Based on an algorithm utilizing lift value indicating degree of
relevance, we can identify journal entries that deviate fromnormal entry patterns, such as a combination of accounts. This
enables us to promptly identify journal entries with risk in an
objective way in addition to risk scenarios based on auditor
insights, making our audits more sophisticated.

KaizanCheckBot_ai

Process mining

This tool processes images toreveal traces of edits made toelectronic ﬁles such as PDF
documents, and extracts andveriﬁes ﬁle properties,
leading to early detection ofsigns of tampering withelectronic vouchers toprevent fraud.

This enables detection ofhigh-risk workﬂows andprocesses that deviate fromthe rules by visualizing
workﬂows based on data
regarding business processes
and providing a comprehensive
and objective understanding of
unexpected processes andtransactions. It also makes it
possible for us to reevaluate client business processes andsupport management with informed recommendations.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

Topics 1

Make audit
more efﬁcientand visualized

Make audit moresophisticatedDetection of
fraud and error

Continuous audit

Methodology

DigitalMake audit moresophisticatedImprove efﬁciency

Strengthen
governance

Automation ofaudit procedures

Continuous audit

Automation of audit proceduresEnterprise Data Analytics

DisclosureBot_ai

Large amounts of data can be extracted in bulk from a client’s
core business system and processed at high speed. Our analysts
with insights into clients’ system data analyze this data frommultiple angles. Increasing the frequency of data extraction willlead to performing future audits in real time. We can also build ananalysis menu optimized according to journal entries, receivables,
payables, etc., and conduct exploratory data analysis to detect
anomalies at the line item level to strengthen governance.

This bot analyzes draft disclosure documents received fromaudit clients in PDF format, such as the ﬁnancial statements’accounting practices sections. It automatically veriﬁes theaccuracy of calculations, consistency between the main table
and notes, and reconciliation of ﬁgures from the previous year.
Used in over 7,000 cases between July 2020 and June 2021,
this has helped reduce man-hours while curbing human error in
the veriﬁcation of disclosure documents.

Audit report KAM tools
We have developed a tool thatallows audit teams to aggregate
and analyze real examples of
Key Audit Matters according to
speciﬁed conditions, such asindustry-based cases, after a
sufﬁcient accumulation of
securities report and audit
report XBRL data on EDINET.
We have also developed a tool for checking the accuracy ofchanges and differences in the text of audit reports and XBRL
tagging. The use of this tool is being introduced for audits ofﬁnancial statements from the ﬁscal year ended March 31, 2021.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

9

Methodology transformation

Methodology

Global(2) Audits of subsidiaries

Many parent companies face the challenge of how
best to prevent, or detect and correct, fraud atoverseas subsidiaries. At KPMG AZSA we thoroughly
assess the risk of fraud and errors in subsidiaries andtake steps to ensure the appropriate communication
with our audit clients.
Speciﬁcally, we combine the Subsidiary Risk
Assessment Questionnaire, a qualitative analysis, andGroup Company Analytics, a quantitative analysis, toidentify subsidiaries with issues in a timely manner. The
parent company audit team then instructs the local
audit team to carry out a detailed investigation of theidentiﬁed subsidiaries, or in some cases the parent
audit team visits the the local site to conduct theinvestigation directly. In addition to using the Group
Company Analytics tool, the parent company audit
team can directly view and analyze the local
bookkeeping data of subsidiaries if the data isstandardized and linked to the group’s accounting
system. This is an example of Centralized Audit,
allowing centralized analysis and monitoring ofsubsidiary information by the parent company audit
team, an approach that is increasingly effective intoday’s remote environment.

10

Qualitative analysis —Subsidiary Risk Assessment Questionnaire
Our Quality Assurance Headquarters has issued theSubsidiary Risk Assessment Questionnaire with theaim of understanding a subsidiary’s business and theparent company’s control over the subsidiary. The audit
team carries out a risk assessment based on thequestionnaire, and discusses any governance mattersthat may come to light with the audit client.

Understanding audit issues and progress ofoverseas subsidiaries
We have established a framework in which the parent
company audit team can monitor the audit progress of
subsidiaries across the globe, and have a timely
understanding of key issues. Information collected isshared with audit clients as needed through KPMG
Clara Client Collaboration to enable a coordinatedresponse to issues.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

Topics 1

C o l u m n
Quantitative analysis —group company analytics
This tool conducts a comprehensive analysis of ﬁnancial
data of all group companies to identify high-risk areas
for individual companies. It analyzes all ﬁnancial dataand quantiﬁes the risks (scoring) of subsidiaries using
statistical methods, thereby objectively exposing any
abnormal ﬂuctuations in the ﬁnancials of a subsidiary.
This allows a comprehensive risk assessment including
for small subsidiaries not included in consolidated groupaudits. The monitoring also leads to strengthening thegovernance of our audit clients.
This analysis is applied to audit engagements withmore than a certain number of subsidiaries. As of theend of September 2021, it has been used for over 300
companies, most of which are listed.

Financial data analysis service tosupport accounting DX
Corporate DX initiatives are now being applied
to the accounting function, not only tooperations. Our Accounting Advisory Service(AAS) Division, comprising specialists inaccounting, business processes and technology,
plays a central role in supporting the DX of ourclients’ accounting departments.
In response to strong interest from clients, wehave been providing a SaaS (Software as aService) type service called Financial Data
Analytics (FDA) since July 2020. The use of theservice has been extended from the accounting
function to business administration and internal
audit. To meet client needs, we have been
reﬂecting their feedback in the enhancementand development of new functions for the FDA
tool, while utilizing the analytical know-how
gained from our audit DX. We are also making
improvements toward creating a format thatallows each company to customize analysis
according to the nature and risk of individual
client businesses. We will help companies
achieve data-driven organizations andbusinesses by supporting FDA and otheraccounting DX initiatives.

Upload Data

Financial Data
Analytics Platform

Visualization ofanalysis results

Analysis of various data
(tools will be added sequentially)
Group company
analysis

Consolidated
journal entry

Jornal entry
analysis

Expenseanalysis

Communication

Shift resources from tasks that do not generate
added value to actions that generate added value© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

11Platform transformation

Platform

Digital(1) Digital platform: KPMG Clara

At KPMG AZSA, we use a digital audit platform called
KPMG Clara to achieve 3C x I. KPMG Clara comprises
three platforms: KPMG Clara for clients is a portal
designed to make communication with audit clients
efﬁcient and secure; KPMG Clara analytics enables
efﬁcient and advanced analysis and audit procedures;and KPMG Clara workﬂow compiles audit approaches
and working papers.

KPMG Clara for clients
KPMG Clara for clients is a more advanced version of
KPMG Clara Client Collaboration that will be graduallyrolled out from FY2021. KPMG Clara for clients allows
users to exchange and manage the status ofaudit-related materials, upload data analysis results, list
and track the progress of audit tasks and issues, andcentrally manage audit results. All of this information isshared with audit clients at all times. Operability, speed
and security have been improved, and we will continue
to add and enhance functions in the future.

Automatic data acquisition and continuous
audit initiative
We are developing a series of systems that are linked
and wholly contained within KPMG Clara — this includes
bulk data extraction from clients’ core systems using a
program for extracting data for audits, storing the data in
KPMG Clara for clients, analyzing the data using KPMG
Clara analytics, and incorporating the results into KPMG
Clara workﬂow. We will aim to achieve Continuous Audit(real-time audit) by expanding this initiative andincreasing the frequency of bulk data acquisition.

Robust security
KPMG Clara features robust security measures. It has
in place two-factor authentication, access control, data
storage and communication encryption, data centersecurity veriﬁcation, antivirus protection, and data
backup and synchronization. KPMG AZSA’s Information
Security Department, ITS Operations Department,
and ITS Development Department are ISMS certiﬁed
and have a framework to ensure a certain level of CIA(conﬁdentiality, integrity, and availability) for handlingall information.

»Three main platforms on
KPMG Clara

KPMG Clara for clients/
client collaboration

Usage rate
Total

1,000
80

clients% listed

Online collaboration platform forinteracting with audit clients*Including the same
framework as before

KPMG Clara analytics
KPMG Clara analytics is an integrated data
analytics platform that provides one-stop
services from data extraction to analysis.
It centrally stores individual data analysis
tools such as Group Company Analytics
and audit procedure tools that can be usedby audit teams. At the same time, it storescommon processing applications that canbe used for data processing, enabling audit
teams to conduct efﬁcient data analysis
and audit procedures.

Companies using
data analytics(listed)

680

Companies using
audit tools(listed)739

KPMG Clara workflow
A platform for audit working papers
incorporating an audit methodology thatallows central management of audit
procedures and their results. This is a newplatform based on a new audit methodology
called KPMG Audit Execution Guide, whichtakes a more in-depth risk approach.

12

Transitioning fromeAudit to KPMG Clara
workﬂow
Full roll-out fromnext year© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

Topics 1

Platform

GlobalPlatform

Automated and centralized(2) Global platform(3) Continuous automation andcentralization of operations

The Global Japanese Practice (GJP) network comprises
Japanese-speaking professionals including secondees
based in 89 cities around the world. They supportclients with collection in the respective countries of
information on accounting, taxation and risk including
government regulations. They also support the audits ofoverseas subsidiaries, maintaining and enhancing audit
quality on a global level.

Automation:
Use of RPA and other digital technologies

As a key member of the KPMG Global Board, KPMG
AZSA has strong involvement in global conversations
and decision-making on policies and initiatives. We also
work closely to exchange information and collaborate
with KPMG member ﬁrms across the globe, allowing us
to take quick action when issues arise in group audits.
Particularly in the AsPac (Asia Paciﬁc) region, KPMG
AZSA partners serve as the AsPac Head of Audit andother key roles such as the Head of the Department ofProfessional Practice (DPP), which is responsible forinterpretation and judgment of auditing andaccounting standards.

KPMG in JapanGJP Headquarters

Americas
EMEA(Europe,
Middle East and Africa)

AsPac(Asia Pacific)

Our audit teams working on-site and at headquarters
are collaborating on promoting the automation of routine
tasks that can be standardized using OCR technology,
RPA and Alteryx. Audit teams are also working on
gradually automating audit tasks from processing andanalyzing data to drafting working papers.

Centralization:
Utilization of ADC, ACC, and DI divisions
We centralize routine tasks for which automation is not
currently suitable with the aim of improving efﬁciency
and consistency. The AZSA Delivery Center (ADC),
established within the Quality Assurance Headquarters,
centrally manages routine tasks including sending andcollecting balance conﬁrmations, reconciling vouchers,
checking ﬁnancial statements and preparing audit
instructions for overseas subsidiaries.
The ADC comprises diverse talent including non-CPAs
and is contributing to the transformation of audit work.
We also established the Audit Conﬁrmation Center GK(ACC) as a joint venture with three major Japanese audit
ﬁrms in November 2008. The ACC works to digitalizebalance conﬁrmation procedures while centralizing andstreamlining the tasks of sending and collecting paper
conﬁrmation letters.
The Digital Innovation (DI) Division centrally manages
the processing of large amounts of data and analyzing
journal entries. It undertakes everything from
conﬁrming the comprehensiveness of data received toprocessing data and visualizing analysis results.
Automation andCentralization
Automation

Utilize RPA, Alteryx, etc.

Digital centralization

Centralization

Utilize ADC and ACC

Specialized tasks

Digitalcentralization

Process large amounts ofdata, advanced analysis

Automation
Centralization

Specialized
tasks

Audit teamtasks

Greater focus onadvanced tasks

BeforeAudit team
tasks

After

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

13

Talent transformation

TalentDigitalGlobal(1) Improving digital skills —ﬁrmwide digital talent(2) Investment in global skills
and experience

We introduced the AZSA Digital Academy (ADA) in
FY2020 as a digital talent development program torealize 3C x I at audit sites by utilizing technologies anddata that continue to evolve at a rapid pace.

KPMG AZSA is committed to making continuous
investments in the overseas work experience of our
professionals. We currently have GJP network
members based in North and South America, Europe,
the Middle East and Africa, and the Asia Paciﬁc region.

The ADA has deﬁned the image of the future audit
team and the hierarchy of digital talent and theirrespective roles. We developed an environment forsystematic training and OJT based on a clariﬁcation of
the roles and skills required for each hierarchical level.
We have a particular focus on developing Digital
Meisters, who play the role of leading audit DX within
audit teams. As of the end of September 2021, 723
people have been certiﬁed as Digital Meisters.
DI Division/
IT Audit Division

Audit Divisions

Digital Leader

Digital Fellow

Leads ﬁrm-wide
digitalization andrelevant projects

Leads alltechnological ﬁelds
Leadership

Certiﬁcate

Consultation

Digital Core
Develops tools andproviders solutions

AdviseDigital Meister
Capable of problem-solving
and making
proposals clients

Understandingof data tools
Certiﬁcate
Algorithm beginner

Digital AssistantCapable of analysis andoutput using tools

Audit Clients

Consultation
Presentation

We also introduced the Future Auditor Initiative in
FY2021, a program for selecting accountants fromamong our Digital Meisters and developing talentcapable of leading future audits in the digital age.
Participants in this program will invest approximately
70% of their working hours over a two-year period tounderstand processes from a data perspective, analyze
data, and promote audit automation while receiving
instruction on digital core skills.

14

TalentWe are also expanding our secondment quota for young
people, and have been offering an 18- to 24-monthoverseas assignment program called JUMP. Anotherthree-month program called STAR has also enabledmany young accountants to take on the challenge ofworking overseas. By sending more young professionals
overseas, we are fostering talent rich in diversity.
We have also established business divisions for four
regions of strategic importance to Japanesecompanies — China, ASEAN, India, and the Middle
East and Africa — in addition to Country Desks
managed by people with experience in approximately
30 countries, as a way to support local secondees
from Japan.
Country desks now have more active and timely
communication with local staff by holding meetings andother events online. A remote environment has enabled
us to provide more regular regional updates andmaintain better communication with regions than
before the COVID-19 pandemic, enhancing our ability toprovide high-quality services to Japanese clients.
In the digital domain, we are one of four majorcountries (Japan, the US, the UK, and Germany) leading
digital strategies and initiatives on a global level andworking together on product development.
We also continuously send our professionals to KPMG
Global Solutions Group (KGSG), a KPMG international
research institute that is actively engaged in informationand technology exchange with other countries.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

Topics 1

Diversity

TalentC o l u m n(3) Diversity leads to high-quality services

KPMG AZSA comprises not only certiﬁed public
accountants but also specialists in various ﬁelds suchas digital, cyber, ﬁnance, and real estate. We have adiverse workforce, including colleagues from overseas
with different values as well as those who work undertime constraints due to childcare and other caregiving
responsibilities. A diverse environment in which we canall do our best work while recognizing and respecting
individual differences is the most effective way tofoster diverse perspectives, maximize the abilities of
our talent, and improve the quality of our audits.
We are also implementing a broad range of talentdevelopment initiatives in order to foster talent capableof responding ﬂexibly to rapid changes in theenvironment while providing high value-added services.
In addition to continuous professional education for
CPAs, we also provide global skills training, digitaltraining, and people skills training.
The DI Division plays a central role in planning anddeveloping data analytics and audit tools to make audits
more sophisticated, efﬁcient, and visualized. The
division has many digital specialists such as data
scientists, data engineers, and IT specialists in addition
to CPAs. They work with KPMG Ignition Tokyo, a groupof experts in advanced technologies such as AI andblockchain, to transform the audit process and develop
audit platform solutions.
Talent Transformation
Automation

Automaton

Audit
Assistant

Audit
Assistant

Digital Expert
ExpertDigitalExpertExpertAccountant
Accountant

More focus onadvanced works

BeforeAfter

Utilize diverse
talents with various
backgrounds andhigh skills including
DigitalDigital Assurance Ofﬁce and
AI Assurance Group establishedAs digital transformation progresses in thecorporate world, AI is increasingly used invarious business operations. With this comes
the heightened need to ensure that AI isfunctioning appropriately by asking questions
such as, “Is the AI performing as initially
expected?” and “Is it producing unexpected
results that interfere with fairness, for example
due to inappropriate discrimination in processes
or outputs?” It is also necessary to comply withregulations that will continue to become more
stringent in the future.
KPMG AZSA has been providing a service toverify the readiness of AI to deal with potential
risks using our extensive industry insights, andtechnology insights regarding cutting-edge AI.
The service is based on KPMG's unique AI
veriﬁcation framework complying with domestic
and overseas regulations and guidance. We
newly established the Digital Assurance Ofﬁceand the AI Assurance Group (AAG) — a group of
AI assessment specialists — on September 1,
2021, with the aim of meeting client needs toassess and verify the effectiveness ofgovernance related to risk management and AI
quality control processes. The groups bring
together specialists in AI development andveriﬁcation, regulations in Japan and overseas,
as well as accounting and IT audits withextensive experience in assurance services.

Digital Assurance Division
AI Assurance Group(Established on September 1)

AIdevelopment
andveriﬁcation
specialists

AI
regulation
specialists

Audit andIT audit
specialists

Full-scale provision of third-party
AI evaluation and veriﬁcation services© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

15

Topics
I

2
Initiatives to assure
the reliability of
non-financial information

Current status of non-ﬁnancial disclosures

Rising expectations for
non-ﬁnancial information
Initiatives to expand the disclosure of narrative
information in securities reports have been in full swing
from the ﬁscal year ended March 2020. There is also
increasing focus on sustainability issues, including
climate change.
Sustainability issues may not be linked to a company’s
cash ﬂow. This makes it difﬁcult for stakeholders tounderstand a company’s situation based only on
ﬁnancial information, leading to expectations for further
expansion of non-ﬁnancial disclosures.

Changes in the environment
Rising expectations for expansion of
non-ﬁnancial reporting

Key points of revised auditing standards
The auditor is required, while reading theother information, to consider whether there
is a material inconsistency between the otherinformation and the ﬁnancial statements or
the auditor’s knowledge obtained in the audit.
Remain alert for indications of material
misstatements in other information.

Report in the auditor’s report whether
there are material misstatements inother information.

16© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

Topics 2

Revision of auditing standards for
non-ﬁnancial information

KPMG AZSA’s response

In response to increasing expectations for non-ﬁnancial
information, the Business Accounting Council of the
Financial Services Agency announced the revision ofauditing standards in November 2020. The revision
makes the responsibility of the auditor stronger withrespect to “other information,” or the parts ofdisclosure documents other than the ﬁnancial
statements and the auditor’s report.

In July 2021, KPMG AZSA established the Ofﬁce for
Promotion of Advanced Disclosures within the Quality
Assurance Headquarters in response to the greater
responsibility auditors are expected to have in the
expansion of non-ﬁnancial reporting.

“Other information” corresponds to what is referred toas non-ﬁnancial information. The revised auditing
standards clarify the auditor’s procedure for handlingsuch information and require the auditor to include thisin the auditor’s report.

» New audit reports on other information

We will fulﬁll the responsibility expected of auditorswith regard to non-ﬁnancial reporting based on theknowledge accumulated in the Ofﬁce for Promotion ofAdvanced Disclosures.

» Systematic response at KPMG AZSA
BeforeAuditor’s report

Quality Assurance
HQ

Other information(Omitted)
Our responsibility in the audit of the ﬁnancial
statements is to read the other information and,in doing so, consider whether the other

DPPAudit Quality

DPPAccounting

information is materially inconsistent with theﬁnancial statements or knowledge obtained in
the audit, and to remain alert for indications, apart

After July 2021

from any material inconsistencies, that the otherinformation may be materially misstated.

Quality Assurance
HQ

If we conclude that there is a material
misstatement of this other information based on
the work we have performed on the otherinformation obtained prior to the date of thisauditor’s report, we are required to report thatfact. Our ﬁrm has nothing to report in this regard.

DPPAudit Quality

DPPAccounting

DPPDisclosures© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

17

II

Responding to enhanced sustainability reporting

Growing interest in sustainability issues

Survey by the World Economic Forum

Interest in ESG has been growing since the Principles
for Responsible Investment (PRI), adopted as a United
Nations initiative in 2006, announced its initiative toexpand ESG investments.
Rapid changes recently happening in the corporate andsocial environment have led to further interest in ESG.

The World Economic Forum releases an annual reporton global risks. While environmental matters were notin the top ﬁve for any items in the 2010 report, they
dominated the top ﬁve in both “top risks by likelihood”
and “top risks by impact” in the report published in
January 2021.

» A change in interest in sustainability issues» ESG risks

Before2010
Global environment/Unchanged

Company

No matters relating to the environment

Major change

2021
ClientTop risks
by likelihood

Stakeholder/Investor

Recent years
Global environment/Major changes

Employee Company

ClientTop risks
by impact
Rise of 1.5-4°C above
pre-industrial levels?

1 Extreme weather
2 Climate action failure
environmental
3 Humandamage4 Infectious diseases
5 Biodiversity loss

E
E
E
S
E

S
1 Infectious diseases
2 Climate action failure E
Weapons of
3 massdestruction
E
4 Biodiversity loss
5 Natural resources crises E

Stakeholder/Investor
Source: Global Risk Report 2021 — The World Economic Forum18© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

Topics 2

C o l u m n

Trends in Japan and overseas toward
expanding sustainability reporting
With the growing attention on sustainability issues,
there is heightened interest in the disclosure ofsustainability information by companies. In light of this,many countries are implementing initiatives forsustainability reporting at a rapid pace.
In Japan, the Corporate Governance Code revised inJune 2021 requires companies listed on the Prime
Market to disclose sustainability information. The Codestipulates in particular that these companies need toenhance the quality and quantity of disclosure on
climate change risks based on the recommendations of
the Task Force on Climate-Related Financial Disclosures(TCFD) or an equivalent framework.
The Follow-up on the Growth Strategy was approvedby the Cabinet in June 2021, and in line with this, theWorking Group on Corporate Disclosure of the
Financial System Council has been considering the
expansion of disclosures in the annual securities
report since autumn 2021.
Main issues under consideration• Disclosure of climate change risk
• Disclosure of human capital investment• Disclosure of Board of Directors activities» Sustainability reporting trends in Japan and overseas
Mandatory disclosures based on
TCFD recommendations

Stronger ESG disclosures
under consideration

US

UK

Responding to theestablishment of the ISSB
Non-ﬁnancial reporting had been voluntary in
the past. However, sustainability information
now plays a major role in investment decisions
given the urgency of sustainability issues, andinitiatives to enhance institutional disclosures
have been made at a rapid pace in recent years.
In order to meet such changes in investor
needs, there is also a growing move toward
globally consistent sustainability reporting.
In particular, the IFRS Foundation, under which
the International Accounting Standards Board(IASB®) is organized, is considering theestablishment of the International Sustainability
Standards Board (ISSB), and an announcement
is expected to be made before COP26 in
November 2021. It remains to be seen whatform the ISSB will take, but we believe that the
ISSB will be recognized globally given thestrong support expressed in the statement of
the G20 Finance Ministers and Central Bank
Governors Meeting held in July 2021, as well as
the strong endorsement from the International
Organization of Securities Commissions(IOSCO), of which the FSA is a member.
In light of this, sustainability reporting standards
developed by the ISSB are expected to be applied
worldwide especially among listed companies,
in the same way that IFRS ® standards wereapplied in the ﬁeld of ﬁnancial reporting.

» Positioning of the ISSBJapanIFRS Foundation
Monitoring Board

Revision of the Corporate Governance CodeExpansion of climate-related disclosures insecurities reports under consideration
Expansion and mandatory third-party assurance of

EU non-ﬁnancial disclosures under consideration

Trustees of
the IFRS Foundation

IASB

ISSB

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

19

II

Responding to enhanced sustainability reporting

Changes in audit approach in light of the urgency ofsustainability information
The growing interest in sustainability issues andinformation has had a signiﬁcant impact on audits. The
reason for this is that while, for example, climatechange risk may not have a signiﬁcant impact on acompany’s business activities in the short term, it islikely to have an impact over a different time horizon(see the speech by Mark Carney, Breaking the tragedyof the horizon — climate change and ﬁnancial stability(September 2015)).

For example, a disaster due to climate change could
cause signiﬁcant damage to a plant that is currently
operating normally (manifestation of physical risk). Or aproduct sold by a company may be pushed out of amarket on the basis that it goes against the Paris
Agreement over the life cycle of the product, resulting
in a loss of the product’s portfolio (transition risk).
This may also force companies to be cautious about therecognition of impairment loss on plants that previously
did not require the recognition of such loss.

Environmental and Social Materiality

Financial Materiality

Impacts of companies on climate change

Impact of climate change on companies

Impacts

Impacts

Impacts• Products do not sell due tonon-compliance• Need to replace equipment

Need torecognize
impairment
loss?

Sustainability issues including climate change can have a signiﬁcant impact on a company’s ﬁnancial statements over different time horizons.

Care also required in audits20© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

Topics 2

Providing assurance services forsustainability information

KPMG AZSA’s response — Establishment of
the Sustainable Value Headquarters

Sustainability information now needs to be morereliable than ever, and market participants and society
are demanding that companies provide third-party
assurance for this information. In the proposed
Corporate Sustainability Reporting Directive (CSRD)
published in April 2021, the EU will signiﬁcantly expand
the scope of sustainability reporting, and in principle,
require companies to use assurance services by astatutory auditor or audit ﬁrm.

In recognizing the urgency of sustainability reporting,
KPMG AZSA established the Sustainable Value
Headquarters in July 2021. We are strengthening ourstructure to provide advisory services related tosustainability and to share information and opinions
both inside and outside the ﬁrm.

In light of these changes, at KPMG AZSA we believethat we need to respond to the needs of market
participants and society in a timely and appropriatemanner in order to fulﬁll our mission.

At the same time, we are making preparations toward
providing assurance services for sustainability reporting
while ensuring sufﬁcient quality as an audit ﬁrm, basedon insights gained from our KPMG network.

Future vision: Corporate reporting integrating
ﬁnancial and non-ﬁnancial information and therole of audit ﬁrms
In recognizing the urgency of sustainability reporting,
KPMG AZSA established the Sustainable Value
Headquarters in July 2021. We are strengthening ourstructure to provide advisory services related tosustainability and to share information and opinions
both inside and outside the ﬁrm.
At the same time, we are making preparations toward
providing assurance services for sustainability reporting
while ensuring sufﬁcient quality as an audit ﬁrm, basedon insights gained from our KPMG network.

Expansion ofsustainability reporting

Provision of limited assurance
services for non-ﬁnancial
information of listed companies

Provision of audit and assurance
services for corporate reporting
integrating ﬁnancial andnon-ﬁnancial information© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

21

Message
Message from Our Head of Quality Assurance

Inspiring confidence in the economy and society
by providing high-quality services, and supportingthe challenges of our clients and society

Our Purpose
Our purpose is to inspire confidence
and empower change in all we do.
Audits are the core service of KPMG
AZSA. We believe that our mission
is to secure the reliability of financial
information from an independent
standpoint through our audits, while
contributing to the transformationof our clients and society towardachieving sustainable growth.
Japan’s capital markets haverecently undergone various
reforms to ensure their soundness
and transparency (enhanced
disclosures). Narrative information is
being enhanced by such measures
as the restructuring of the Tokyo
Stock Exchange into new market
segments and corporate governancereforms focusing on corporate value.
Society is paying more attention
to non-financial factors that impact
corporate value, such as climate risk.
Non-financial information is now

22

an important element of corporate
value that investors look at, in
addition to financial factors. Nonfinancial reporting is expected to befurther enhanced in order to ensure
its effectiveness and comparability.
In light of these circumstances,
we will support the transformationof companies based on ouroutstanding expertise, capabilities,
and experience. We also hope
to contribute to the design ofcapital market policies by providing
recommendations and opinions
to society.

Our Vision
Based on our purpose, we strive toperform high-quality audits in orderto achieve our Vision to be the Clear
Choice of our clients, society, andall other stakeholders, now and in
the future.
The most important resource
for achieving our Vision is ourpeople at KPMG AZSA. Our

people will acquire global, digitaland sector insights and apply
them as appropriate. They will act
autonomously based on what isessential and what needs to beaccomplished. We believe our firm
will be made stronger by each of
our professionals developing theirskills in this way. We also havethe highest standards of auditing
methodologies in the world, basedon which we have built a global
network and insights, capabilities
and experiences to serve global
clients over the long history of
KPMG AZSA.
We have also been developing
digital platforms and tools to conduct
in-depth analysis supported byrobust security as a means of making
our audits more sophisticated.
KPMG AZSA, together with theentire KPMG in Japan Group, hasdeveloped a system to enhance
our expertise by consolidating andaccumulating advanced insights in
sectors and industries.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

We apply such resources to our
audits and provide output in the formof auditor reports on capital market
information. We will pursue anecosystem implementing a virtuous
cycle that produces a positive
outcome of trust, by making further
improvements to enhance our audit
quality based on feedback fromcompanies and market participantsin the process leading up to therelease of our auditor report.

T o s hi hi ro
Ots uka
Executive Board Member(Head of Quality Control,
Head of Risk Management)© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

23

KPMG AZSA’s audit quality is founded
on a shared basic principle,
an open corporate culture,a strong governance structure andthe ﬁrm’s four defense lines.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

1. Basic Principles and Corporate Culture
Our shared basic principles and open corporate culture serve as the cornerstone forthe foundation of audit quality at KPMG AZSA.

1-1. Shared Basic Principles That are the Foundation of Our Audit Quality

Purpose : This is why we are here

Inspire Confidence,
Empower Change.
Through our audit and accounting services, we will ensure the reliability of information
while driving positive transformations and contributing to the realization of a fair society
and sound economy.
Values : This is what we believe in

Vision : This is what we want to be

Integrity

The Clear Choice

We do what is right.

Excellence

KPMG AZSA aims to become The Clear Choice for the
public, our clients, and our people by relentlessly
pursuing quality in our services.

We never stop learningand improving.

Courage
We think and act boldly.

TogetherWe respect each other anddraw strength from our differences.

For Better
We do what matters.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

25

1-2. Management from Diverse Backgrounds
At KPMG AZSA, we have a history of people withdiverse experience and knowledge and from various
corporate cultures coming together through repeatedmergers with various audit firms.
Our current management comprise people fromseveral different firms who make use of their diverse
backgrounds in executing management tasks.
We have been implementing regular and continuous
structural reforms in order to allow our management
themselves to exemplify diversity, while providing
an environment that allows our people with various
backgrounds to come together and exert theirfull potential.

In 2021, we restructured our audit divisions with theaim of further enhancing our level of expertise by
consolidating sector insights.

1-3. A Corporate Culture Encouraging Free andOpen Communication
At KPMG AZSA we have a corporate culture ofencouraging free and open communication.
As previously mentioned, in addition to ourbackground of merging with a number of firms tobecome the firm that we are today, at KPMG AZSA
we follow the conduct guidelines of Courage (we think
and act boldly) and Together (we respect each otherand draw strength from our differences) as a member
firm of KPMG International.

» History of Organizational Reforms— present

Before reorganization
Collection of small
accounting ﬁrms

2021

— present

Reorganization todivisional structure

Reorganization tohomogenize audit
quality and adapt
to globalization

Open organizational
culture based on ourbasic principles

Organization offeringa higher level ofexpertise throughaggregation of
sector insights

Division A

Division A

Division A

Managing
Division A

Division B

Division B

Division B

Managing
Division B

Division C

Division C

Division C

Managing
Division C

Department A

Department B

Department C

Department D

26© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

2. Organization and Governance Framework
KPMG AZSA is a limited liability audit corporation managed by partners who areshareholders with authority over operational execution. Our governance frameworkcomprises the Partners Meeting as the supreme decision-making body, the Senior
Executive and Executive boards, and a supervisory and evaluation body.

» KPMG AZSA LLC Organization Chart(September 1, 2021)

Partners Meeting
Partner Committee

Supervision and
Evaluation

Management
Oversight Committee

Managing Partner

Public Interest
Oversight
Committee

Nomination Committee

SeniorExecutive Board

P.31

Audit Committee
Compensation
Committee

P.30

Internal Control

Executive Board

P.28

P.28

Divisional Review Boards

Audit Quality
Committee

Review Structure P.60

Divisions

Financial Services
Division

FS Audit 1
FS Audit 2
FS Audit 3
FS Advisory

Division 1

Clients ＆ Markets

1-1 (Shizuoka)
1-2
Yokohama

Division 2

Research
Strategy & Planning
Legal Affairs
Corporate Communications

2-1
2-2
Sendai
Kitakanto

Division 3

3-1
3-2
SapporoHiroshima
Fukuoka

Division 4

4-1
4-2
Hokuriku
5-1
5-2

Risk Management HQ

Risk Management
National Info Sec Management

GJPHQ

GJP
Global Mobility

People, Performance & Culture
Human Resources
Diversity Development
Financial Accounting

General HQ

General Affairs

Division 5

IT Service HQ

IT Development
IT Service

Tokyo IT Audit Division

Digital Innovation HQ

Digital Planning
Digital Innovation

Nagoya Division

Osaka Division 1(Osaka FS)

Public Sector HQ

Osaka Division 2

Middle Market
Development HQOsaka IT Audit Division
Sustainable Value HQ

Sustainable Value Ofﬁce

1-1
1-2
Kobe
2-1
2-2
Kyoto

Osaka Ofﬁce Block

Financial Services HQ

Nagoya(Nagoya FS)

NagoyaOfﬁce
Block

Financial HQTokyo Ofﬁce Block

Tokyo AAS
Osaka AAS
Nagoya AAS

DPP-Audit Quality
DPP-Accounting
DPP-Disclosure

HR HQ

Ofﬁce of Senior
Review Board

Accounting Advisory
Services Division

Quality Assurance HQ

Planning HQ

Senior Review Board

Compliance
Committee

Head Quarters

Clients & Markets HQManagement/
Execution

P.28

Osaka Administration© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

27

2-1. Management/Execution,
Supervision and Evaluation

2-3. Decision-making Managementand Execution

KPMG AZSA is a limited liability audit corporation
managed by partners who are shareholders withauthority over operational execution.

KPMG AZSA operates as a firm with clarity about
the respective roles of the Senior Executive Board,a decision-making body for corporate management
affairs, and the Executive Board, an executive body.

KPMG’s governance framework comprises thePartners Meeting as the supreme decision-making
body; the Senior Executive Board, as a decision-making
body for management affairs; the Executive Board,as the body responsible for the execution of matters
decided by the Senior Executive Board; and, theManagement Oversight Committee, as a supervisoryand evaluation organization. Additionally, there is the
Public Interest Oversight Committee, an independent
supervisory body, which supervises management fromthe standpoint of the public interest.
Furthermore, we have audit and advisory divisions
providing professional services, which are supported byheadquarter operations.
*For a limited liability audit corporation, partners bear unlimited liability
only for the audit report they have signed. While this organizational
structure reduces the liability of partners, enhancement of theaudit corporation’s financial base, enhancement of disclosures, andregistration with the Prime Minister are mandatory.

Chief Executive Officer (CEO)The Managing Partner is the Chief Executive Officer of
KPMG AZSA and presides over the Senior Executive
Board and Executive Board.
Senior Executive Board
The Senior Executive Board is composed of the CEO
and senior executives. It makes decisions on firmmanagement policies and other significant matters, andinstructs Executive Board members on the executionof corporate affairs. It also prepares draft candidate lists
for members of the Management Oversight Committee
and Public Interest Oversight Committee, as well as for
the Chairman of the Senior Review Board.
(The Senior Executive Board comprises the CEO
and nine Senior Executive Board members)
Executive Board

2-2. T he Partners Meeting as the Supreme
Decision-making Body
The Partners Meeting comprises all partners andadopts resolutions on important firm matters in addition
to matters set forth in laws and regulations and thearticles of incorporation, as the supreme decisionmaking body.

Nomination Committee

Partner Compensation

The Nomination Committee is composed of the CEO,Senior Executive Board members, and Chairman of the
Senior Review Board. It is tasked with reviewing partner
appointments and with drafting disciplinary actions.

Compensation for each partner is decided based ona band according to their job title, role, skills and otherfactors as determined by the Senior Executive Board.
Each applicable band has an associated range of points.
Each year, points to be granted to each partner are
determined based on the results of the performance
evaluation, which is conducted according to the firm’s
partner performance evaluation policy, as well as theresults of a competence assessment and other factors.
Partner compensation is determined by multiplying
the points granted by a monetary value per point.
The Compensation Committee, a subcommittee ofthe Management Oversight Committee, reviews theprocesses for determining the compensation for the CEO,Senior Executive Board and Senior Review Board.

Election System
In order to ensure fair organizational operation, the CEO,Senior Executive Board members and Executive Board
members, all of whom are responsible at various levels
for firm management and execution, as well as themembers of the Management Oversight Committee,
who are responsible for supervision and evaluation, areappointed through direct election by all partners.

28

The Executive Board is composed of the CEO, a Senior
Executive (Chief Operating Officer) and Executives. It ischaired by the CEO in order to execute decision-making
matters of the Senior Executive Board appropriately.
(The Executive Board comprises the CEO, nine Senior
Executive Board members, and 20 Executive
Board members)© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

CEO

Senior Executive Board Member

Toshiya Mori

Kanako Ogura

The chairman of KPMG in Japan, Chairman of
GJP, Head of Digital Innovation

In charge of JICPA matters and special missions

1986 Joined KPMG Minato Audit Corporation
1990–93 Seconded to the Honolulu office
1999 Promoted to partner at KPMG ShinNihon
2004	Joined newly established KPMG AZSA
as partner
2010	Appointed as Executive Board member(current appointment)2015	Appointed as Senior Executive Board member
2018 Appointed as The chairman of KPMG in Japan
2019 Appointed as Deputy Managing Partner
2021 Appointed as CEO

1988	Joined Asahi & Shinwa & Co.
(currently KPMG AZSA)
2008 Promoted to partner
2015	Appointed as Executive Board member(current appointment)
2021 Appointed as Senior Executive Board member

Senior Executive Board Member

Senior Executive Board Member

Hiroyuki Yamada

Michitaka Shishido

Chief Operating Officer,
Tokyo Office Managing Partner
Head of Planning, Head of HR

Head of Tokai District, Head of HR,
Head of Diversity

1991	Joined Asahi Shinwa & Co.
(currently KPMG AZSA)
2004–05 Seconded to London office
2004 Promoted to partner
2015	Appointed as Executive Board member(current appointment)2019	Appointed as Senior Executive Board member

1986	Joined Asahi Shinwa & Co.
(currently KPMG AZSA)
1991–96 Seconded to New York office2007 Promoted to partner
2015	Appointed as Executive Board member(current appointment)2019 Appointed as Senior Executive Board member

Senior Executive Board Member

Senior Executive Board Member

Hiroyuki Yamada

Masahiko Chino

Head of Quality Control,
Head of Risk Management

Head of Clients & Markets,
Head of Public Sector

1987 Joined KPMG Minato Audit Corporation
1991–95 Seconded to the London office
2003 Promoted to partner at KPMG ShinNihon
2004	Joined newly established KPMG AZSA
as partner
2010	Appointed as Executive Board member(current appointment)2017 Appointed as Senior Executive Board member

1988 Joined KPMG Minato Audit Corporation
1993 Seconded to the Honolulu office
1994–97 Seconded to the Los Angeles office
2001	Appointed as Representative Director at thetime of KPMG FAS establishment
2018	Joined KPMG AZSA, appointed as Partnerand Senior Executive Board member

Senior Executive Board Member

Senior Executive Board Member

Daisuke Harada

Yutaka Terasawa

Head of Kansai District, Osaka Office Managing
Partner, Chief Financial Officer, Head of General
Affairs, Head of IPO Support

Head of Financial Services

1987	Joined Asahi Shinwa & Co.
(currently KPMG AZSA)
1997–98 Seconded to Chicago office2008 Promoted to partner2017	Appointed as Executive Board member(current appointment)2019 Appointed as Senior Executive Board member

1986	Joined Asahi Shinwa & Co.
(currently KPMG AZSA)
1991–92 Seconded to Nashville office
2002–03 Seconded to London office2006 Promoted to partner2017	Appointed as Executive Board member(current appointment)2019 Appointed as Senior Executive Board member

Senior Executive Board Member

Senior Executive Board Member

Yoshihide Takehisa

Masakazu Hattori

Head of Sustainable Value

Head of Planning1990	Joined Asahi Shinwa & Co.
(currently KPMG AZSA)
2009 Promoted to partner
2015	Appointed as Executive Board member(current appointment)
2021 Appointed as Senior Executive Board member

1991	Joined Asahi Shinwa & Co.
(currently KPMG AZSA)
2000–02 Seconded to New York office2010 Promoted to partner2017	Appointed as Executive Board member(current appointment)
2021 Appointed as Senior Executive Board member© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

29

2-4. S upervision and Evaluation of Effectiveness ofManagement Functions
The Management Oversight Committee supervises and evaluates thefirm’s management. At the same time, the Public Interest OversightCommittee, whose members also include independent outside members,
supervises management from the standpoint of the public interest. The firm
has established an environment that enables the smooth conduct of thecommittees’ work, which includes a secretariat to assist the Management
Oversight Committee and Public Interest Oversight Committee and ensure
they have necessary information required for their role.
Management Oversight Committee
The Management Oversight Committee is composed of members who are
not engaged in management or execution, and is tasked with evaluating
the effectiveness of initiatives to enhance audit quality. The Management
Oversight Committee has three subcommittees, as described below, andis committed to enhancing the function of audits. The committee members
also attend meetings of management and executive bodies to present theiropinions and periodically report to and exchange opinions with the Public
Interest Oversight Committee. The committee members are also vested withthe authority to express their opinions to the Partners Meeting and also torequest that the Chairman of the Partners Meeting convenes such meetings.
(The Management Oversight Committee comprises five committee members)
Nomination Committee
Screens candidates for the Senior Executive Board, the Executive Board,
the Chairman, the Chairman of the Senior Review Board, members of theManagement Oversight Committee and members of the Public Interest
Oversight Committee.
Audit Committee
Performs audits of the firm’s operations and finances (including subsidiaries),
liaising with the firm’s external auditors and Office of Internal Control.
Compensation Committee
Evaluates whether the compensation of the CEO, Senior Executive Board,
Chairman and the Chairman of the Senior Review Board is decided appropriately
in accordance with the firm’s system for determining partner compensation.
Conduct of Management Oversight Committee Meetings(including subcommittees)
Held at least twice a month
Attendance of Senior Executive Board and Other Meetings

Management OversightCommittee Members
ChairmanJunshiOno

Vice Chairman

Ayumu
Nakajima

Hirofumi
KubotaManabuMatsumoto• Attendance of major meetings including the Senior Executive Board,
Executive Board and KPMG Japan Management Committee• Attendance of meetings such as the Partner Committee, Managing
Division Head Meeting, National Quality Control Partner Council, HR
Partner Meeting, Compliance Committee meetings
Other Activities of the Management Oversight Committee• Reporting to and exchange of opinions with the Public Interest
Oversight Committee

Masahiko
Kobayashi• Interviewing the CEO, Senior Executive Board members, Chairman of
the Senior Review Board, etc.
• Visiting relevant headquarter departments, managing divisions,regional offices and subsidiaries.

30© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

Public Interest Oversight Committee
Independent outside and internal members whooversee firm management for its sound operation fromthe standpoint of the public interest.
An outside member chairs committee meetings. The
committee receives reports from the CEO, Senior
Executive Board members and Management OversightCommittee regarding the firm’s important activities
and management matters, while outside committee
members also choose themes for consideration andproactively hold discussions with the CEO and Senior
Executive Board members.
The committee also monitors the supervision andevaluation processes carried out by the Management
Oversight Committee including those of theNomination Committee, Audit Committee andCompensation Committee.
(The Public Oversight Committee comprises four outside
members and two internal members (Management
Oversight Committee Chair and Vice Chair))Outside Committee Members (In alphabetical order)
Koji Ishida

former Councilor, Policy
Committee, Bank of Japan

Haruya Uehara

Senior Advisor, Mitsubishi UFJ
Trust & Banking Corporation

Mitsudo Urano

former Advisor, Nichirei Corp.

Masahiro Sakata

Attorney-at-Law, Advisor,
Anderson Mori & Tomotsune LPC,
former Director-General, Cabinet
Legislation Bureau

Conduct of Public Interest OversightCommittee meetings• Meetings held once a month in principle• Make inquiries concerning management issues
as appropriate, receive reports from the CEO
and Senior Executive Board members andhold discussions
Other activities of outside committee members• Attending meetings for exchanging opinionswith market participants• Participating in some Audit Committee visits toregional offices• Attending regular Partner Meetings(From left) M itsudo Urano, Haruya Urano, Koji Ishida, Masahiro Sakata

Policy for appointing outside committee members
KPMG AZSA believes that we can strengthen
our governance and increase our managementtransparency by receiving various opinions basedon a broad outlook.
As outside committee members, we appoint
diverse people who understand the viewpoints ofcapital market participants, who have experiencein organizational operations in a company, and/or
who have experience as a legal expert.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

31

Message
Message from the Public Interest Oversight Committee Outside Members(In alphabetical order)

KPMG AZSA’s
Governance Initiatives
Koji Ishida
former Councilor, Policy Committee,
Bank of JapanThe main job of an audit firm is to confirm with a trueand fair view that financial statements have been
appropriately prepared. Smooth economic and financial
activities cannot be maintained without the trust placedin audit firms by clients and stakeholders, and it is ofutmost importance for an audit firm to maintain andprotect this trust. Audit quality needs to be maintainedand enhanced even as corporate activities become
more diverse and complex to prevent this trust fromwavering in any way. An audit firm needs to build andappropriately operate a business management system— in other words, an internal control system. Large
audit firms that have evolved from a partnership have adouble structure in which a majority of partners, who are

KPMG AZSA’s
HR Initiatives
Haruya Uehara
Senior Advisor, Mitsubishi UFJ
Trust & Banking Corporation

For any organization, its people are a major asset. And
for a group of professionals like an audit firm, while
it is of course important to have reliable businessknowledge, I believe it is even more important to havestrong people skills. In order to foster people skills,
the firm’s talent need to have diverse experiences thatare not only about overcoming hardships or working intheir main field, but also having back office and otherwork experience, as well as building relationships andcommunicating with all kinds of people, including thoseoutside of their work environment. In this respect,
KPMG AZSA’s talent development initiative based on theThree O’s (see P.70) enables its talent to interact with all
kinds of people through training sessions, in addition to32

equivalent to investors in a corporation, report to partners
who manage the firm. While having homogeneous
constituents of an organization may be a strength, there
are concerns regarding a lack of robust command and atendency to become a closed organization.
In this regard, I understand that KPMG AZSA aims toensure effective management and execution based on
its management comprising the CEO, Senior Executive
Board and Executive Board, while the Management
Oversight Committee supervises and evaluates theeffectiveness of management functions.
As a member of the Public Interest OversightCommittee, I ensure the transparency of management
decisions through close dialogue with executives fromthe standpoint of an external third party, and inspect
the establishment and operation of the overall internal
control system. Our current evaluation is that an internal
control system is in place and that the governancestatus is appropriate, including the activities of theManagement Oversight Committee.

achieving growth in their main field. The firm has beensteadily implementing many initiatives over a long period
aimed at providing opportunities for diverse experiences.
I believe we all learn from our mistakes, and this has
certainly been true for me. You may not fail if you always
do the same thing or what you are used to doing, but
you will also not grow. Auditing of course requires highquality execution at all times. However, I believe that
individuals can still take on challenges by working as ateam and complementing each other. I understand that
KPMG AZSA is already actively working on providing
its people with opportunities for various experiences
both at work and in their personal life. I hope that thefirm will continue to foster a corporate culture thatencourages taking on new and difficult challenges andmeeting diverse people through overseas assignments
and secondments to external organizations, and that you
will aim to become a group of professionals with strong
people skills.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

The Public Interest Oversight Committee, which regularly monitors the management
functions of KPMG AZSA from the standpoint of the public interest, evaluated and maderecommendations on priority management themes from an objective viewpoint.

KPMG AZSA’s
Digital Strategy
Mitsudo Urano
former Advisor,
Nichirei Corp.

KPMG AZSA is promoting Audit DX (Digital
Transformation) based on the 3C x I concept. The
3C’s (Comprehensive Audit, Centralized Audit, andContinuous Audit) in particular are highly evaluated asthey provide an appropriate and concrete direction for
digital auditing. Based on the 3C x I, KPMG AZSA has
already been using various solutions and audit support
tools, including an automatic disclosure checking
tool (DisclosureBOT_ai), an automatic matching tool
(MatchingBOT_ai), and a tampering detection tool
(KaizanBOT_ai). These original tools, developed aheadof other firms, have improved efficiency in areas that
require a lot of man-hours for the accounting departmentof audit clients, and have also led to cost reduction,

Compliance at
KPMG AZSA
Masahiro Sakata
Attorney-at-Law, Advisor,
Anderson Mori & Tomotsune LPC,
former Director-General, Cabinet
Legislation Bureau

Compliance at KPMG AZSA is supported by the ethicalstandards of individual members of the firm. Audit
firm members are in a position to point out faults
through audits. It is therefore essential that they do
not put themselves in a position of being criticized, andthat they have a sense of professional ethics throughself-discipline. Generally speaking, it is not easy to
improve ethics in the workplace as ethical values are
nurtured largely at home and at school. However, audit
firms are highly regarded as a group of professionals
centered on CPAs who fulfill public responsibilities andshould make every effort to live up to that high regard.
Fostering a sense of pride among firm members in theirwork will naturally heighten their awareness of ethicalstandards and compliance. The attitude of the firm iswhich is considered an important objective of the DX
strategy. In the future, however, it is important to go
beyond this to reduce externalities and create external
economies of scale. Audit firms will need to individuallypromote DX, while also identifying areas for competitionand cooperation between audit firms. Collaboration
with Accounting DX will also be essential for the further
promotion of Audit DX. Encouraging clients to promote
Accounting DX is also an important role of an audit firm.
In addition, we expect the makeup of audit teams toshift to a group of specialists with diverse capabilities,
such as accountants with sector insights, accountants
with strong digital insights, and digital specialists. We
hope that this diversity will act as a catalyst for providing
clients’ management with useful insights.

key to fostering such pride. As is often mentioned inmanagement messages, the actual decision-making
process of the firm, together with the daily actionsof executives and partners, need to reflect the factthat their standard of judgment is based on the public
interest and doing the right thing, rather than on theamount of profit involved, or private interest.
I believe KPMG AZSA is working with a sense ofurgency to foster high ethical standards and complianceawareness. I have high expectations for the Compliance
Promotion Office established last year to proactively
raise compliance awareness while effectively planning,drafting and implementing initiatives for preventing
compliance violations that occur unconsciously due toignorance. However, ethics and compliance awarenessis limitless, and does not improve overnight. The
purpose of CPAs and expectations of audit firms changewith the times, which means that the scope and levelof compliance required by society will also continue toincrease. I hope that KPMG AZSA will continue to makesteady and long-lasting efforts to maintain appropriate
compliance in line with current standards and in
anticipation of future trends.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

33

2-5. Evaluation of Effectiveness of Management Functions
The Management Oversight Committee members attend
meetings of the Senior Executive Board and Executive
Board to present their opinions and conduct interviews
with the CEO and Senior Executive Board members.

Moreover, they are responsible for supervising andevaluating the management and execution by the CEO
and Senior Executive Board members. Results of thesupervision and evaluation are shared at the Partners
Meeting, and the management and executive bodies
will consider improvement measures going forward.

Effectiveness evaluation by the Management Oversight Committee
for the year ended June 2021
The Committee concluded that KPMG AZSA’s initiatives are working effectively.

Status of important matters in the supervision and evaluation by theManagement Oversight Committee and status of initiatives bymanagement and executive bodies• Management engaged in active discussions regarding
KPMG AZSA’s operations

1

Status of compliancewith the Audit Firm
Governance Code• More expansive information provided to support appropriate judgments bymanagement in Partners Meetings• Recommendations were made to the Management Oversight Committee andmanagement by the Public Interest Oversight Committee• Group governance strengthened• Addressing various issues arising due to COVID-19

2
3
34

Status of continuous
initiatives for enhancing
audit quality such as thefour defense lines anddigital audits

Status of establishing anenvironment enabling the
growth of employees withconfidence, such as work
style reforms in line withnew behavioral guidelines,
and talent development• Executed improvement measures for issues identified in
the Audit Quality Enhancement Project• Strengthened the organizational quality control structure based on
the four defense lines• Dissemination of “thinking audits”• Upgraded audit technologies through the implementation and wider use ofdigital audit technologies and provision of audit support tools utilizing AI• Implemented various projects relating to the utilization ofhuman resources and talent development for work style reforms in line withnew behavioral guidelines• Initiatives related to inclusion & diversity• Established and executed preventive measures after investigating thecircumstances surrounding the inappropriate conduct relating to e-Learningand analyzing the root causes© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

Management issues focused on by the Management Oversight Committee
While the Management Oversight Committee assesses management initiatives as effective,
it recommends that the firm tackle the following issues:• Thoroughly building awareness regarding the Code of Ethics for each andevery member of the firm, and having them reaffirm that maintaining a highstandard of ethics and unwavering efforts for self-improvement are the basis
for earning trust as professionals

1Compliance with
Code of Ethics andenhancement of governance• Steadily executing various measures for compliance with the code of
ethics established by the firm. In particular, conscientiously implementing
preventive measures including strengthening the internal control system
and working to restore trust with respect to the inappropriate completion of
e-Learning courses• Strengthen discipline regarding the allocation of resources and the timingof implementation of measures to ensure their effectiveness and enhance
corporate governance2

Continuous initiatives forenhancing audit quality

3

Addressing quality control
standards for audit

4• Incorporating issues identified in the Audit Quality Enhancement Project
and the related improvement measures into firmwide initiatives andexecuting them
• Ensuring appropriate functioning of the quality control system establishedthrough the restructuring of audit divisions to enhance the firm’s expertiseby consolidating sector insights, and addressing sector-specific audit risks
and key audit issues amid the COVID-19 pandemic• In response to the application of ISQM1, ISQM2 and ISA 220, Japan’s
practical guidelines on quality control for audits are scheduled to berevised. The firm will proceed with appropriate preparations for theapplication of revised standards• Monitoring the status of digital audits for all audit engagements and further
implementation support of tools and methods
Audit digitalization• Making efforts to further expand the digital knowledge of partners andemployees in order to respond to the advanced digitalization of society andthe audit environment• Continuous implementation of thorough information security measures

5

Promoting inclusion &diversity• Being open to diverse values and promoting the success of women whilefurther encouraging inclusion & diversity from various viewpoints, including
job type, nationality and age, and qualifications in order to increase ourcompetitiveness by utilizing a wide pool of talent• Establishing a sustainable work environment for handling increased
workload resulting from stricter auditing standards© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

35

3. Quality Control Based on Our Four Defense Lines
Our organizational quality control structure, which we call our four defense lines,
serves as the foundation for KPMG AZSA’s initiatives for enhancing audit quality.

36© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

3-1. A Comprehensive Organizational Control Framework
The four defense lines refer to a system in which the four layers —management (CEO and Senior Executive Board members), quality control
departments, audit divisions and audit teams — each fulfill their respective
duties in regard to audit quality. We can ensure audit quality by building
a comprehensive organizational control system, and consequently,
effectively realize high-quality audits that ensure that no matters arise that
may surprise the market.
The Four Defense Lines also serve the purpose of disseminating themanagement policies of the CEO and Senior Executive Board members
down to the audit teams and sharing information with management at
audit work sites.

• Creating a culture in which individuals take the initiative to enhance audit quality, andensuring this culture permeates audit teams• Maintenance, operation, and continuous improvement of the system of quality
controls and the system for assigning and evaluating human resources• Identification of significant audit risks to be dealt with as a firm and providing
instructions for timely and appropriate actions• Maintenance, operation and continuous improvement of quality control and support
systems to address audit risks• Development of measures and tools for enhancing audit quality in cooperation withaudit divisions• Evaluation of risk assessments made by audit teams in the audit divisions and firmwide assessment of monitoring activities• Assigning the right people according to the audit risk assessment• Ensuring audit teams are thoroughly aware of the measures and tools for enhancing
audit quality• Understanding the material audit risks and status of measures taken throughmonitoring activities, and organizational response• Identification of critical audit risks by exhibiting professional skepticism andimplementation of audit procedures• Review of guidance on audit work papers and human resource development bysupervisors• Timely communication with reviewers© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

37

KPMG AZSA’s initiatives aimed atmaintaining and enhancing audit
quality are based on our organizational
quality control structure of
the four defense lines.

1
2

Review
Boards3
4

38© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

1. Responsibility for Quality Control
Management at the highest rank of the four defense lines is responsible for KPMG
AZSA’s audit quality.

1-1. T he CEO Bears Final Responsibility for
Audit Quality• Maintaining and operating our organizationalfoundation (P.24)

The final responsibility for quality control rests with theCEO. The Senior Executive Board member appointed
by the CEO to oversee quality control is responsiblefor developing overall quality control policies and formonitoring how such quality control policies are followed.

• Maintaining and operating our quality control system(P.38)

Strong messages on the following four points arerepeatedly sent by the CEO and other members ofmanagement to all partners and staff in order to emphasizethat audit quality is the firm’s number one priority.
• Reliability of financial information in the capital
markets is indispensable to the sound growthof Japanese corporations and the sustainable
development of the economy.
• Providing confidence in the financial information of ourclients is our mission as certified public accountants.
• Our top priority is to accurately identify risks basedon a deep understanding of our client’s businessand management environment, and to ensure our
audits do not result in matters that take the market
by surprise. To accomplish this goal, necessary andadequate audit procedures focusing on key audit
issues must be devised and implemented. If any new
and important audit issues or problems are detected,
we are responsible for conveying them to client
management in an accurate and thorough manner.
Number of CEO’s message
Year ended June 2021

27

year

1-2. Maintenance and Operation ofOrganizational Quality Control Structure
In order for our organizational quality control structure
based on our four defense lines to function effectively,
our CEO and Senior Executive Board member incharge of quality control will be responsible for thedevelopment and operation of the necessary structure.

• Promoting talent development (P.68)• Utilizing the KPMG network (P.79)

1-3. Continuous Initiatives for
Audit Quality Enhancement
At KPMG AZSA, we continuously implement activities
for enhancing audit quality through an analysis ofroot causes regarding issues identified in the courseof Communication with Stakeholders (see P.42) andContinual Improvement (see P.63) under the leadershipof our CEO and other management.
KPMG AZSA aims to be an organization in which eachmember can develop through engaging in “thinking audits.”
This refers to audits in which we think autonomously,
which have a story, and also provide Insights.
In recent years, initiatives for work style reforms havebeen promoted robustly as a national initiative, and theproliferation of borderless and digitalized businesses
is accelerating. Meanwhile, there is no end to casesof corporate fraud, and demands for enhanced audit
quality are also increasing on the international stage.
The pursuit of audit quality that meets the expectationsof clients and society is a priority management issue for
audit firms.
Against this backdrop, KPMG AZSA’s Audit Quality
Enhancement Project carried out a firmwide analysisof root causes relating to audit quality over a six-month
period and clarified the roles of the four defense lines.
We further formulated the following improvement
measures with the aim of thoroughly promulgating theinitiatives of “thinking audits.”• Clarifying and visualizing audit risks• Clarifying policies regarding new audit contracts orcontract renewals, and reallocating audit tasks andresources of divisions• Responding to changes (P.6-21)© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

39

• Clarifying the roles and responsibilities of partners,
and reflecting them in evaluations• Creating an environment for continued promotion of“thinking audits” and monitoring various measures
We will continue to pursue audit quality based on athorough operation of the above improvement measures,
while implementing additional measures as needed.

1-4. Improvement through Feedback fromClients (ACCESS)
The firm has established the ACCESS (AZSA Client
Relationship Continuous Enhancement Process) program,which seeks feedback from a client’s management andother personnel on the quality of services provided.
ACCESS is intended to provide an understanding of theclient’s expectations and any areas of dissatisfaction,
as well as areas in need of improvement, all with theobjective of enhancing audit quality.
664 clients provided feedback on audits performed in
the year ended June 2020, and we held discussions
with clients as needed according to the feedback. A
comparison of average scores over the three years

since 2018 did not show any major changes. However,where an individual item ranked lower, audit teams areanalyzing details and discussing a concrete action planfor continuous improvement.
To further facilitate communication, the firm initiated an
ACCESS program for receiving evaluations directly fromthose charged with governance beginning in the year
ended June 2016, and received 671 replies in the year
ended June 2020.
Evaluations regarding audits improved from theprevious year. Evaluations regarding “information
sharing,” while showing improvement from previous
years, scored lower than the overall average.
We also received feedback from clients regarding
our audit response amid the COVID-19 pandemic.
While average scores were higher than the overall
average, we received requests for further action in thecomments section.
We will reflect the feedback in future audits and strive
to make firmwide improvements and provide further
information of value.

» Flow of ACCESS Activity
ACCESS Committee’s actions• Share and analyze issues• Provide feedback to related divisions• Implement and monitor action plans

Improve
Address
Issues

Begin
Audit

KPMG AZSA LLC
Feedback

Complete
Audit

Address
IssuesAudit Client
Feedback

Analyze

Audit Team’s actions• Share and analyze issues• Draft action plan40

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

2. Audit Contracts
At KPMG AZSA we will thoroughly assess risks at the time of contracting, while
establishing a structure for providing high-quality audits through an appropriate
assignment of partners.

2-1. Thorough Risk Assessment in Engagement
Acceptance and ContinuanceWe verify compliance with independence requirements
before proceeding with an acceptance or continuanceof audit contracts. We also conduct a backgroundcheck of prospective clients in accordance with ourrisk assessment policy, including consideration for
management’s integrity, governance status, andthat officers and other key figures do not belong toantisocial forces. We then analyze and evaluate audit
risks before considering the feasibility of addressing
such risks, including securing talent for providing highquality audits. A contract will then be entered into after
completing an approval process.
We review risk assessments at least once a year inorder to ensure a constant understanding of the mostrecent risk status. We also promptly reassess risks if
there are signs of change in the risk factors of a client,such as a change in management or shareholders or
the emergence of a material incident.
Information related to risk assessment is centrally
managed in a database to ensure that significant
audit issues, including fraud risk, are communicatedto successor partners when there is a change inengagement partners.

2-2. Appropriate Assignment of Partners
At KPMG AZSA we appoint engagement partners
with the capabilities, qualities, time and authority
required for appropriately fulfilling their assigned roles
in engagements.
To ensure high-quality audits are provided to all of ourclients, the division head holds discussions with all
engagement partners at least once a year, and verifies
client portfolios of respective clients.
The capabilities, qualities and qualifications of anengagement partner, and the industry, characteristics
and risks of clients, are taken into account in theverification process.

2-3. Change of Auditors
When there is a change of audit firm, departments
responsible for quality control will issue instructions
and attend meetings between the predecessor andsuccessor auditors, as necessary, to reasonably
ensure that the transfer of audit work is appropriately
conducted for both the predecessor auditor andsuccessor auditor.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

41

3. Communication with Stakeholders
At KPMG AZSA, we implement appropriate risk assessments throughcommunication with our clients’ management and auditors. We are also
committed to maintaining and enhancing audit quality through engaging in
dialogue with capital market participants.
3-1. Promotion of Understanding throughCommunication with Management•D iscussions when fraud is identified or there is suspicionof fraud

We communicate with the client’s management in orderto understand their decisions, and the background to thedecision-making process, which have a significant impact on
the financial statements of an audit client. This enables us tounderstand the nature of the audit client’s business and carryout appropriate risk assessments without overlooking any riskof material misstatement due to fraud or error.

•D iscussions when material deficiencies are identified ininternal control

We share any issues regarding key matters with clientsin a timely manner so as to prevent any unexpectedissues arising.
Furthermore, we promptly discuss with clients what actions
are appropriate or are required to deal with any situations
that are identified, including where material misstatements
are identified during audits, where misstatements due
to suspected fraud are identified or where a significant
deficiency in internal controls needs to be disclosed.

3-2. T wo-Way Communication with Those
Charged with GovernanceIn order to strengthen corporate governance, cooperation
between those charged with governance and external
auditors is essential. KPMG AZSA engages in open
and frank two-way communication through reporting tothose charged with governance and through continuous
consultations in order to share issues that have arisen
during audits and other information that is useful tothose charged with governance. Specifically, if a client
is a listed company, reports and briefings are madeperiodically through formal correspondence, interviews
and other means depending on the status of the audit orquarterly review. For situations requiring timely action,communication channels are maintained to allow for adhoc consultations.
Two-Way Communication with Those Charged
with Governance• An explanation of the audit plan
• Results of quarterly reviews• Companies Act audit results• Financial Instruments and Exchange Act audit results• Compliance status of laws and regulations, anddiscussions regarding material misstatement risks
including fraud42

3-3. C ommunication with Client’s Internal
Audit Department
Collaboration with a client’s internal audit department,
which is familiar with the details of the company’sbusiness, is important for performing effective andefficient audits in a business environment where drasticchanges occur. KPMG AZSA proactively works onappropriate collaboration with internal audit departments.
Communication with Internal Auditors•E xchange of information on internal audit plan•D
 iscussion of risk assessment by the internal auditor•D iscussion of internal audit results and conclusions

3-4. Proactive Dialogue with Market Participants
Sharing information more broadly with the public regarding
the activities and initiatives of audit firms is an important
issue as an audit firm. We also feel it is necessary to have anappropriate understanding of the societal changes and needs,
and perform audits that meet such standards of expectation.
KPMG AZSA therefore takes every opportunity to
exchange opinions with investors or those involved in
the operation of the capital markets. In explaining our
initiatives for enhancing audit quality and deepening theunderstanding of audits, we will listen to the opinions of
all those concerned and utilize them to achieve further
improvements in organizational operations.
March 2021
<Meeting for exchange of opinions with market participants>“Disclosure of non-financial information andour firm’s response”
We exchanged opinions regarding the disclosure of
non-financial information with outside experts, including
regulatory authorities, the Japan Audit & Supervisory
Board Members Association, and academic experts. We
asked participants to share their opinions on the disclosureof narrative information for the year ended March 2020,
issues related to future disclosures and expectations they
have of audit firms in addressing disclosure expansion. We
then explained the current status of our firm’s response.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

4. Audit Methodology and Audit Team Formation
At KPMG AZSA, we continuously invest in our audit methodology and tools inorder to perform high-quality and efficient audits. We have also established andoperate a system that allows partners and team members to secure sufficient
hours for executing their work.
4-1. Global Audit Methodology
KPMG AZSA conducts audits in accordance with the
KPMG Audit Manual, which is the manual used incommon by KPMG member firms. The KPMG Audit
Manual contains KPMG’s audit methodology andaudit policies that must be complied with, meetinginternational audit requirements while including
additional requirements for the maintenance andenhancement of audit quality.
KPMG AZSA has added to the KPMG Audit Manual
criteria required of professionals that are uniqueto Japan, as well as applicable laws, regulations,guidelines and other norms. KPMG AZSA also
maintains the Combined Audit Manual (CAM) basedon the KPMG Audit Manual for audits of internal
control, allowing efficient integrated audits of financial
statements and internal controls.

4-2. M anual-based Utilization of Electronic
Audit Tools
At KPMG AZSA, working papers are created using
eAudIT, an electronic audit tool. eAudIT supports
auditing based on the KPMG Audit Manual and canbe accessed at all times simultaneously by themembers of audit teams. eAudIT allows the timely
and appropriate preparation of working papers andreview by supervisors.

4-3. Introduction of Digital Audit Platform
While the current audit workflow, eAudIT, and the audit
manual, KAM, are consistent with the requirements of
all auditing standards, KPMG International and KPMG
AZSA have been working on the development andintroduction of a new audit platform, KPMG Clara,
with the aim of enhancing audit quality and expanding
the use of new technologies. KPMG Clara integrates
advanced and automated data analysis, a collaboration
platform, and a new audit workflow (KPMG Clara

workflow). This enables us to perform consistentinnovative and high-quality audits, and to provide useful
insights to our audit clients.
KPMG International and KPMG AZSA have started
introducing the KPMG Clara workflow and acorresponding new audit manual, the KPMG Audit
Execution Guide, with full deployment scheduled forthe 2022 fiscal year.

4-4. Formation of Audit Teams According toSkills and Experience
We have a talent management system comprising a
database of skills required for various tasks and scopeof experience in the industry and sector to which an
audit client belongs. Leaders of the firm’s management
units, including offices and audit divisions, utilize thissystem to identify candidates and assign appropriate
partners and professionals to form an audit team.

4-5. A ppropriate Involvement ofEngagement Partners
Audit partners are in a position to bear responsibility
regarding all processes and results of an audit. Basedon a sufficient understanding of a client, partners will
be appropriately involved and exert their leadershipin each stage of assessing risk, addressing risk
procedures and coordinating audits.
Full participation by the engagement partner is
indispensable in identifying critical audit matters,such as areas requiring judgment and significant risks.
Full involvement of engagement partners allows for
effective and efficient audits.
When multiple partners are involved, the partners
clarify the roles they have within an audit team to fostera strong sense of ownership and responsibility. We will
work to enhance audit quality by securing appropriate
partner resources.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

43

4-6. Involvement of Specialists Such as
IT Experts

4-8. Promoting Efficient and Consistent Audits
Through Work Centralization

Where an audit involves complex IT processes,
transactions requiring expertise related to tax, financeor pensions, or fraud, experts will be involved.

At KPMG AZSA, we established the AZSA Delivery
Center (ADC) within the Quality Assurance
Headquarters to centralize audit tasks. We are also
continuously working to create an environment in which
our professionals can focus on areas requiring highexpertise by embedding audit assistants in our audit
teams (323 assistants as of the end of June 2021).

Specialists belonging to KPMG AZSA or another KPMG
member firm, or a specialist from Global, may be
involved depending on the risk assessment.
KPMG AZSA’s policy is to include IT specialists withexpertise in information technology and system audits
in audit teams in order to address the increasingly
sophisticated and complex information systems ofclients. For the year ended June 2020, specialists wereinvolved in 1,468 audit teams.

4-7. S ecuring Working Hours for
Audit Team Members
The assignment of audit team members is decided insuch a way as to ensure that sufficient time is allowed
for completing essential tasks such as assessing risks
and procedures for addressing risks. The streamliningof audit tasks will also be driven through the automationand centralization of various tasks.
Meanwhile, we have also established a mechanism forpreventing excessive overwork through measures suchas restricting access to internal networks.

The ADC centralizes tasks including support forreconciling vouchers, checking financial statements,
and preparing audit instructions sent to overseas
subsidiaries. We will continue to improve efficiency andconsistency through further centralization of audit tasks.
We have also been working on the centralization andstreamlining of sending and collecting confirmation
letters through the establishment of the Audit
Confirmation Center GK (ACC) as a joint investment
with the other three major audit firms.
As a result, the centralization of confirmation letters forthe entire firm for the year ended June 2021 reached79.3%. ACC has been promoting the digitalizationof confirmation letters, and as of the end of the year
ended June 2021, over 10,000 confirmation letters at
approximately 1,000 audit clients were electronic. We
will continue to promote the streamlining of tasks relating
to confirmation letters by driving further digitalization.

» Average Annual Audit Hours According to Title
Title

Year ended
June 2021

Partner

2,003

Senior Manager, Manager

2,060

Other professionals

2,028

Average

2,032Standard annual
audit hours

1,687* Standard annual audit hours are calculated by converting the annual number ofworking days specified by the firm based on a 7-hour working day.
* Time spent on engagement work, management work and training is included in
audit hours, while non-assigned hours or used for leave is not included.

44© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

5. Pursuing a High Level of Expertise andProviding High-quality Services
At KPMG AZSA, the quality control department and support departments liaise tosupport the implementation of high-quality audits by audit teams. A system has also
been developed that is fully capable of addressing IFRS standards and US standards.

Headquarters oversees matters regarding professional
ethics and independence, the supervision of quality
control as well as information security.

5-1. Quality Control Department Comprising
Two HQ Functions
The quality control department within KPMG AZSA
consists of the Quality Assurance Headquarters andRisk Management Headquarters.

Both headquarters comprise partners and professionals
with experience in the relevant field, and provide
appropriate support to audit divisions and audit teams.

The Quality Assurance Headquarters oversees mattersregarding the quality control of audits and accounting
treatments and disclosures. The Risk Management

In addition to the quality control department, we havealso established the Senior Review Board, Divisional» Quality Control Departments
Firm Management
CEO and Senior Executive Board Members

DirectReportReview Board

Support Departments
to Quality Assurance

Quality Control Departments
Quality Assurance
Headquarters

Senior Review Board●

Divisional Review
BoardsRisk Management
Headquarters

Audit Practice Department●

AZSA Delivery Center
Audit Operations Reform Ofﬁce

Office of Senior
Review Board●

Risk Management Ofﬁce
Audit Monitoring Ofﬁce
Compliance Promotion Ofﬁce
SoQM Ofﬁce

Accounting Practice Department
IFRS Advisory Ofﬁce
US Capital Markets Ofﬁce●

Risk Management●●

Digital Innovation●

GJP Network/
Country Desk●

Sector Management
Ofﬁce

Information Security
Department

Department of Promotion ofAdvanced Disclosures

Instruction/
SupportInquiry

MonitorReportAudit Divisions
Risk Assessment & Monitoring

Audit Teams
Team 1Team 2

Team 3

Team 4

Team 5…

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

45

KPMG AZSA’s quality control department works closelywith the following departments in working towards theenhancement of audit quality.

Partners at our headquarters with a wealth ofexperience and insights monitor key audit areas
according to themes across all audit divisions. We
have a lateral understanding of the monitoring status ofeach audit division through communication with audit
divisions every three months.

• Digital Innovation Division (DI) — Carries out
research and development for the sophistication andstreamlining of audit procedures utilizing AI anddigital technologies.

This also serves the purpose of making audit divisions
aware of matters that need to be addressed or issues
common to many audit tasks in response to changes in
the outside environment.

Review Boards for implementing quality control reviews
from a standpoint independent of management, as wellas the Review Support Office for supporting operations.

• GJP Network and Country Desks — Support themaintenance and enhancement of audit quality at a
global level through collecting information on risks
including those relating to accounting, tax, andgovernment regulations, and supporting audits foroverseas subsidiaries (see P.50).
» Headcount of Quality Control Departments(including those with concurrent roles)
as of June 30,
2020

as of June 30,
2021

149

169

Audit Assurance Headquarters
Risk Management Headquarters

111

112

Total

260

281

as of June 30,
2020

as of June 30,
2021

212

220

» Headcount of Review Boards

5-2. M onitoring of Audit Tasks by the Audit
Divisions and Headquarters
Our audit divisions and Risk Management Headquarters(Audit Monitoring Office) monitor audit tasks with the aimof maintaining and enhancing the quality of all audit tasks.
Through such monitoring we can gain an understandingof particularly significant risks, and support resolving
accounting and audit issues as necessary while
confirming the response status of audit teams on an
ongoing basis. Audit divisions select companies subject
to monitoring taking into account overall risks of auditsthat the division oversees, and inherent accounting andaudit topics of the respective financial year.
Audit tasks are monitored by partners with appropriate
experience and knowledge from the perspective of a third
party, from the viewpoints of whether the planning andaudit procedures performed are necessary and sufficient
together with the progress of the audit, and whether
descriptions in audit work papers are sufficient and clear.

46

Companies subject toaudit monitoring as ofJune 30, 2021

197

companies

5.3. Establishment of Portal forProfessional Opinions
We have established a portal for receiving professional
opinions related to individual engagements in order toassist audit engagement professionals in addressing
difficult or contentious matters. If review by the Senior
Review Board (see P.60) is deemed necessary as a resultof a consultation, audit teams will promptly receive sucha review. KPMG AZSA accepts advance consultations
from audit teams even for cases for which consultations
or review by the Senior Review Board are not mandatory,
and encourages consultation submissions and quality
control reviews where appropriate.
Engagement teams are required to submit professional
opinions to the portal when indicators suggesting material
misstatements due to fraud are identified (see P.53).
Moreover, we are also progressing with the utilizationof our accounting and audit Q&A system (KOMEI)
that accumulates and shares insights within the firm
through the utilization of AI technologies, in addition
to releasing an FAQ page on our website based on aclassification of inquiries received from audit teams.
Through this process we are able to narrow down our
focus on matters of higher priority and secure time forconsideration with a focus on these matters.

5-4. Contribution to the Development of
Accounting and Audit Standards
KPMG AZSA sends our professionals toaccounting standard and audit standard
development bodies, thereby contributing to
the development of such standards.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality» Flow of Inquiries
Senior Review

Escalation as necessaryCompile into
a database

Portal for consultations
Audit procedures

Inquiry

Answer

Accounting/Disclosure

Inquiry

Answer

Fraud

Inquiry

Q&A Accounting
and Audit System“KOMEI”

Answer
SearchEngagement Team
Examples of transactions that require consultation
・When consideration is required for the accounting treatment of transactions with a complex scheme
・When consideration is required for the accounting treatment of transactions for which business practices are not yet established・When signiﬁcant changes occur in the audit plan (e.g. when implementing alternative procedures due to not being able toimplement important audit procedures as scheduled due to impacts of COVID-19)
・When fraud is identiﬁed (including suspicion of fraud)

5-5. E
 nsuring a Sufficient Audit Structure forCompanies Adopting IFRS Standards» Structure for Addressing IFRS Adoption

At KPMG AZSA, we have many professionals with awealth of experience in audits of companies adopting
IFRS standards both in and outside of Japan.

Companies that have adopted or plan toadopt IFRS Standards

KPMG AZSA has continuously seconded our employees
to the IFRS-setting body IASB and KPMG’s central
organization for IFRS standards (International Standards
Group based in London), and has accumulated insights
regarding audits for Japanese companies centering on
our partners with a wealth of IFRS knowledge.
At KPMG AZSA, we have developed a system formaking judgments for ourselves on issues regarding
the interpretation and application of IFRS standards inaccount closing and audits for Japanese companies
based on such insights, and have the capability toprovide interpretations and judgments appropriate to
the practice of Japanese companies in a timely andappropriate manner.
We have also established the IFRS Advisory Office
for analyzing topics specific to Japan, and collectand share information relating to recent IFRS trends,
while also writing articles or books for publication, andholding seminars.
We have prepared a structure for responding to
IFRS standards through practice and training for thecontinuous growth of talent in anticipation of a further
increase in companies adopting IFRS standards.

(as of June 30, 2021)

Professionals that have completed the IFRS Update training

71
1,802

Professionals seconded to the IFRS Foundation

6

5-6. Expertise Regarding US Standards
The Department of Professional Practice collects
and shares information on the latest trends anddevelopments in IFRS, US and Japanese standards.
Audit teams need to make judgments related to various
issues of interpretation and application of US GAAP/GAAS at Japanese clients that arise during the closingof accounts and during the audit. KPMG AZSA’s
US Capital Markets Group, established within the
Department of Professional Practice, supports audit
teams by interpreting US GAAP/GAAS in the context ofbusiness practices of Japanese corporations.
The US Capital Markets Group is organized aroundthose who have experience in the US member
firm’s quality control department, US Department ofProfessional Practice (US-DPP, New York), thereby
providing a high degree of expertise in US standards.
The head of the US Capital Markets Group also
concurrently serves as the Leader of DPP for the
AsPac (Asia Pacific) region, and has a high degreeof knowledge and expertise enabling appropriate
judgments to be made that suit the actual practices ofJapanese companies conducting business globally.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

47

5-7. R estructuring with Managing Divisions to
Make Better Use of Sector Insights
The need for timely responses to sector-specificproblems and challenges in a social environment wherecomplex changes are occurring at an unprecedented
speed has made consolidating sector insights more
important than ever. On July 1, 2021, we restructured
KPMG AZSA’s divisions with the aim of enhancing
our expertise by aggregating sector insights. We also
assigned a SQP (Sector Quality Partner) and SL (Sector
Assurance Leader) for each sector in line with thisrestructuring. The SQP aims to enhance audit quality
based on sector-specific issues while the SL aims tofoster talent for strengthening sector insights and toprovide value-added information to audit clients.
The enhancement of corporate disclosures including
non-financial information is rapidly progressing as
companies face a growing demand for sustainable
management in recent years. Audit firms are therefore
also expected to have more sophisticated insights
by sector, and a transition to a structure capable ofunderstanding and addressing sector-specificbusiness risks in audit procedures is essential for
meeting such social needs.

We have introduced a structure in which two divisions
are established under a managing division, thereby
creating a firewall for assigning competing audit clientsto separate divisions.
SQP (Sector Quality Partner)
Reporting to the Head of Quality Assurance, the SQP will
be involved in understanding audit risks for engagements
and decisions on the acceptance, continuance, andtermination of audit contracts, in addition to monitoring
audit procedures and working papers, and advising on
accounting and audit issues for engagements in the sector
for which the SQP is responsible.
The SQP will work with the SL to share information
on sector-specific industry information and businessrisks, address accounting and audit issues, and promotestreamlining and standardization specific to the sector.
SL (Sector Assurance Leader)
The SL supports audit teams by collecting sector insights
and disseminating useful information based on such
insights. The SL will first collect sector insights within
the managing division and develop sector talent throughtraining, while forming a firmwide sector community
for sharing sector insights. The provision of high valueadded sector information will become possible byaggregating sector-specific insights obtained from nonfinancial information and integrated reports.

» Restructuring with Managing Divisions to Make Better Use of Sector Insights
Identiﬁcation and consideration of
the following:・Sector-speciﬁc business risks
・Sector-speciﬁc accounting and audit
issues・Streamlining of standard audit
procedures and working paper
preparation
Understanding ofindividual company
information

Head of Managing Division

Head of Quality Assurance

SQP
Sector Quality Partner

Viewpoint of
improving quality
and efﬁciency

SL

Sector Assurance
Leader・Collaborates with the SQP
to disseminate informationand share knowledge for thesector community

Information
disseminationand knowledge
sharing

・Cross-sectoral engagementmonitoring and counseling・Provides sector information for
consideration by the SQP・Joint consideration of
sector-speciﬁc business risks
with the SQPSector community within the ﬁrm

Audit engagement teams
belonging to the same sector

Industry(Sector)48

Finance

Telecommunications, Media,
General Trading
Companies

Service,Technology,
Entertainment

Client teams belonging to the same
sector in other managing divisions
and regional ofﬁces

Consumer Goods,
Logistics, Distribution,
Transportation,
PublicLife
Science,
Energy,Chemicals

Automotive,
Manufacture,
Construction,
Heavy Industry© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

6. Audit Structure for Addressing the Globalization of Clients
With the global impacts of COVID-19, significant changes are occurring in how to
conduct global business. KPMG AZSA has an audit structure and support system
in place that goes beyond borders to address the globalization of our clients.

6-1. Implementation of Group Audits
According to Materiality
For group audits, the parent company audit teamconducts an assessment of financial materialityand degree of risk for consolidated subsidiaries andplans required audit procedures for each company
according to materiality.
The subsidiary audit teams perform audits based on
instructions from the parent company audit team.
The parent company audit team expresses an opinion
on consolidated financial statements after receiving
reports on audit results from subsidiary audit teams.

Designation

6-2. Parent Company Audit Team Initiatives
Close cooperation between parent and subsidiary audit
teams is important for ensuring the smooth completionof group audits.
Given that material accounting and audit issues arise
in subsidiaries located in regions with significantly
different accounting practices and business styles,

Information sharing

Other
component
unit

Depending on
the risk, financial
statement audit,
risk-specific audit
procedures, or
analytical procedures
at a group level
perform by the parent
company auditor

Sharing overall
informationand issues andproblem solving

Reporting

Audit procedures
addressing financial
statement audits orrisks of each company

4-way communication
Information sharing/
Reaching a uniﬁed view

Significant
component
unit

KPMG AZSAParent Company
Audit Team

Instructions

Companies otherthan the above

Reporting on mattersunder consideration
Presenting a uniﬁed
KPMG view

Audit Procedures

Audit Client

Companies with highfinancial materiality

Companies withsignificant risks inconsolidated financial
statements

KPMG AZSA gains an understanding of issues throughappropriate communication utilizing online meetingsystems and remote reviews of audit working papers.
Engagement partners of the parent company audit
team ensure that there is close communication
between the parent company, overseas subsidiaries
and local audit teams to ensure a smooth resolution ofissues even with restrictions imposed on travel amid
the COVID-19 pandemic.
» Communication in the Group Audit» Scoping of Group Audits
Consolidated
Subsidiaries etc

the parent company audit team in Japan should takeownership to solve problems collaboratively, rather thanleaving issues to be resolved by subsidiary audit teams.

Overseas
KPMG Firms
Client Overseas
Subsidiaries

Audit/
Information sharing

Component
Auditor

6-3. E
 nsuring Consistent Standards ofAuditing at a Global Level
All KPMG member firms strictly comply with prescribed
procedures based on a common quality management
framework and audit methodologies.
We are therefore able to ensure consistent standardsof auditing at a global level by having our KPMG
member firms carry out the audits of our clients’
overseas subsidiaries.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

49

6-4. Contributing to the Enhancement of Audit
Quality at a Global Level
KPMG AZSA fulfills an important role in KPMG’s audit
quality enhancement at a global level. KPMG AZSA’s
Deputy Managing Partner (Head of Quality Control) isin a position of representing and leading Asia Pacific(AsPac) as the Regional Head of Audit & Assurance,
while also serving as a member of the Global Audit
Steering Group (GASG) which includes representativesof the top ten countries, and is deeply involved indeciding policies and measures at a global level.

6-5. Collaboration with KPMG Member Firms
KPMG AZSA participates in KPMG’s Global Board
meetings as a leading country and is strengthening ourconnection with KPMG member firms in all countries
through a close exchange of information.
This allows us to take necessary measuresappropriately in liaison with KPMG member firms if
issues should occur in group audits.

6-6. The GJP Network

GJP has established a network of Japanese-speaking
professionals including professionals on secondment in
89 cities across each of our regions: Americas; Europe,
Middle East and Africa (EMA); and Asia Pacific (AsPac).
We implement high-quality group audits and advisory
services through this network. The network also
provides the latest local information in Japaneseand supports the entry of Japanese companies into
overseas markets.

6-7. S upporting Local Professionals on
Secondment from Japan
KPMG AZSA has established divisions for four regionsof high strategic importance for Japanese companies(China, ASEAN, India, Middle East and Africa), as well
as Country Desks comprising professionals who haveexperience working abroad in over 30 countries.
Those in charge of Country Desks support local
professionals on secondment from Japan, andliaise with KPMG member firms to coordinate
information regarding each region and realize smoothcommunication in group audits.

The GJP Network (Global Japanese Practice
Network) is an organization supporting the provisionof optimal services to Japanese Companies by
KPMG member firms.
» GJP Network

KPMG in JapanGJP Headquarters

Europe, Middle East
and Africa
about

85

peopleAmericas

Asia Pacific

about

420

peopleabout

300

peopleNumbers above are Japanese-speaking professionals(as of June 30, 2021)

50© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

7. Initiatives for Improving Transparency of Audit Reports (KAM)
The application of KAM (Key Audit Matters) has been mandatory fromthe year ended March 2021.*
KPMG AZSA has been continuing efforts to make KAM descriptions more meaningful.

7-1. Enhancement of Audit Report Descriptions
in Response to Expectations ofMarket Participants
In accordance with the “Opinion on the Revisionof Auditing Standards” published by the BusinessAccounting Council of the Financial Services Agency
in July 2018, the mandatory application of KAM has
been introduced to audits of listed companies under the
Financial Instruments and Exchange Act from the year
ended March 2021.
KAM was introduced in response to indications
from market participants that the audit process was
becoming a black box and that the auditors’ work was
hard to understand.
KAM is intended to improve the transparency of audits
and enhance the information value of audit reports
for market participants. This has led to expectationsof further improvements in the quality of audits andfinancial statements based on a shared understanding
and appropriate discussion of key audit issues andresponses among management, those charged withgovernance, and auditors.

7-2. E nhancement of Information Disclosure
by Companies
In parallel with the introduction of KAM, efforts areunderway to enhance disclosure in securities reports.

Requirements relating to the disclosure of narrative
information including risk information and management
discussion and analysis (MD&A) have expanded fromthe year ended March 2020. In addition, the AccountingStandard for Disclosure of Accounting Estimates has
been applied regarding information that needs to bedisclosed in the financial statements from the year
ended March 2021.

7-3. KAM Application Schedule
Against this background, early application of KAM has
started from the audits for the fiscal year ended March
2020. KAM application is mandatory from the year
ended March 2021 for audits of listed companies under
the Financial Instruments and Exchange Act.
» Adoption Schedule of KAM

Year ended
March 2020

Early application

Year ended
March 2021

Mandatory application

Year ended
March 2022

Analysis of application status
and further improvements» KAM Overview
Descriptions included for matters selected as KAM
Key Audit
Matters（KAM）

Deﬁnition of KAM
Those matters that, in the auditor’s professional
judgment, were of most signiﬁcance in the audit of
the ﬁnancial statements of the current period.

●
●
●
●

Reference to the disclosure in the relevant ﬁnancial statement
Description of individual KAM
Reason for selecting a matter as a KAM due to its signiﬁcance in theﬁnancial statement audit
Audit response to the matter

KAM requirement according to audit report●●

Financial Instruments and Exchange Act audit report (consolidated andnon-consolidated): Required
Companies Act audit report (consolidated and non-consolidated): Optional© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

51

Initiative 1

Strengthening our audit response to KAM

7-4. Initiatives Implemented Toward Mandatory
KAM Application
KAM application started from audits for the year ended
March 2020. While the number of early application
cases was limited to about 50 companies as it
coincided with the COVID-19 pandemic, initiatives forearly application and an analysis of results provided
useful insights toward mandatory application.
KPMG AZSA mainly implemented the following
initiatives based on an analysis of early application cases.
• Expansion of guidance regarding KAM selection anddescription and examples of KAM description• Discussions and additional consideration withaudit clients regarding the accounting treatment
and disclosure of matters selected as KAM, andconfirmation of sufficiency of corresponding
audit procedures• Workshop to consider the description of KAM basedon preceding overseas cases• All drafts were reviewed multiple times by members
outside of the audit team (including a review byJapanese language experts and a review of KAM in
English). In particular, we made careful judgments
regarding matters that required significant auditor
attention, including the possibility of the judgmentthat there are no KAM by involving the relevant
persons responsible from headquarters.

7-5. A nalysis of KAM Cases in the Year Ended
March 2021
KPMG AZSA believes that the description of KAM
is extremely important for providing information on
audit quality to those charged with governance andusers of financial statements to enable an appropriate
evaluation of our audit quality. We therefore developed
the KAM Analysis Tool for analyzing KAMs in the year
ended March 2021 and conducted a detailed analysis.
We will further consider the description of KAM byhaving discussions with our stakeholders based on
analysis results.

7-6. Initiatives For Making the Description of
KAM More Meaningful
KPMG AZSA will promote the initiatives shown on
the right in order to make the description of KAM
more meaningful.

In the process of finalizing the description of KAM,
there were cases for which our audit was morethorough than in prior years due to a review of our audit
approach in response to questions and suggestions
from stakeholders to the audit team.
The introduction of KAM was intended to bringabout such a cycle in which disclosures lead to theawareness of issues which in turn lead to a morerobust audit response.
We believe that it is important for this kind of cycle tofunction effectively in order to further enhance our audit
quality, and we will deepen the dialogue regarding KAM
with our stakeholders.
We will deepen the dialogue with relevant parties to provide
an opportunity for them to discuss the description of KAM,
thereby promoting the enhancement of audit quality.

Initiative 2

Consideration of KAM in line with the
expansion of corporate disclosures
KAM are closely related to notes on accounting
estimates and the narrative information in securities
reports because they often concern estimatesof future events, such as the need to recognize
impairment losses on fixed assets.
There are also many matters selected as KAM
for which the ultimate outcome is uncertain,
and which are significant for understanding
corporate information.
As part of our initiative to enhance the description of
KAM, we will continue to hold in-depth discussions
with management and those charged withgovernance to ensure that information disclosure
overall meets user expectations and contributes toconstructive dialogue.
We will strive to ensure that information disclosure meetsuser expectations by discussing the description of KAM in
addition to corporate disclosures.

Initiative 3

Detailed descriptions specific toindividual clients
Our firm has implemented measures to ensure thatthe description of KAM is provided in detail in a clientspecific manner.
When a matter with a high degree of uncertainty
is selected as a KAM, a client-specific detailed
description of the matter may be particularly
useful to users. A client-specific description is
also important for communicating audit quality tofinancial statement users.
We will continue to make the description of KAM easierto understand and detailed in order to appropriately
communicate our audit response to significant audit
issues and fulfill our auditor accountability.
We will include client-specific and detailed descriptions of
KAM in order to provide information that contributes to theevaluation of audit quality.

52© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

8. Actions to Address Fraud and Fraud Risk
KPMG AZSA identifies and assesses fraud risk and formulates audit plansaccording to risk. We also make the completion of training courses on fraud
mandatory for all of our professionals involved in audit services.

8-1. A More Robust Structure for Addressing
Fraud Risk
Even after the Financial Services Agency issued
the Standard to Address Risks of Fraud in an Audit,
accounting scandals continue to occur. Based on
this standard, KPMG AZSA develops overall audit
plans that ensure sufficient time, assignment ofappropriate specialists and implementation of
specific audit procedures to address identified fraudrisks. In situations where a material misstatement issuspected or identified, it is always reported to the
Quality Assurance Headquarters through the portal for
professional opinions. Instructions are then received
from the Quality Assurance Headquarters on the audit
procedures to be implemented and whether or not
review by the Senior Review Board is required. Review
by the Senior Review Board is mandatory in cases
where a material misstatement is suspected.
At KPMG AZSA, all partners and managers engaged
in audits are required to attend multiple training
sessions on fraud to raise their awareness of fraud.
These training sessions explain specific fraud casesand provide reminders for auditors using cases fromthe Audit Recommendations Guide, which is issued by
the Japanese Institute of Certified Public Accountants(JICPA) for practical use in the routine execution of audits.

8-2. Quick Action in the Event of Fraud
Quick action is required when a client has committed
fraud. The client needs to make clear all facts andanalyze the cause of the fraud, determine any impact
on accounting and investigate whether or not othersimilar situations exist. The client then needs toconsider whether financial statements in prior years
need to be revised, while implementing measures toprevent a recurrence and taking corrective actions forinternal control. It is further necessary to devise andimplement measures to prevent a recurrence of similarcases, take corrective actions for internal control andconsider whether prior year financial statements must
be revised. For such clients, the audit team provides
timely and appropriate advice in consideration of theadequacy of the client’s investigation, determinationof the need for retroactive corrections, and corrective

actions taken with respect to internal controls.
Depending on the case, a specialist with insight into
fraud and corporate malfeasance investigations may be
involved to complete the necessary procedures.
Where fraud takes place at an overseas subsidiary,communication may be inadequate due to differencesin business practices, values and cultural norms among
various countries. Such situations require carefulattention so that adequate investigations and timely
reporting may be conducted locally. The audit team ofa parent company must collect information and identify
and assess the fraud risk in cooperation with auditors of
the component. Necessary information is provided andinstructions are given to auditors of the component sothat the local audit is performed efficiently.
» Examples of Actions Taken to Address Fraud
ClientAudit Team• Suspicion of fraud uncovered
through whistleblowing (Indicationof material misstatement)• Fact finding throughinternal investigation• Reporting to the audit firm,
discussion of actions to be taken• Clarification of all facts,
investigation into the cause of
the fraud, and investigation into
similar situations• Consultation with Engagement
Quality Control (EQC) reviewer• Consulting with the Quality
Control Headquarters• Involvement of a fraud specialist• L aunch an official
internal investigation*• Consideration of the need for
retroactive revisions of prior year
financial statements; if necessary,
revisions to be made• Report results of investigation• Review results of internal
investigation, selective conductof own investigation• Consideration of the need for
retroactive revisions of prioryear financial statements• Consultation with EQC reviewer• Review by the Senior
Review Board• Consideration by the Compliance
Committee and decision on
disciplinary actions• Improvement actions forinternal controls• Verification of internal
control improvements• Consultation with EQC
reviewer* Depending on the nature of the case and the financial impact, a third-party
committee may need to be organized in addition to internal investigation.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

53

9. Independence, Integrity, Ethics and Objectivity
Strict independence is required for the provision of audit services.
At KPMG AZSA, we establish rules and policies regarding independence andimplement training and monitoring initiatives.

9-1. E
 nactment of Code of Ethics on
Maintaining Independence
KPMG AZSA stipulates policies and procedures
regarding matters including firm independence,
independence at an individual level, relationships
after retirement, rotation of partners and audit teammembers, and approvals of audit and non-audit
services. Our internal ethics policies regarding themaintenance of independence reflect the requirements
of KPMG’s independence policies, the Certified Public
Accountants Act and other Relevant Ordinances,and the JICPA’s Code of Ethics and Independence
Guidelines.
In addition, the following matters are implemented forall of our partners and employees.
• The completion of training programs regarding
independence and affidavits is mandatory, andthoroughly disseminated.
• Investigations on the economic independence ofindividuals are conducted, and the compliance status2020 年 6月期
2021年 6月期
of independence monitored.

Submission rate ofwritten afﬁdavits of
independence

Number ofviolations identiﬁed

100 100
8 1%

FY endedJune 2020

FY endedJune 2021

FY endedJune 2020

FY endedJune 2021

9-2. R otation of Partners andAudit Team Members
There is a limitation as to the number of years KPMG
AZSA partners can be involved with the same client(this includes years before being appointed as theengagement partner for Public Interest Entities).
This limitation complies with the Certified Public
Accountants Act and other Relevant Ordinances, the
JICPA’s Code of Ethics and related regulations, andour firm’s policy, “Limitations on the Maximum Period
of Involvement of Partners in Audit and Attestation
Engagements,” which reflects KPMG International’s
policies in this area.
The following conduct is restricted for partners during
the cooling-off period after their involvement in theaudit engagement of a particular client is finished.
• Continued involvement in audits of the client• Appointment as a quality control reviewer%• Total number of cases resulting in a violation of independence regulations• We confirmed that there was no impact on our objectivity and fairness as a uditor bycarrying out additional procedures immediately after the violation c ame to light. We
are implementing necessary measures to ensure t he prevention of similar violations.

The independence of firms from clients also needs to be
assured for all services provided by KPMG member firms
globally. At KPMG, the engagement partners responsible
for audits therefore confirm whether or not services can54

be provided by cross-checking against the regulations ofprofessional ethics regarding independence for all audit
and non-audit service contracts.

• Involvement in professional consultations• Having any influence on audit results• Supervising or coordinating other professional
services for the client• Supervision of the relationship between the firm andthe client• Important or frequent interaction with the
management and those charged with governance ofthe client
There is a risk of impaired independence due tofamiliarity arising from long-term and consecutive
involvement with clients that are Public Interest
Entities. Additional rules regarding the independence ofpartners, audit team members and the audit team as awhole have been established in order to prevent this.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

9-3. C larification of Policy for Providing
Non-audit Services» Group Governance and System for Checking
Independence and Identifying Conflicts of Interest

KPMG in Japan is an accounting firm with KPMG AZSA
at its core.
With a view toward our social infrastructure role of
ensuring the reliability and fairness of the capital markets,
we follow a policy of providing services that are worthyof the trust placed in us by society by contributing to thesound development and transformation of companies,
rather than only pursuing profit.
When providing non-audit services to our clients,
we limit our services to those that allow us to retain
our independence as auditors without assuming
management responsibilities or performing work that
we would go on to audit (i.e. self-audit).

KPMG AZSAGroup governance through 100% ownership of subsidiaries
and appointment of board of directors

KPMG
FAS

KPMG
Healthcare
Japan

KPMG
Consulting

KPMG
AZSA
Sustainability

Governance of Group Companies
KPMG AZSA manages group companies that provide
advisory services as 100%-owned subsidiaries. Senior
Executive Board members of the audit corporation act
as directors of group companies and participate in their
management in order to reinforce governance of thegroup by KPMG AZSA. The firm has established the
KPMG Japan Management Committee (see P.82) withparticipation by representatives of the group entities
of KPMG in Japan in order to unify the management
policies of its advisory subsidiaries.
Checking Independence and Conflicts of Interest
KPMG member firms are required to register proposed
audit and non-audit services prior to commencing workwithin Sentinel, a system that checks independence
and identifies conflicts of interest.
The verification process within Sentinel enables
audit engagement partners, who are responsible formanaging client relationships, to determine which
services are provided. The firm’s Risk Management
department further confirms that the proposed service
does not present a conflict of interest. This process
prevents the acceptance of engagements for services
that may impair the firm’s independence or cause aconflict of interest.

KPMG Member Firms(Country A)(Country B)(Country C)

Inquiries on independence and freedom from conﬂicts ofinterest before providing non-audit service

Independence
Check
The audit engagement
partner and otherpersonnel verify thenature of a non-audit
service to be provided
and consider whether
or not an engagement
should be accepted.

Sentinel System

Conﬂict ofInterest Check
Services alreadyregistered arecompared against
the new service
being proposed todetermine whether
a conﬂict of interest
exists and whether anengagement shouldbe accepted.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

55

10. Initiatives for Compliance and Information Security
The strict handling demanded by society with regard to compliance matters andinformation security is increasing year by year. KPMG AZSA works conscientiously
towards the maintenance and operation of a compliance organization andinformation security structure.
10-1. B asic Principle of Our
Compliance Activities
KPMG AZSA believes it is essential to embody our
purpose of inspiring confidence and empoweringchange in our compliance activities.
We established our Code of Ethics to clearly define ourcorporate culture based on the basic principles of our
purpose, values and vision.

10-2. An Organization That Leads the Way on
Compliance Activities
1. Management
The CEO of the firm is responsible for all firm activities
including compliance activities. Significant mattersrelating to the areas of responsibility of the Senior
Executive Board members are designated as topics
for discussion at the Senior Executive Board Meeting(pursuant to the Regulations for the CEO and Senior
Executive Board Meeting), and important compliancematters are reported to the Senior Executive Board for
decisions by management.
2. Compliance Committee
We established the Compliance Committee as astanding committee of the firm. The committee has
15 members, 14 from inside and one from outside thefirm (a lawyer). In accordance with the Compliance
Committee’s Operational Guidelines, the Committee
reviews and implements the following matters, andreports results to the Senior Executive Board in atimely manner.
• Compliance with relevant domestic and overseas
laws and regulations, rules set forth by the JICPA,
firm regulations and norms, and formulation of various
measures to improve professional ethics• Understanding the status of compliance with andviolations of relevant domestic and overseas laws
and regulations, rules set forth by the JICPA, firm
regulations and norms, and issuing warnings andrecommendations in response to violations

We are also actively working to raise complianceawareness among our members and to ensurecompliance with our Code of Conduct through thefollowing activities.
• Revision of the Code of Conduct• Implementation of ethics and compliance training• Distribution of email letters to raise awareness• Establishment of compliance hotline for reporting
power harassment and other compliance violations by
our members
3. Risk Management Department
The Risk Management Department serves as theCompliance Committee Secretariat.
4. Compliance Promotion Office
The Compliance Promotion Office is responsible
for raising and disseminating awareness ofcompliance, and for detecting and preventing
legal violations and misconduct.
5. Strategy and Planning Department
The Strategy and Planning Department is responsible
for the firm’s crisis response.
It will also serve as the secretariat for the crisis
response team formed for crisis events led by the
Chief Crisis Response Officer (designated as the CEO)according to the Crisis Response Regulations and Crisis
Response Guidelines.
6. Office of General Counsel
The Office of General Counsel provides support
when adherence to laws or compliance becomesa legal matter.
7. Talent Development Department
The Talent Development Department is responsible formatters related to talent development including training.
It will work on preparing various training programs topromote an awareness of compliance.

• Other compliance matters in our firm56

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

10-3. Thorough Information Security Measures

VDI (Virtual Desktop Infrastructure)

The maintenance of information security is an important
challenge for audit firms that handle confidential client
information. KPMG AZSA has established an Information
Security Department within the Risk Management
Headquarters, while also setting a clear policy for thewide-ranging domains of information security.

Due to the nature of audit work, personal computers
are often carried outside company premises. The
firm therefore introduced VDI (Virtual Desktop
Infrastructure) with PC storage limited to ROM so thatdata cannot be stored on a PC as a security measure.
In a VDI environment, data including eAudit and KPMG
Clara workflow (see P.12) is not saved on firm-issued
PCs but is saved instead on the server. This meansclient data is stored on a server in a data center
managed by KPMG AZSA, rather than on the hard
drive of a firm-issued PC, thereby further enhancing
information security.

The importance of handling confidential client
information is communicated to all partners andemployees by providing training on the Code of Conduct
and annual processes including a compliance affidavit.
The policy for retention periods and methods ofhandling working papers is decided in accordance withethics rules, standards of regulatory authorities, laws
and regulations for handling of audit working papers andother policies related to auditing.
The firm’s policy on data privacy for managing thehandling of personal information complies with the
Act on the Protection of Personal Information, and allpartners and employees are required to receive training
on data privacy.

10-4. Establishment of Compliance Day
We designated September 7 of every year as
Compliance Day to create an opportunity to reaffirm theimportance of ethical standards and awareness of thecompliance that we are expected to maintain as CPAs
and professionals.

The Security Operation Center run by KPMGInternational and the Japan firm monitors internal andexternal communications in real time 24 hours a day as
a cybersecurity measure for our internal network.

» Image of online discussion on Compliance Day© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

57

Inappropriate Completion of e-Learning Courses
In accordance with the Certified Public Accountants Act, CPAs are obligatedto continually complete training courses and acquire required credits. In
2020, it became evident that some of our firm’s partners and professionals
were involved in inappropriate conduct relating to the completion of
e-Learning courses within the firm, and consequently did not satisfy
credit requirements.
We believe that the root causes of this incident were a lack of ethicalstandards expected of CPAs and professionals, together with aninadequate internal control system in our firm. We will further strengthen
and disseminate an awareness of compliance based on the preventative
measures outlined below.

Initiatives for Preventing a Recurrence
Ensure everyone is informed and aware of “Tone at the Top”

• Communication of messages from the firm’s senior management
regarding ethics and compliance• Implementation of individual training for those involved ininappropriate completion of courses• Reinforcement of ethical values through compliance training• Establishment of Compliance Day and holding events to regularlyreflect on compliance
Strengthening our internal management structure• Securing time to complete training based on regular reviews ofassignment status• Identifying inappropriate conduct through regular monitoring oftraining completion records• Thoroughly implementing comprehensive checks whenchanging systems• Strengthening monitoring by means of a department newly
established for compliance (the Compliance Promotion Office)We also monitor the above measures by conducting internal audits. The
Senior Executive Board and the Management Oversight Committee arecommitted to ensuring continuity of a system that prevents the recurrenceof inappropriate training, based on reports from relevant departments andfrom the Internal Audit Office.

58© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

Compliance with the Code of Professional Ethics as Members of the Auditing andAccounting Profession
It is the mission of CPAs, as auditing and accounting professionals, to ensure thereliability of financial statements and other financial information from an independent
standpoint, thereby protecting the fair business activities of companies, investors andcreditors, and contributing to the sound development of the national economy.
In order to achieve this mission, CPAs are expected to fulfill their professional
responsibility based on an awareness of their social role and self-discipline, and bycontributing to the public interest while meeting the requests of individual clients.
Audits are conducted exclusively by CPAs. While CPAs perform audits in accordancewith quality control standards for audits and generally accepted auditing standards,
appropriate audits can only be completed if individual CPAs performing the audit
have an accurate understanding of the Code of Professional Ethics for fulfilling their
responsibilities and acting accordingly. It is of the utmost importance that all membersof an audit firm, including both partners and employees, comply with the Code ofProfessional Ethics. In Japan, ethical standards in the Code of Professional Ethics include
the following five fundamental principles regarding expected conduct, which are similar
to international standards.
Principle 1 Integrity
Principle 2 Objectivity (maintaining an objective point of view when making decisions)
Principle 3 Professional competence and due care
Principle 4 Confidentiality
Principle 5 Professional behavior
Companies are required to address information other than financial information as a resultof the revised auditing standards from the year ending March 2022. CPAs must be able
to maintain a level of professional competence required for providing appropriate audit
services to clients according to Principle 3.
We need to understand the latest professional trends relating to our area of expertisein order to maintain professional competence. As
CPAs, we will be able to improve and maintain our
professional competence for performing audits byconstantly refining our capabilities.
We are committed to the acquisition of expertise asa significant factor that supports our audits.

Executive Board Member(in charge of JICPA)

Kanako Ogura© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

5911. Review Structure
KPMG AZSA aims to maintain and improve audit quality by implementing
quality control reviews at two levels, according to the degree of significance.
We also mitigate the risk of surprises through our open corporate culture which
encourages early consultation and review.
11-1. T
 wo-layer Review Structure According to
Degree of SignificanceRoles

At KPMG AZSA, we implement two layers of quality
control reviews. All of our audit services undergo
divisional reviews, and those engagements withsignificant audit judgments are further subject to review
by the Senior Review Board.

• Appointing and guiding divisional review
board members• Understanding audit risks and monitoring
divisional reviews• Reporting review results to the Senior Review Board

Senior Review Board
The Senior Review Board comprises a Chairman who
is appointed by a vote of confidence by partners, and aVice-Chairman appointed by the Chairman.
Roles• Establishing the basic policies for quality
control reviews• Appointing the Chairman and Vice-Chairmen for
Divisional Review Boards• Monitoring the status of divisional reviews• Making final judgments on significant audit issues

11-2. Divisional Reviews Implemented for
All Audits
When audit reports are issued for all audit services,
it is mandatory that a partner with the experienceand capabilities required to conduct a review and
who is in a position independent of the audit teamconducts a quality control review within the
Divisional Review Board.
» Quality Control Review Schedule(March year-end company)

Divisional Review Boards

Timing

Review Subject

Review boards are set up by audit division units andto address the expertise and special nature of certain
industries across all of the firm’s areas nationwide.

Early AugQ1 Review» Review Structure
Senior Review Board

・Establishing the basic
policies of a review
・Appointing the Chairman
and Vice-Chairman for
Divisional Review Boards・Monitoring the statusof reviews

Review by Senior
Review Board
・In case of a signiﬁcant audit judgment
requiring review under the ﬁrm’s policies

・Reporting audit risks
・Reporting status of reviews

Details
Review plan and conclusions
for the ﬁrst quarterEnd ofAudit Plan
Sept (goal) Review 1

Basic approach for theannual audit

Early Nov

Review plan and conclusions
for the second quarter

Q2 Review

End of Dec Audit Plan
(goal)
Review 2

Detailed plan for theannual audit

Early Feb

Q3 Review

Review plan and conclusions
for the third quarter

Divisional
Review Board

・Responding consultations
from engagement partners

Audit Division

Mar toEarly Apr

Review Prior to
Discussion regarding key audit
the year-end audit issues prior to the year-end audit

Reviewer

Review

Audit Team

Early May

Companies
Act Audit

Mid June

Opinion on the Financial
Fin Inst &Instruments & Exchange
Exchange Act Audit
Act Audit

・Reviewer selection
and supervision60• Addressing engagement partner consultations

・All audit engagements are subject to review
・For listed companies, each phase of the audit issubject to review

Opinion on the Companies
Act Audit© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

For the audits of listed companies in particular, a strict
review is implemented with regard to judgments madeby the audit team from accepting an engagement,
preparing an audit plan to forming an audit opinion.
If the divisional review for listed companies is for
a company with a March year-end, the following
schedule will be implemented. Additional reviews will
be conducted as necessary if audit risk is high or there
are significant issues for consideration.

11-3. T he Senior Review Board Renders Final
Judgment on Significant Audit Issues
In situations where the audit team and reviewer havea difference of opinion, or significant audit judgments
are involved, the review is escalated from the relevant
Divisional Review Board to the Senior Review Board,which renders the firm’s final judgment.
The number of cases considered by the Senior Review
Board for the year ended June 2021 totaled 361.

11-4. Comprehensive Understanding of Risk
Information Based on Risk Survey Forms
Audit teams of clients subject to certain requirements,
such as listed companies, prepare a risk survey form
twice a year and submit these to the Divisional
Review Boards.
The Divisional Review Boards review the risk survey
forms and conduct hearings with audit teams andDivisional Review Board members to comprehensively
understand audit risk information.

11-5. Smooth and Timely Communication
KPMG AZSA considers our open corporate culture
which encourages smooth and timely communication
as a particular strength.
We accept consultations as needed when audit
teams are unsure of judgments, and encourage early
consultation and review.
We mitigate the risk of new issues, unexpected
outcomes, or surprises occurring near the accountclosing date by providing such support in advance.

11-6. A llocation of Reviewers with Expertise on
IFRS and US Standards
Audits of companies that have adopted IFRS or US
accounting standards are subject to a divisional review
by reviewers who have experience auditing clientsthat use these standards and are fully competent in
conducting reviews.
The same applies for the Senior Review Board, wherepartners who are experts in IFRS and US GAAP audits
are selected as reviewers and address complex anddifficult issues.
For SEC filings, Japanese SEC reviewing partners
review and approve related documents, and audits arecompleted within the firm. For audits involving highly
sensitive matters, reviewing partners consult with
KPMG US-DPP as necessary and take prompt action.

Risks are reported to the Senior Review Board, whichthen conducts a review if they deem it necessary.
» Status of Consultations and Reviews(From July 2019 to June 2020)
Number ofin advance consultations
and reviews

Number of
final consultations
and reviews

Review643

82

Accounting

296

107

Audit

402

361

Total

1,341

550

* Of the requests for review by the Senior Review Board, those for which the Board
convened are categorized as “final” and those which were handled primarily on a
documentation basis are categorized as “in advance.”© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

61

Message from the Chairman of
the Senior Review Board
Objective Assessment of the Auditor’s Judgment
The application of KAM (Key Audit Matters) has led to a clear andconcise demonstration to the market of how engagement partners
identify audit risks and get thoroughly involved in the audit procedureson which the auditor’s opinion is then based. In terms of businessperformance, the environment for individual companies varies as the
COVID-19 pandemic continues to impact companies. Some industries
are still far from recovering to pre-COVID levels. I believe thesecircumstances will lead to heightened expectations for auditors amongmarket participants.
Performing an audit from an independent standpoint and withprofessional skepticism, all while engagement partners communicate
closely with the client’s management, is fundamental to an audit. A
quality control review is important for providing an additional objective
evaluation, from a standpoint independent of the auditor, of judgments
by engagement partners and of the final audit opinion. It therefore
remains one of the most essential functions for maintaining andenhancing audit quality.
At KPMG AZSA, we have been continuing to work on the maintenanceand enhancement of audit quality based on an objective awarenessof the circumstances for individual clients. In order for a reviewer tooperate effectively, we have established Divisional Review Boards towhich individual reviewers belong and a Senior Review Board as thesupreme authority, with the aim of preventing deficiencies in audit
procedures and errors in audit judgments particularly in key audit areas.
Specifically, we establish basic principles and priority items for review
every year, and disseminate them throughout the firm. We have also
placed more emphasis on the four defense lines from the current fiscal
year. Audit divisions, the Risk Management Department, the Senior
Review Board and Divisional Review Boards jointly address audit risks
by conducting regular interviews regarding relevant audit client risks,
identify any matters that require attention in the review at a firm level,
and make sure that the matters are appropriately disseminated and areview is implemented.
Our firm aims to be theClear Choice, and to bechosen by the market on thebasis of trust. To do this, wewill continue to maintain andenhance our audit quality
while devising new audit
procedures for individual
audits according to therevision of audit standards.

The Chairman of The
Senior Review Board

Ryoji Fujii

62© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

12. Continual Improvement
KPMG AZSA is committed to the maintenance and enhancement of audit quality
by utilizing the results of both our firm’s voluntary quality monitoring program andinspections conducted by external institutions to continually improve quality.

12-1. U tilization of Results of Voluntary Quality Monitoring
Programs for Quality Improvement
KPMG requires all member firms to undergo an integrated monitoring
program to verify that quality control policies and procedures are fit for
purpose, appropriate and operating effectively. Based on this monitoring
program, KPMG AZSA conducts Quality Performance Reviews at theengagement level and the Risk Compliance Program at the firm level.
Any areas for improvement that are identified by this monitoring program
are reported to the Senior Executive Review Board and the required actionplans are implemented.

Quality Performance Reviews

Risk Compliance Program

We conduct an annual review at the operational levelbased on instructions from KPMG International.

KPMG member firms annually self-assess the status of
their compliance with quality control requirements.

All engagement partners are subject to a quality
performance review at least once every three years.

KPMG International’s Global Compliance Review teamreviews the self-assessments of firms, in principle,
once every three years. The team reviews theprocedures conducted as part of the self-assessment
and the appropriateness of judgments in order toachieve consistency of procedures and judgment
criteria at a global level.

The results are subject to a second round of reviewsby partners from other KPMG member firms before
ratings are finalized.
Results of this review for the past two years are given
below. None of the review results included cases that
required a revision of audit opinion.

The most recent review resulted in no objections to
KPMG AZSA’s self-assessment results.

» Quality Performance Review Results
Year ended
June 2020

Year ended
June 2021

S

No deficiencies, or
clearly immaterial
deficiencies only

55
(59%)

77
(69%)

P

Mainly deficiencies indocumentation

29
(31%)

22
(20%)

U

Mainly deficiencies inaudit procedures

9
(10%)

13
(11%)

93
43.8%

112
49%

Number of reviews(partner coverage)© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

6312-2. Inspection by External Bodies as Verification of the Status of Our Firm’s
Quality Control
The Japanese Institute of Certified Public Accountants (JICPA), the Certified Public Accountantsand Auditing Oversight Board (CPAAOB) and the Public Company Accounting Oversight Board(PCAOB) conduct external inspections of KPMG AZSA.
We have a structure in place for conducting root cause analysis and taking corrective measures
for any deficiencies that are identified in our audits.
Review by the Japan Institute of Certified Public
Accountants (JICPA)

issuing an order to improve business operations, whole orpartial suspension of business, or a fine.

Quality control reviews by the JICPA are performed
for audit firms that audit listed companies and otherdesignated entities. Quality control reviews of thelargest audit firms are normally undertaken once every
two years. Additionally, where circumstances are
identified that could damage the public’s trust in audits,
special reviews are conducted, for example reviews of alimited population of audit firms.

In the past five years, KPMG AZSA received noadministrative sanctions from the Financial
Services Agency.

*The JICPA operates a registration system for audit firms that conduct audits oflisted companies and publishes on its website the Register of Listed Company
Audit Firms including an overview of firm systems of quality control.

Certified Public Accountants and Auditing Oversight
Board (CPAAOB)The CPAAOB receives reports from the JICPA on quality
control reviews and examines, from a public interest
standpoint independent of the JICPA, whether thequality control review system is operating appropriately
and whether audits by audit firms are being conducted
appropriately. The CPAAOB also conducts on-site
inspections of audit firms as necessary.
If it becomes clear that a quality control review by the
JICPA was not conducted appropriately, an audit firm’s
quality control was found to be materially insufficient,or audit work did not comply with a law or regulation,
the CPAAOB will recommend to the Commissioner of
the Financial Services Agency administrative sanctions
necessary to ensure the proper operation of the JICPA
and audit firms.
In response to such a recommendation made by the
CPAAOB, the Financial Services Agency may impose
administrative sanctions (disciplinary actions), including

64

Administrative sanctions fromthe Financial Services Agency

In the past ﬁve years» Quality Control Review by JICPA andInspection by CPAAOB

0
0
0

case

case

ClientAudit
Committee⑤ Recommendation④

Inspection
Communication

KPMG AZSA has not been subject to any such actions
resulting from quality control reviews made in the past —neither disclosure of qualifications to the Register of Listed
Company Audit Firms nor removal from the register.

In the past ﬁve years

Audit

The results of the regular quality control reviews arereported to audit firms as a conclusion of the quality
control review. Depending on the conclusion of thequality control review or the progress of improvement
relating to any improvement orders, the JICPA may takeactions including issuing a warning, a strict warning, ora recommendation to resign from an audit engagement.
Depending on the nature of such actions, the JICPA may
additionally add a disclosure to the Register of Listed
Company Audit Firms* explaining any qualifications or may
have the firm in question removed from the register.

Action required based on
JICPA review results②

Report on
qualitycontrolreview③

Oversight
review④

Inspection① Quality control review

Quality control review: JICPA examines the state of operationsof an audit firm.
Report on quality control review: JICPA reports the results of areview to the CPAAOB.
Oversight review: CPAAOB conducts an oversight review
primarily on the appropriate operation of the quality control
review system and of the audit work of the audit firm.
Inspection: CPAAOB inspects the JICPA, the audit firm or theaudit client.
Recommendation: CPAAOB recommends administrative
sanctions or other measures to the Financial Services Agency.

Inspection by the Public Company Accounting
Oversight Board (PCAOB)
It is mandatory for accounting firms performing auditsof publicly listed companies in the US to register with
the PCAOB.
The PCAOB conducts a regular inspection of both thesystems of quality control and quality of individual audit
engagements of registered accounting firms in accordancewith PCAOB standards.
Inspection reports that have been conducted by the
PCAOB to date are available on its website.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

13. Addressing New Quality Management Standards
There is demand for further improvement of quality management in audits.
KPMG AZSA has been working to meet international standards prior to theintroduction of standards in Japan.

13-1. Publication of International Standards
Demanding Enhancement of
Quality Management
It is important first and foremost that audit teams andreviewers take appropriate action in order to ensure thequality of audits. This alone however is not sufficient
to fully assure audit quality, and it is essential thatappropriate action is taken at a firm level.
From this perspective, the International Auditing andAssurance Standards Board (IAASB) published thefollowing three new standards on quality management
for audit firms in December 2020.
• ISQM1 Quality Management for Firms that Perform
Audits and Reviews of Financial Statements andOther Assurance and Related Services Engagements

13-2. KPMG Network Response
KPMG sees the application of ISQM1 as an opportunity
for promoting measures to ensure consistent and highquality audits throughout the network.
Specifically, we analyze risk factors that hinder theachievement of quality objectives set forth in ISQM1.
All audit firms belonging to the KPMG network thenestablish and operate necessary controls. KPMG
AZSA actively participates in the discussions of the
KPMG network.
» KPMG Network Response
Global• Establishing controls at the network level/
Consideration and approval of controls thatmember firms should establish and operate

By region• Exchange of information on method ofbuilding specific controls in each region/
Consideration of whether controls can betested at a regional level• ISQM2 Engagement Quality Reviews• ISA220 Quality Management for an Audit ofFinancial Statements
Of the three new standards, the application of ISQM1
has significant impact on the quality management ofaudit firms.

By country• Establishing controls based on threecomponents determined at the global
level (process description, detailed control
description and flowchart)• Consideration of additional measures basedon the laws and standards of each country» Relations by Standard
Standard

Scope

ISQM1

Firm level

ISQM2

Firm and engagement level

ISA220Engagement level

There is demand for further enhancement of audit quality
based on a unified response to all three standards.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

65

13-3. Response in Japan based on ISQM1
and other standards
Overview
The Business Accounting Council of the Financial
Services Agency is considering revisions to the quality
control standards for audit (“Quality Control Standards”)
based on ISQM1, ISQM2 and ISA220 and has publishedan exposure draft (“Exposure Draft”) in June 2021.
The Exposure Draft proposes the introductionof a quality management system based on a risk
approach. Rather than establishing predetermined
quality management policies and procedures, it
proposes individual audit firms establish their own
quality objectives according to each system of quality
management component and determine policies andprocedures for identified and assessed risks that mayhinder the achievement of such quality objectives.
Components of the System of Quality Management
According to the Exposure Draft, the system of quality
management should comprise the following components:(1) Audit firm risk assessment process(2) Governance and leadership(3) Relevant ethical and independence requirements(4) Acceptance and continuance of audit contracts(5) Engagement performance(6) Resources related to the services of an audit firm(7) Information and communication(8) Monitoring and remediation process of the systemof quality management(9) Succession between audit firms

When an Audit Firm Belongs to a Network
If a firm belongs to a global network and performs
audits, the Exposure Draft stipulates that individual
firms shall apply or use the resources provided by
the network based on an understanding of the firm’s
responsibilities in relation to the network.
In addition, when a network monitors the quality
management system of an audit firm, the impact ofsuch monitoring on the audit firm’s processes should
be considered.
Evaluation of the System of Quality Management
The Exposure Draft stipulates that, at least annually,
the individual assigned ultimate responsibility
and accountability for the firm’s system of quality
management evaluates the system of quality
management as of a specified date and concludes
whether it provides reasonable assurance that theobjectives of the system are being achieved.
It also recommends audit firms issue a public
release of the status of their firm’s system of quality
management, including the conclusion of such
evaluations and reasons for reaching the conclusion,
to enable an appropriate evaluation of audit quality byusers of audit reports.
Applicable Date
The Exposure Draft proposes the timing of audits
based on the revised quality management standards
as follows.
• The revised quality management standards will be
introduced from the audit of financial statements forthe fiscal year or accounting period beginning on orafter 1 July 2023.
• The system of quality management can be evaluatedfrom the last day of the audit firm’s accounting year
beginning after the revised quality management
standards have been introduced.
• The revised standards can be applied for audits offinancial statements prior to the above period.

66© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

13-4. Response of KPMG AZSA

(2) Specific Procedures for Each Component

As a member firm of the KPMG network, KPMG AZSA
is taking the necessary steps to apply the revised
quality management standards on the application
date of ISQM1 and other standards, without waiting
for the finalization of the revised quality management
standards in Japan.

At KPMG AZSA, we are undertaking an examination ofeach component according to the following procedures.

Item

Procedure

1. Identification ofquality objectives• Identify quality objectives foreach of the components based onstandard requirements.

KPMG will consider its approach according to thespecific procedures presented in (2) for each of thecomponents that we have outlined as follows based on
our network policy.

2. Identification ofsignificant
quality risks•E valuate likelihood andmagnitude to identify risks that
may hinder the achievement ofquality objectives.

» ISQM1 Components

3. Identification ofprocess risk points• Identify where and how risk canoccur in a process.

(1) Overall Process

Code ofethicsEngagement
acceptanceandcontinuation

Engagement
performance

Human
resources

Technology
resources

Intellectual
resources

Information and communication

KPMG AZSA has set up a project team for this matterand is proceeding with consideration of the specifics
while collaborating with KPMG’s global network.

4. Confirm controls
and gap analysis
Monitoring

Risk assessment process

Governance•C onfirm what kind of controls
are in place and operating foreach risk.
• Identify deficiencies relative to
expected controls.

5. Establish
additional controls•F or controls that are judged to beinadequate, establish and operate
new controls.

6. D esign of controls
and tests ofoperational
effectiveness• Third parties other than thecontrol operators conduct tests
on the implementation andoperation of controls.
•R eport to superiors based on test
results for each component.

7. R eport ofevaluation results•R eport from the individual
responsible at KPMG AZSA to
the individual responsible at
KPMG International.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

67

At KPMG AZSA we have created anenvironment in which our people canacquire professional knowledge and skills
for proving high-quality services, basedon an understanding that the basis ofaudit quality is the quality of our people.

68© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

1. KPMG AZSA’s Professionals
Regardless of how much technology evolves, the source of providing highquality audits and value-added services is our people. KPMG AZSA is enhancing
the diversity of our people and organization in order to address the various
expectations placed on audit firms in a timely manner.
1-1. D iverse Professionals Responsible forHigh-quality Audits

1-2. Active Recruitment of Talent with
Diverse Backgrounds

Nowadays, the involvement of specialists outside ofaccounting is essential for the provision of audit services.

At KPMG AZSA we employ professional staff based on
the firm’s management policy and in accordance with apersonnel plan.

Our professionals comprise not only certified public
accountants but also experts in various fields including
IT experts and data scientists, and consultants who
deliver advisory services.

Our partners interview applicants directly in the final
stage of recruitment, following a document screening
and selection of candidates based on competence
and professional aptitude tests. We are committed
to identifying talent who are capable of executing
tasks appropriately in accordance with KPMG AZSA’s
management policy.

» Composition of Professional Workforce,
Average Year of Experience(as of June 30, 2021)

Partners and Directors

13.0

695 21.3%

years

1-3. Evaluation System Emphasizing Audit
Quality Enhancement

Managers

23.2

1,259 13.5

%

years

Other professionals

63.8 3,459 4.7
70. 3
12. 2
%

years

%

%

17. 5

We actively recruit talent with diverse expertise andbackgrounds in addition to regular recruitment of
individuals who have passed the CPA exam.

We believe that the appropriate assessment ofprofessional staff and feedback on performance andresults assists them in accelerating their further growth,which results in an enhancement in audit quality.
Assessments emphasize the ability to make appropriate
judgments utilizing professional skills based on a highlevel of comprehension, logical thinking and problem
solving skills, founded on ethics and integrity.
Assessments of partners involved in audit engagements
are heavily focused on quality control, and acomprehensive rating is given based on the guidance for
Quality and Compliance. Non-audit services provided toclients are not subject to evaluation.

%

70. 3

%

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

69

2. Human Resource Development at KPMG AZSAAt KPMG AZSA we place an emphasis on human resource development basedon an understanding that the basis of audit quality is the quality of our people.
We will foster true professionals who contribute to society through the“Three O’s” — OJT, Off-JT and Opportunity.
2-1. Fostering True Professionals WhoContribute to Society

2-2. H uman Resource Development by
Means of the “Three O’s”

KPMG AZSA understands that the basis of audit quality
is the quality of our people, and we have set our Human
Resource Development Principle as follows.

OJT | Improving Skills and Abilities throughPractical Experience“In order for KPMG AZSA to realize the firm’s
basic principles and to fulfill its responsibilities
as a public institution, we must develop true
professionals who make a contribution to society
by systematically building and maintaining anenvironment that allows our people to acquire theexpertise and skills necessary to provide highquality services.”
We define true professionals as persons who not
only possess both expertise and skills, but also
have high ethical standards, integrity, and a sense of
responsibility, and are capable of solving problems
based on their own powers of understanding andlogical thinking.
We believe that decision-making and conduct rooted
in high ethical standards and integrity are essential for
providing high-quality services and for compliance.
While the individual’s own diligent self-study and highaspirations are the foundation of developing such true
professionals, we also believe that true professionals
can be developed by enhancing OJT, by supplementing
practical expertise and human skills through Off-JT, andby providing wide-ranging opportunities in accordancewith the firm’s Human Resource Development Principle
described above.

OJ
T

True
professionals

KPMG AZSA has been providing planned andconsistent OJT at both the firm and division levels
through the introduction of a PDCA cycle for talentdevelopment. We seek to foster a growth mindset
through discussions regarding OJT and an introductionof successful cases, and provide guidance to junior staff
based on a tutoring system.
We are committed to promoting team managementthat addresses environmental changes to ensure that
we foster talent through OJT in any environment.
Off-JT | Providing Practical and Pragmatic Training
Of the Off-JT we offer, our headquarters hosts training
regarding mandatory knowledge for those involved in
audit engagements, as well as training for addressing
firm issues. In responding to the needs at audit sites,
our divisions also implement training in line withprofessional knowledge and practice as training to
supplement OJT.
We also provide training for acquiring digital skills andskills necessary for working in an online environment.
During the year ended June 2021, training hours per
trainee averaged 67.3 hours. With a focus on technicaltraining, questionnaires completed after the training areused for continuous improvement of training courses.

f
Of

KPM
G

n

A

s
ple
n) rinci
tP
-JT

S
AZ e
S

» Conceptual Diagram
Growth Mindset (F
and
ou
nd
dy
esource Devof Human Resource
u
t
at
an R
elo
-s
um
p
f
l
m io
H
Developmente’s

OJT is the basis of developing talent. Professional
skills and abilities are acquired through the guidance ofsupervisors and through practical experiences, such as
consultations with clients.

Average annual training
hours per trainee

67. 3

hours

FY ended June 2021
O pp o70

Results of questionnaire
regarding training

4.4 5 4.5 5
pointspointsFY ended June 2020

FY ended June 2021

r t u nit y© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality» Training System (overview)
Top down requirements

情

Acquiring mandatory knowledge for those involved in audit engagements｜Firmwide announcements including
Quality Assurance and Risk Management｜Response to ﬁrm’s priority
Professional Ethics

Technical Skills Training

Partner/
Director

Audit Quality
UpdateSenior Manager/
Manager

AccountingStandards Update
Fraud Cases
KPMG Clara
workﬂow/Audit
Foundations

Audit
Effectiveness &Efﬁciency

Business Skills Training

Human Skills
OnlineLectures by
OutsideExperts

Leadership*²

Interview/
Feedback

Project
Management*²

Women’sleadershipprogramFraud Cases

AssistantManager

Professional
Ethics・Compliance

IFRS Standards

Fraud Case
Studies for
In-Charges

SeniorProductivity*²

Tax

Interpersonal
Skills*²
Audit Topic
Trainings*¹

Digital Training

General

New Partners
Training

New Managers
Training
Digital IT Skill（including online）
Internal
English Training（including online）

Task
Management*²

US GAAP/
GAAS/SEC

SectorGlobal Skills Training

Short-Term
Oversea
MBA*³

New AssistantManagers
Training

Data Processing
Basics,Advanced

KPMG Global
Training*³
Analysis Tool
Basic,
Advanced

New Seniors
Training

TalentDevelopment*²

Staff

OutputSkills*²

GovernanceInduction
Training

MentalToughness

Bottom up requirements
Response to the needs at audit sites｜Supplement to OJT*1 Training Programs such as Internal Control Audit, Corporate Tax and Tax Effect Accounting *2 Conducted on Milestone Training*3 Conducted by on-line due to COVID-19 on the year ended June 2021

Opportunity | Providing Wide-ranging
Work Opportunities
In order to become audit professionals, our talent needto deepen their insights for specific tasks while also
expanding the range of their insights by engaging in avariety of tasks, thereby improving their objectivity andproblem-solving skills.
We seek to develop true professionals with diverse
experience by transferring staff members not only
between audit divisions but also to departments
responsible for quality control, to our advisory divisions
and among different offices. Staff members are also
actively seconded to external public institutions andcorporations, in an effort to develop true professionals
by providing diverse experience.

» Number of Persons Transferred within KPMG AZSA
Transfer toYear ended
June 2020

Year ended
June 2021

HQ (Quality Control Departments)

124

169

Other Audit Divisions and Offices

189

189

Advisory Divisions

68

45

Total

381

403

» Number of Persons Loaned to External Public
Institutions and Corporations
Loan toas of June 30,
2020

as of June 30,
2021

JICPA, FASF etc.

28

30

Other (corporations)

40

37

Total

68

67

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

71

Message from Senior Executive Board Member —Head of People
At KPMG AZSA we understand that fostering true professionals
capable of providing professional support for our clients’ social
responsibilities and operations is a top priority in our pursuit ofenhancing audit quality. We have therefore been working continuously
on talent development.
We have continued to develop talent through the Three O’s — OJT,
Off-JT, and Opportunity. We also established an environment inwhich our professionals can focus on audits, while striving to enhancecommunication and project management skills of our people in the
new normal.
In particular, we have been working on enhancing the content of
Off-JT by conducting continuous reviews and securing time for ourpeople to complete training based on an understanding that fosteringand improving ethical standards and professional skills and expertise
are the foundations that support audit quality. This year, we willfurther strengthen the career manager system and introduce one-onone communication to clarify future careers, and we will implement
initiatives that contribute to the growth of individual professionals
based on more timely and accurate feedback.
We will enhance training programs for improving accounting andauditing insights and skills. At the same time, we will provide
continuous opportunities to acquire new skills that are required ofprofessionals in line with the changing times. In particular, we needto maintain and further improve our global capabilities, a strength of
KPMG AZSA, and we will develop capable talent through global skills
training. We will also focus on developing digital talent through the
ADA (AZSA Digital Academy) to achieve the digital transformation ofaudits and to provide added value to society and clients. In order toachieve enhanced audit quality in a rapidly changing environment, andin response to diversifying values and work styles, our professionals
need to have still higher ethical standards, to self-study, to identify
and take on new challenges, and to think about how problems can besolved. We will therefore focus on creating an environment in which
individual professionals can attain their full potential.

Executive Board Memberin charge of HR

Michitaka Shishido

72© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

3. Responsiveness to Change
At KPMG AZSA we believe that having the resilience, or strength to respond tothe constant changes in companies and society in a timely manner, demonstrates
true growth, and we are focused on fostering talent who can address the recent
acceleration in digitalization and globalization.
3-1. Common Talent Development for
All KPMG Firms
KPMG adopts a common approach to talentdevelopment among member firms by disseminating
a global leadership framework to all regions — theAmericas, EMA (Europe, Middle East and Africa), andAsPac (Asia Pacific) — and in individual countries. We
are also continuously developing leadership programsfor training talent capable of taking an active role on the
global stage, regardless of country or region.

3-2. G lobal Talent Who UnderstandDifferent Cultures and Diversity
As the globalization of Japanese corporations
accelerates, KPMG AZSA is continuously nurturing
global talent to build an infrastructure system thatenables us to support the globalization of our clients. We
define global talent as “professionals who understanddifferent cultures and diversity, who have a certain
level of linguistic ability and who perform work on the
global playing field.” Global talent is fostered throughthe global skills training which includes language training
and short-term study-abroad opportunities, as well as
the overseas secondment programs. The cumulative
number of globally capable professionals we havedeveloped through the global skills training and overseas
secondment programs is 2,295.
Due to difficulties in realizing study-abroad andoverseas secondment programs due to COVID-19 in
2021, we have enhanced our online training.

Global Skills Training
As a basis for overseas secondments and for working
in Japan on international audit work, KPMG AZSA
is implementing various programs, such as English
training in Japan, short-term study-abroad opportunities
and new manager training programs held by KPMG inother countries to develop wide-ranging global skills, inaddition to English as a linguistic skill.
KPMG AZSA has maintained good relations with theCentral University of Finance and Economics in Beijing.
Based on this relationship, the firm sends professionals
to study at the university on both a two-week programin Chinese and a four-month intensive program for the
purpose of developing candidates for future assignment
to China.
» Global Skills Training
Year ended
June 2020

Year ended
June 2021*1

English Training in Japan

888

839

Short Term study
abroad program

131

23

Training atoverseas KPMG firms

60

27*2

One Week MBA training

60

Others

5

0

1,090

889

Number of participants*1 Temporary decline in participants for the year ended June 2021 due to COVID-19*2 O
 nline training implemented as an alternative to training hosted by overseas
KPMG firms© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

73

Overseas Secondment Programs
KPMG AZSA is developing global professionals who
have a global mindset through business experience
gained abroad. The firm is therefore actively promoting
the assignment of its personnel to other KPMG
member firms.
» Overseas Secondment Program
TargetPeriodGJP(Global Japanese Practice)

Above themanager level

Principle
3 years

JUMP(Junior Upskill Mobility
Program)Assistantmanger, Senior,
Staff

18-24
monthsSTAR(Short-Term Assignment
Resources)

Senior, Staff

3-6
monthsHIT(Highly-motivated Internship
Program)Staff year 1,
Part-time
student

1 monthKPMG AZSA has two primary overseas secondment
programs, the Global Japanese Practice (GJP) program
and the Senior Development Program.
We have additionally been sending many personnel who
are managers or above to KPMG Global Solutions Group(KGSG), a research institution of KPMG International, as
well as to International Standards Group (ISG) in the UK
and Department of Professional Practice (DPP) in the US,
both of which formulate interpretations and application
guidelines for accounting standards.

The cumulative number of participants in these
programs is 620. The ratio of partners and managers
who have overseas secondment experience is shown
below. One in every four partners and managers havesecondment experience.
Next Generation Leader Development Program
The annual Chairman’s 75 Program hosted by KPMG
brings together successful partners across the globe
and provides leaders from individual countries andregions the opportunity to interact directly with the
Chairman of KPMG International and members of global
management. Many partners from KPMG in Japan also
participate in the annual Chairman’s 25 Program which
is held in the Americas, EMA, and AsPac regions, tostimulate the development of a global mindset throughexposure to the thinking of global leadership, whilestrengthening relationships with the regions.
Global New Partners’ Conference
KPMG holds the Global New Partners’ Conference onan annual basis in principle for those promoted to thepartnership in member firms around the world thatyear. KPMG in Japan sends many young partners to
the conference as a valuable opportunity for building a
network within KPMG and meeting new partners fromaround the world. In addition to partners who have justbeen promoted, many management and senior partners
from Japan and other major countries also attend theconference, providing an opportunity to interact withdifferent generations of partners.

» Partners and Mangers with Overseas
Secondment Experience» Global Opportunities Program(as of June 30, 2021)
Year ended
June 2020

Year ended
June 2021*

Global Japanese Practice

147

127

Partner, Director

Senior Development Program

53

51

Secondments to KPMG International

13

6

Others13

2

Number of participants

226

186

Number

Percent

264

37.5%

Senior Manager, Manager

301

23.9%

Total

565

28.7%

* Temporary decline in participants for the year ended June 2021 due to COVID-19

74© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

class, we establish an environment for organizational
training or OJT. The certification of digital talent
involves business experience requirements in addition
to the completion of specific training programs.

3-3. Improvement in Digital Literacy
KPMG AZSA is focused on improving the digital literacyof our professionals.
We established the AZSA Digital Academy (ADA), a
program for fostering digital talent, in 2020 with the aimof realizing 3C x Impacts & Insights in our audit teams
by utilizing rapidly evolving technologies and data.

We provide basic training for all professionals involved in
audit engagements to become digital assistants. We also
aim to train over 2,500 Digital Meisters in the short term,
who will be at the core of our digital transformation.

The ADA has defined the future audit team image andthe classes of digital talent and their respective roles.
After clarifying the roles and required skillset for each
DI 部・IT 監査部» Classes and Roles of Digital Talents

監査事業部

Certiﬁcate

Digital Leader

Digital Fellow
Leads all technological ﬁelds

Leadership

Digital Core

Presentation

Audit
Clients

Certiﬁcate

Consultation

Develops tools and providers solutions

Leads ﬁrm-wide digitalization
and relevant projects

AdviseUnderstanding of data tools
Algorithm beginner

Digital Meister
meister
Certiﬁcate

CapableCapable ofof problem-solving
problem-solving andandmaking proposals clients

Consultation

Digital AssistantCapable of analysis and output using tools

DI Division・IT Audit Division

Audit Divisions

The Voice of Our People

After joining KPMG AZSA and engaging in audits for several
years, I took advantage of the Senior Development Program
and was seconded to KPMG Netherlands for two years. In the
Netherlands, I was assigned to an international department
and had the opportunity to work and spend time outside of theoffice with not only Dutch but also Italian, Australian, Brazilian,
Indian, and other colleagues of various nationalities. It wasa very valuable experience that helped me foster a global
mindset, including empathy for different cultures and diversity.

audit engagements in Japan. My current work is challenging
and rewarding, as I learn about the world’s most advanced
technologies and apply them to audits based on the recognition
that KPMG’s global network is One KPMG with the samevalues and objectives.
I feel that I have grown significantly through my work
experience at KPMG AZSA.

After returning to Japan and taking maternity and childcare
leave twice, I am now a member of the Digital Innovation
Division (DI Division).
In the DI Division, I provide opinions from the perspective ofJapan on audit tools developed at the global level. I also analyze
the functions of audit tools used overseas and apply them to

Digital Innovation Department
ManagerAki Inden© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

75

4. Creating a Friendly Working Environment
At KPMG AZSA we believe that in order to effectively develop talent it is also
important to create a working environment in which all of our people find it easy
to work and achieve results. Our firm is active in further improving its working
environment through the execution of work style reform, including the promotionof remote working under New Normal, the promotion of inclusion & diversity, thefirm’s Global People Survey (GPS, an attitude survey) and other means.
4-1. An AZSA Work Style for a Fulfilling Work
Life and Personal LifeAt KPMG AZSA, we have been promoting
improvements in the work environment based on
the three frameworks of audit services, policy andculture, with the aim of our people achieving growth
as professionals while maintaining good physical andmental health.
We have also introduced the “AZSA Work Style” toexemplify a work style of professional awareness,
productivity and communication. We have implemented
various initiatives including morning and evening

division meetings, “kaeru meetings” (with the dual
meaning of “going home” and “changing” work style),
preparing various manuals to improve efficiency, andproviding opportunities for learning to promote selfimprovement. Recent initiatives to rebuild work stylein a way that suits environmental changes due to
COVID-19 have led to the promotion of remote working
and a further enhancement of work style.
We are committed to carrying out reforms with the aimof becoming an organization in which a fulfilling work
life and personal life are the norm by firmly rooting the
AZSA Work Style in our culture.

» Location of Activity According to the Purpose of Audit Services

KPMG

Digital audit platform
KPMG Clara

Audit Client●

Listening and talking deeply,
sharing Insights
Conﬁrming source documents● Exercising professional
skepticism● Face-to-face discussions onimportant issues
●

Ofﬁce
●

Face-to-face discussions
with team members● Group training such as
Off-JT

76

Remote Work●Conﬁrming and verifying electronicsource documents● Creating working papers andreports● Concentrating and thinking deeply© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

4-2. Promotion of Inclusion and Diversity
KPMG AZSA is composed of a wide variety of talent,
including people with expertise in different areas,such as digital, cyber, finance and real estate, as
well as employees including foreign colleagues withdiffering values. In addition, some of our people haverestrictions on their working time due to the provisionof nursing care to family members or child rearing. We
believe that an inclusive working environment whereindividuals respect each other’s differences, inspire
each other, and demonstrate their individual abilities asmuch as possible can foster various perspectives. This
contributes to the improvement of audit and advisory
services and solutions that we provide to addresscomplicated issues confronting society and our clients.
KPMG AZSA promotes Inclusion & Diversity as away of achieving our common goal of contributing
to clients and society through the provision of highquality services.
Main Inclusion and Diversity Initiatives• Established Key Performance Indicators (KPI) for
promoting the success of women. The ratio of
women in management roles is 13.4% as of July 1,
2021. The goal is for this ratio to reach 15% by 2023
• Activities of the Working Women’s Network (WWN)
as a network of female staff working at KPMG AZSA• A “Flexible Work Program” offering choices inwork style• Supporting career development through regularinterviews with employees relating to childbirth, childrearing and nursing care

Feedback from a user of
Flexible Work Program

After giving birth to the first child and taking maternity
leave, I returned to work with reduced working
hours through the Flexible Work Program (FWP) in
June 2020. The audit team I participated had justovercome the last audit in COVID-19 by using bothsite visiting and remote working, and I naturally
decided to use remote working. At first, I was worried
about balancing work and childcare for the first time.
However, working from home has not only reduced
the amount of travel time, but also made it possible
to respond flexibly to work hours. As a result, I wasable to secure sufficient time for childcare and work,and I was able to increase my productivity even byworking shorter hours. Thanks to that, my anxiety was
gradually relieved. Considering the travel time, it ispossible to participate in evening meetings that cannot
be attended face-to-face as long as they are remotemeetings, which reduces physical constraints for FWP
users and helps to secure growth opportunities.
For remote working, I use tools such as Microsoft
Teams to visualize and share tasks and regularly holdmorning and evening meetings so that teams canwork effectively and efficiently. As a result, we havebeen able to work on the same level of quality as
when teams actually gather to work.
By realizing flexible working styles regardless of placeor time, I feel that not only working mothers but also
all people respect working styles according to theirlife events and life stages, and that diverse humanresources can play active roles.

• Expanding the number of childbirth leave days andapplicable period for spouses• Clarifying in the firm’s Code of Ethics that any kindof human rights violations will not be tolerated,
including discrimination based on sexual orientationand gender identity• Acquired the “Platinum Kurumin,”a certification for companies withhigh standards of providing support
to families raising children, the firstof its kind for a large audit firm
Platinum Kurumin

Assistant Manager

Yurika Hirai© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

77

4-3. V OICE —­ Realizing the Ideas of Our People
VOICE (Valuable Opinions and Ideas to Change
Effectively) is an intranet tool for collecting feedback on
issues at work, requests and improvement suggestions,in order to incorporate the voice of our people into thefirm’s operations.
VOICE contributes to the review and standardizationof existing work methods and the establishment of an
efficient business infrastructure. It also provides anopportunity for communication between the staff andmanagement of KPMG AZSA.
Topics raised by staff are studied by the responsible
departments with a view to implementing changes, andthe results are made public.

4-4. GPS — Attitude Survey for Continuous
Improvements in Our Firm
The Global People Survey (GPS) is an attitude survey
conducted by KPMG member firms worldwide covering
all partners and personnel as a continuous improvement
exercise. The survey includes items on leadership andcommunication, as well as staff career development,compensation and benefits and working environment.
We then compare the scores our people give to eachof these items with scores from other regions of KPMG
and from other professional services firms. The survey
results are shared with all personnel and are used inconsidering and implementing measures aimed atcontinuously improving the organization and at creatinga friendly workplace in which people collaborate acrossoffices, divisions, and infrastructure departments.

Feedback from a user of thepaternity leave system
KPMG AZSA has been working to create acomfortable working environment for all employees.
I feel that the COVID-19 pandemic has led to theestablishment of a more flexible work style, including
the promotion of remote working. When my first childwas born, I used the paternity leave system to takechildcare leave.
At the time, I had just started a new engagement inJuly, and was extremely busy compared to previous
years. But the audit team members were supportive
regarding my leave.
My wife had returned to work, so during my childcare
leave, I spent the whole day taking care of our son
and taking him to and from daycare. This made me
realize firsthand the difficulties of child rearing that mywife faces. To be honest my son had not taken to me
because I was away for work most of the time, so it
made me happy when he was able to fall asleep in myarms. It was also great to see his daily growth up close.
After returning to work, I have been utilizing remote
working to continue looking after our son, such as
daycare drop-offs and pickups, despite my busy
schedule. Thanks to the understanding of my audit
team, I am able to concentrate on childcare until myson is bathed and asleep, and communicate with audit
team members through remote meetings at othertimes. I make use of digital tools to take full advantageof the benefits of remote working, and am able to haveboth a fulfilling personal and professional life.

For KPMG AZSA’s most important GPS indicator“Engagement Index (voluntary willingness to serve
the firm and satisfaction with the firm),” the ratio of
positive responses rose by 14% from for the past five
years to 74%.

Manager

Isamu Hatori78© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

At KPMG AZSA, we utilize our
KPMG global network based in nearly
150 countries worldwide and our broad
industry knowledge to provide
valuable services.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

1. KPMG International
KPMG is a global network of professional firms providing audit, tax and advisory
services. We operate in nearly 150 countries and have more than 227,000 people
working in member firms around the world.

1-1. M ember Firms Comprising
Independent Entities
All KPMG member firms are legally independent andseparate entities.
KPMG International* has developed a system forproviding consistent services on a global scale, andsupports the provision of high-quality audit, tax andadvisory services by its member firms.
*KPMG International Limited is a private English company limited by guarantee.
KPMG International Limited and its related entities do not provide services to clients.

1-2. Involvement of Japan in
Key Governance Bodies
Eight major countries — the United States, United
Kingdom, Japan, Germany, Canada, France, Australia andChina — currently lead discussions of KPMG’s operations,and decide investment areas and service offering
strategies. Japan actively shares its opinions which arereflected in the global management of KPMG.
Japan also leads the KPMG AsPac (Asia Pacific) region
along with Australia and China, with Japanese partners
participating in the operations of AsPac headquarters.
The key governance and management bodies of KPMGInternational are the Global Council, the Global Board,and the Global Management Team.
The Global Council — Equivalent toa Shareholders’ Meeting
The Global Council is composed of 56 representatives ofmember firms and is a body equivalent to a shareholders’meeting in ordinary corporations; it is the supremedecision-making body responsible for the annual
accounts, revision of the firm’s statutes and election of
the Global Chairman and Global Board members. Japanis a member of the Global Council.
The Global Board — Equivalent to a Board of Directors
The Global Board is the principal governance andoversight body comprising up to 28 representativesof member firms, the Global Chairman and Regional
Chairmen (representatives of the three regions),
and is equivalent to a “board of directors” inordinary corporations.

The key responsibilities of the Global Board include
approving strategy, protecting and enhancing the
KPMG brand, overseeing the management of KPMGInternational and approving policies and regulations.
As of end of September 2021, Toshiya Mori (CEO of
KPMG AZSA and Chairman of KPMG in Japan) represents
Japan as a member of the Global Board, thus playing animportant role in KPMG International’s management.
The Global Management Team Supervising
the Execution Status of Plans
The Global Management Team is led by the Global
Chairman and includes the Global Chief Operating
Officer, global function heads (audit, tax and advisory
functions), and the global heads of functions including
quality & risk, people, clients & markets, technology &knowledge, corporate affairs, and the General Counsel;
it supports member firms in their execution of the global
strategy and is responsible for holding them accountablefor commitments made.
The Global Management Team also supervises 10 steeringcommittees, which have the role of promoting practical
discussions and matters for resolution in each region.
Japan actively participates in all steering committees.

1-3. Regional Structure Composed ofThree Regions
KPMG maintains a regional structure composed of three
regions: the Americas, EMA (Europe, Middle East, andAfrica), and AsPac (Asia Pacific). Japan belongs to the
AsPac region. Under the regional chairman of each region
there is a board, which acts as a decision-making body.
As of September 2021, the following members of KPMG AZSA participate in
the operation of KPMG AsPac. Through these roles, KPMG AZSA contributes
to the KPMG global network. These arrangements allow for the situationin Japan to be conveyed and discussed in advance so that KPMG’s various
methodologies can be applied to the audit practice in Japan.

Board Member

Head of Audit & Assurance

Toshiya Mori

Takuji Kanai

CEO, The chairman of KPMG in Japan

Partner

Head of DPP

Audit Quality Leader

Eiichi Fujita

Simon Dobbins

Head of Accounting Practice Department

Partner

AAS Leader

Yoshihiro Kurokawa
Partner80© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

Revenues

US$

150

227,000

countries

peopleNumber ofcountries

Number of
personnel

Audit

29.22

about

US$ 11.07 in billions

Tax

US$ 6.48 in billions

Advisory

US$ 11.67 in billions

in billions(as of September 30, 2020)

Message from Chairman of KPMG International

KPMG is powered by great people doing greatthings. We do what matters, leading projects of great
consequence, and delivering positive results for clientsand stakeholders. We have done it for more than acentury guided by a higher Purpose and shared Values.
Our Purpose — to Inspire confidence and Empowerchange — matters more than ever, especially after
the past year and a half. We find ourselves in a unique
moment of time with the world at a place it has neverbeen before and incredible challenges to overcome. With
the world changing, people, business and society need atrusted partner to help lead the way.
KPMG in Japan and our colleagues at KPMG AZSA are
doing just that. They are reorganizing themselves tomeet the urgency of today, while ensuring cross-borderand multi-disciplinary teams understand our clients’industries and aspirations. They have also brought
together environmental, social and governance (ESG)
specialists to embed practical knowledge and creativity
across all of our services.

As Global Chairman, I am fully confident that KPMG
in Japan and KPMG AZSA are committed to buildingthat future by always doing the right thing, providing
the highest quality assurance, and ensuring our clients
receive the very best that KPMG has to offer —wherever and whenever it is needed.
As the world looks to emerge from this health crisis, we
all have an opportunity and responsibility to help build astronger and more resilient future. We look forward tobuilding that future together with you.

Global Chairman
KPMG International

Bill Thomas© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

81

2. KPMG in Japan
KPMG in Japan represents a group of eight professional firms providing audit, tax, andadvisory services and comprising approximately 9,000 personnel. We are committed toproviding services to our clients through seamless collaboration, utilizing the expertise andskills of a wide range of professionals, and maximizing the value of KPMG’s global network.
2-1. Discussing the Management of KPMG in Japan Amongthe Main Member Firms
The KPMG Japan Management Committee comprises representatives
from the major KPMG in Japan firms including KPMG AZSA, KPMG Tax
Corporation, KPMG Consulting and KPMG FAS. The committee discusses themost important topics related to management of KPMG in Japan, including thefirms’ collaborative structure, talent development and continual improvementof the quality of our services. This allows the firm to bring together the best
resources KPMG has to offer and deliver the best possible service to address
the management issues of our clients. KPMG AZSA’s Senior Executive Board
members act as directors on the boards of our advisory subsidiaries, thereby
ensuring a consistent approach to operational management. Additionally,
these advisory subsidiaries are also subject to monitoring and audit by theManagement Oversight Committee and Internal Control office.

Number of
personnel
Revenues

9,016
164.3

Audit

83.2

peoplebillion yen

Tax

Advisory

billion yen

billion yen

18.9 62.2

billion yen(as of June 30, 2021)*Tax revenue as of September 30, 2020

KPMG in Japan
CEO: Toshiya Mori

Audit

Tax

Advisory

KPMG AZSA LLC

KPMG Tax Corporation

KPMG Consulting Co., Ltd.

CEO: Hiroyuki Takanami
Professional services including audit,
assurance and attestation services,ﬁnancial advisory and Initial Public Offering
support services.

Representative: Yuichi Komakine
A team of tax specialists with expertise invarious ﬁelds provides accurate tax advice
to Japanese companies and Japanesesubsidiaries of foreign companies. Tax
advice includes preparation of tax returns,
domestic and international taxation, transfer
pricing, BEPS compliance, customs duties
and indirect taxes, M&A, organizational
restructuring and corporate revitalization,
global mobility and business succession.

President and CEO: Masahiro Miyahara
Support for overall improvement ofmanagement including planning of businessstrategies, improvement of business
efﬁciency, enhancement of proﬁtmanagement capability, and strengthening
governance and risk management.

KPMG Social Insurance &Labor Advisors Corporation

KPMG Healthcare Japan Co., Ltd.

Representative: Wataru Koshida
KPMG Social Insurance & Labor Advisors
Corporation provides Japanese and English
bilingual HR and labor-related services tomultinational Japanese companies andJapanese subsidiaries of foreign companies.
Services include support for new social
insurance application procedures, payroll
calculations, various social insurance
procedures, social security agreements,and employment regulations.

KPMG FAS Co.,Ltd.
Representative Partners: Masahiko Chino,
Osamu Matsushita, Hikaru Okada
Services including M&A and businessrestructuring advisory, management
strategy consulting and fraud investigations.

Managing Partners:
Keiichi Ohwari, Jun Matsuda
Business and ﬁnancial services (strategy,
risk assessment, M&A, etc.) for thehealthcare industry including medical andnursing care facilities.

KPMG AZSA Sustainability Co., Ltd.
Managing Partners:
Junichi Adachi, Kazuhiko Saito
Third party assurance services to enhance
the reliability of non-ﬁnancial information.

KPMG Ignition Tokyo, Inc.
President and CEO, Masayuki Chatani
Development of digital technology solutions for KPMG in Japan’s audit, tax and advisory functions.

82© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

2-2. F ostering Unity Among Constituents
Through Various Activities
KPMG in Japan engages in a number of activities
to ensure all personnel understand the firm’s basic
principles and develop a sense of oneness.
KPMG Japan Kickoff
KPMG in Japan holds the KPMG Japan Kickoff every
year, bringing all personnel together under one roof.
The meeting is a valuable opportunity to foster asense of oneness across all functions including audit,
tax and advisory.
The theme for the 2021 Kickoff held online was“Our Community.” It gave members the opportunity
to deepen their understanding of their individual
involvement in our community amidst the drasticchanges in the social environment.
KPMG Japan Partners Meeting
The KPMG Japan Partners Meeting, attended by thepartners and directors of KPMG in Japan, is held biannually to share information and discuss the directionof KPMG in Japan as a whole, as well as the audit, tax,
and advisory functions, and serves to deepen mutual
understanding among the partners and directors of
KPMG in Japan.
Chairman Award
The Chairman Award is an accolade system for all of
KPMG in Japan to recognize accomplishments andcontributions at work, and to demonstrate timely
appreciation for the efforts of our people. Announcing
the awards within the firm contributes to a feeling ofaccomplishment and enhances motivation.

2-3. Contributing to Society Through
CSR Activities Utilizing Our
Knowledge and Experience
By taking advantage of our experience and insights
gained through our core business as a professional firm
we are committed to share our values with society andcontribute to the development of a sustainable society.
Contribution to Lifelong Learning
By placing emphasis on the fourth UN Sustainable
Development Goal (SDG), “Quality education,” KPMG
AZSA provides activities aimed at fostering the next
generation of leaders to university, high school andjunior-high students.
We help students broaden their career options byproviding accounting and audit classes which show
how accounting knowledge is useful in society, by
supporting members of the younger generation who
wish to solve social issues through business, and bysponsoring HELLO VISITS*.
* A career education service operated by VISITS Technologies Inc.

Support with Expertise
We seek to solve social issues by taking advantage ofskills and experiences gained through our businesses,
such as providing free audits to the US-Japan Council.
We also hold charity seminars and donate all participation
fees to support areas affected by the Great East Japan
Earthquake (2011) and children orphaned by the disaster.
Environment-friendly Firm
KPMG has set a global goal of achieving net zerocarbon emissions by 2030. In Japan, we have also been
compiling data to give us an understanding of actual
carbon emissions associated with our business activities,
and are continuing our efforts to reduce emissions.
Support for Blind Soccer
We entered into a partnership contract with the NPO
Japan Blind Football Association and have held the ClubChampionship event each year since 2016. We havealso been sponsoring the Japan men’s national blindsoccer team since January 2020.
To provide teams with the opportunity to play, we hosted
the AXA x KPMG Blind Soccer 2020 Cup and the AXA x
KPMG Spring Cup (2021) while implementing strict
COVID-19 measures for preventing infection.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

83Corporate Overview
1. Corporate Overview
as of June 30, 2021

CEO

Toshiya Mori
Headquarters 1-2 Tsukudo-cho, Shinjuku-ku, Tokyo
Supervising Offices:Tokyo, Osaka, Nagoya
Regional Offices:	Sapporo, Sendai, Hokuriku, Kita-Kanto, Yokohama,
Kyoto, Kobe, Hiroshima, Fukuoka

12 offices

Number of
Employees(Full-time)

CPAs
Passed the CPA exam
Professionals
Administration Staff

6,173 people

Number of
Clients

Audit Engagements:
3,638
Financial Instruments and Exchange Act and Companies Act: 782 / Financial Instruments and Exchange Act: 32
Companies Act: 1,375 / Incorporated Educational Institutions: 44 / Labor Unions:15 / Other statutory audits: 583 /Other voluntary audits: 807
Other engagements:
2,037 (the number of clients with other engagement contracts for the year ended June 2021)

Offices

History

July 1969
July 1985
October 1993
February 2003
April 2003
January 2004
July 2010

3,083 (Includes 28 Representative Partners and 531 Partners)
1,266
1,075 (Includes 36 Specified Partners and 1 Representative Partner)
749

Asahi & Co. was established
Asahi & Co. and Shinwa Audit Corporation merged to form Asahi Shinwa & Co.
Asahi Shinwa & Co. merged with Inoue Saito Eiwa Audit Corporation to form Asahi & Co.
KPMG audit division spun off from Shin Nihon & Co. to form AZSA & Co.
Asahi & Co. became a member firm of KPMG
Asahi & Co. merged with AZSA & Co. to form KPMG AZSA & Co.
KPMG AZSA & Co. became limited liability company and changed its name to KPMG AZSA LLC

2. Financial Information
The financial status of KPMG AZSA LLC for the years
ended June 2020 and June 2021 is summarized below.
The financial statements of KPMG AZSA are subject toaudit by another audit corporation.
» Summary Income Statement

84(Million yen)

» Summary Balance Sheet(Million yen)
June 30, 2020

June 30, 2021

Current assets

54,65057,833

Non-current assets

22,464

23,591

Total assets

77,11581,425

Year ended
June 30, 2020

Year ended
June 30, 2021

Current liabilities

29,99732,380

Revenue

105,970

105,281

Non-current liabilities

18,973

19,734

Operating expense

103,517

102,483

Total liabilities

48,971

52,115

Operating income

2,452

2,798

Partners’ capital

28,14429,310Non-operating income

1,086

1,344

Valuation and translation djustments

(0)

(0)

Non-operating expense

1,163

1,842

Total net assets

28,14429,309Ordinary income

2,374

2,300

Total liabilities and net assets

77,11581,425© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

3. Principal Clients
The clients of KPMG AZSA include the following companies listed on the First Section of theTokyo Stock Exchange, national universities, and local governments (568 corporations).
as of June 30, 2021

Fishery, Agriculture & Forestry/Mining

Textiles and Apparels/Pulp and Paper

Pharmaceutical• Maruha Nichiro Corporation• SAKATA SEED CORPORATION• K&O Energy Group Inc.

• TOYOBO CO., LTD.
• TEIJIN LIMITED• SUMINOE TEXTILE CO., LTD.
• NIPPON FELT CO., LTD.
• DYNIC CORPORATION• SOTOH CO., LTD.
• KOMATSU MATERE CO., LTD.
• TSI HOLDINGS CO., LTD.
• Sanyo Shokai Ltd.
• DESCENTE, LTD.
• Tokushu Tokai Paper Co., Ltd.
• Hokuetsu Corporation• TOMOEGAWA CO., LTD.
• RENGO CO., LTD.

• Kyowa Kirin Co., Ltd.
• Takeda Pharmaceutical Company Limited• Sumitomo Dainippon Pharma Co., Ltd.
• CHUGAI PHARMACEUTICAL CO., LTD.
• HISAMITSU PHARMACEUTICAL CO., INC.
• SANTEN PHARMACEUTICAL CO., LTD.
• Nichi-Iko Pharmaceutical Co., Ltd.
• Fuji Pharma Co., Ltd.
• Zeria Pharmaceutical Co., Ltd.
• DAIICHI SANKYO COMPANY, LTD• Taiko Pharmaceutical Co., Ltd.
• Daito Pharmaceutical Co., Ltd.
• Otsuka Holdings Co., Ltd.
• PeptiDream Inc.
• SAWAI PHARMACEUTICAL CO., LTD.

Construction• Hinokiya Group Co., Ltd.
• MIRAIT Holdings Corporation• Nippon Aqua Co., Ltd.
• Besterra Co., LTD.
• Daiseki Eco. Solution Co., Ltd.
• Hazama Ando Corporation• Takamatsu Construction Group Co., Ltd.
• Oriental Shiraishi Corporation• Taisei Corporation• Fudo Tetra Corporation• TEKKEN CORPORATION• DAIHO CORPORATION• TOTETSU KOGYO CO., LTD.
• P.S. Mitsubishi Construction Co., Ltd.
• MAEDA ROAD CONSTRUCTION CO., LTD.
• WAKACHIKU CONSTRUCTION CO., LTD.
• NIPPON RIETEC CO., LTD.
• TOENEC CORPORATION• SUMITOMO DENSETSU CO., LTD.
• JGC HOLDINGS CORPORATION• YAMATO CORPORATION• Takasago Thermal Engineering Co., Ltd.
• SANKO METAL INDUSTRIAL CO., LTD.
• DAI-DAN CO., LTD.
• HIBIYA ENGINEERING, LTD.
• Takenaka Corporation

Foods• TOYO SUGAR REFINING CO., LTD.
• Nippon Beet Sugar Manufacturing Co., Ltd.
• Meito Sangyo Co., Ltd.
• CALBEE, Inc.
• Marudai Food Co., Ltd.
• S Foods Inc.
• Itoham Yonekyu Holdings Inc.
• Asahi Group Holdings, Ltd.
• Kirin Holdings Company, Limited• DyDo GROUP HOLDINGS, INC.
• ITO EN, LTD.
• Japan Foods Co., Ltd.
• FUJI OIL HOLDINGS INC.
• AJINOMOTO CO., INC• TOYO SUISAN KAISHA, LTD.
• DAIREI CO., LTD.
• KENKO MAYONNAISE CO., LTD.
• Riken Vitamin Co., Ltd.

Chemicals• Showa Denko K.K.
•S
 UMITOMO CHEMICAL COMPANY,
LIMITED• Sumitomo Seika Chemicals Company, Limited• TOSOH CORPORATION• AIR WATER INC.
• Toho Acetylene Co., Ltd.
• TODA KOGYO CORP.
• KANEKA CORPORATION• JSR Corporation• Sumitomo Bakelite Company, Limited• DaikyoNishikawa Corporation• MORIROKU HOLDINGS COMPANY, LTD.
• DKS Co. Ltd.
• NICCA CHEMICAL CO., LTD.
• Dai Nippon Toryo Company, Limited• Nippon Paint Holdings Co., Ltd.
• Kansai Paint Co., Ltd.
• SHINTO PAINT COMPANY, LIMITED• SAKATA INX CORPORATION• FUJIFILM Holdings Corporation• Shiseido Company,Limited•T AKASAGO INTERNATIONALCORPORATION• KONISHI CO., LTD.
• OAT Agrio Co.,Ltd.
• Taisei Lamick Co., Ltd.
• NITTO DENKO CORPORATION• SANKO GOSEI LTD.
• TOLI Corporation• Nifco Inc.

Oil and Coal/Rubber/Glass andCeramics Products• Fuji Oil Company, Ltd.
• Cosmo Energy Holdings Co., Ltd.
• Toyo Tire Corporation• Sumitomo Rubber Industries, Ltd.
• Sumitomo Riko Company Limited• Bando Chemical Industries, Ltd.
• AGC Inc.
• Nihon Yamamura Glass Co.,Ltd.
• Nippon Electric Glass Co., Ltd.
• TAIHEIYO CEMENT CORPORATION• TOKAI CARBON CO., LTD.
• NORITAKE CO.,LIMITED• NGK SPARK PLUG CO., LTD.
• MARUWA CO., LTD.
• SHINAGAWA REFRACTORIES CO., LTD.
• KROSAKI HARIMA CORPORATION• Isolite Insulating Products Co., Ltd.
• NICHIHA CORPORATION

Iron and Steel• NIPPON STEEL CORPORATION• Kobe Steel, Ltd.
• NAKAYAMA STEEL WORKS, LTD.
• Godo Steel, Ltd.
• TOKYO STEEL MANUFACTURING CO., LTD.
• KYOEI STEEL LTD.
• TOKYO TEKKO CO., LTD.
• OSAKA STEEL CO., LTD.
• MARUICHI STEEL TUBE Ltd.
• Nippon Koshuha Steel Co., Ltd.
• Sanyo Special Steel Co., Ltd.
• PACIFIC METALS CO., LTD.
• NICHIA STEEL WORKS, LTD.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

85

Nonferrous Metals/Metal ProductsElectric Appliances

Precision Instruments• MITSUI MINING & SMELTING CO., LTD.
• MITSUBISHI MATERIALS CORPORATION• Sumitomo Metal Mining Co., Ltd.
• Sumitomo Electric Industries, Ltd.
• ALPHA Corporation• RS Technologies Co., Ltd.
• Shinwa Co., Ltd.
• CORONA CORPORATION• TAKADAKIKO Co., Ltd.
• Sankyo Tateyama, Inc.
• ALINCO INCORPORATED• NORITZ CORPORATION• SANYO INDUSTRIES, LTD.

• IBIDEN CO., LTD.
• KONICA MINOLTA, INC.
• MINEBEA MITSUMI Inc.
• MITSUBISHI ELECTRIC CORPORATION• SINFONIA TECHNOLOGY CO., LTD.
• Meidensha Corporation• TOREX SEMICONDUCTOR LTD.
• W-SCOPE Corporation• DAIHEN Corporation• YA-MAN LTD.
• Nissin Electric Co., Ltd.
• NITTO KOGYO CORPORATION• GS Yuasa Corporation• NEC CORPORATION• Iwatsu Electric Co., Ltd.
• Japan Display Inc.
• NOHMI BOSAI LTD.
• Panasonic Corporation• ANRITSU CORPORATION• TDK Corporation• NIHON DEMPA KOGYO CO., LTD.
• Meiko Electronics Co., Ltd.
• NIHON TRIM CO., LTD.
• YOKOWO CO., LTD.
• HIROSE ELECTRIC CO., LTD.
• SUMIDA CORPORATION• HORIBA, Ltd.
• MegaChips Corporation• COSEL CO., LTD.
• Stanley Electric Co., Ltd.
• OKAYA ELECTRIC INDUSTRIES CO., LTD.
• Zuken Inc.
• CASIO COMPUTER CO., LTD.
• TAIYO YUDEN CO., LTD.
• SCREEN Holdings Co., Ltd.
• ZOJIRUSHI CORPORATION• TOKYO ELECTRON LIMITED• TERUMO CORPORATION• CREATE MEDIC CO., LTD.
• JMS Co., Ltd.
• Mani, Inc.
• A&D Company, Limited• DAIKEN MEDICAL Co., LTD.
• Sincere Co., LTD.
• SEIKO HOLDINGS CORPORATION

Machinery• Takuma Co., Ltd.
• TAKISAWA MACHINE TOOL CO., LTD.
• FUJI CORPORATION• DISCO CORPORATION• NC Holdings Co., Ltd.
• IWAKI CO., LTD.
• HIRATA Corporation• Nabtesco Corporation• MODEC, Inc.
• HOSOKAWA MICRON CORPORATION• SATO HOLDINGS CORPORATION• GIKEN LTD.
• OKADA AIYON CORPORATION• KOMATSU LTD.
• SUMITOMO HEAVY INDUSTRIES, LTD.
• NIKKO CO., LTD.
• KITAGAWA IRON WORKS CO., LTD.
• TAKAKITA CO., LTD.
• Organo Corporation• DAIDO KOGYO CO., LTD.
• SAMCO Inc.
• RISO KAGAKU CORPORATION• DAIKOKU DENKI CO., LTD.
• MAX CO., LTD.
• SEGA SAMMY HOLDINGS INC.
• TSUBAKI NAKASHIMA CO., LTD.
• MAEZAWA KYUSO INDUSTRIES CO., LTD.
• NIPPON PILLAR PACKING CO., LTD.
• Makita Corporation• Hitachi Zosen Corporation• Mitsubishi Heavy Industries, Ltd.

86

Transportation Equipment• Mitsui E&S Holdings Co., Ltd.
• Kawasaki Heavy Industries, Ltd.
• THE KINKI SHARYO CO., LTD.
• F-TECH INC.
• Lecip Holdings Corporation• KYB Corporation• PRESS KOGYO CO., LTD.
• Mazda Motor Corporation• Imasen Electric Industrial Co., Ltd.
• Honda Motor Co., Ltd.
• SUBARU CORPORATION• TBK Co., Ltd.
• MEIWA INDUSTRY CO., LTD.
• NIHON PLAST CO., LTD.
• TS TECH CO.,LTD.

Other Products• TRANSACTION CO., LTD.
• Eidai Co., Ltd.
• BANDAI NAMCO Holdings Inc.
• TOMY COMPANY, LTD.
• TOPPAN PRINTING CO., LTD• TSUTSUMI JEWELRY CO., LTD.
• OLIVER CORPORATION• KING JIM CO., LTD.
• ITOKI CORPORATION• Mitsubishi Pencil Co., Ltd.
• KOKUYO CO., LTD.
• OKAMURA CORPORATIONElectric Power and Gas• Chubu Electric Power Company,
Incorporated• The Chugoku Electric Power Company,
Incorporated• RENOVA, Inc.
• Tokyo Gas Co., Ltd.
• OSAKA GAS CO., LTD.
• TOHO GAS CO., LTD.
• HIROSHIMA GAS CO., LTD.

Land/Marine/Air Transportation• TOBU RAILWAY CO., LTD.
• Sotetsu Holdings, Inc.
• Keio Corporation• East Japan Railway Company• Kintetsu Group Holdings Co., Ltd.
• HANKYU HANSHIN HOLDINGS, INC.
• Nankai Electric Railway Co., Ltd.
• Kobe Electric Railway Co., Ltd.
• Nagoya Railroad Co., Ltd.
• NIKKON Holdings CO., LTD.
• JAPAN OIL TRANSPORTATION CO., LTD.
• FUKUYAMA TRANSPORTING CO., LTD.
• SEINO HOLDINGS CO., LTD.
• S LINE CO., LTD.
• Mitsui O.S.K. Lines, Ltd.
• IINO KAIUN KAISHA, LTD.
• Japan Airlines Co., Ltd.
• Pasco Corporation© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality

as of June 30, 2021

Warehousing and Harbor
Transportation• NISSIN CORPORATION• MITSUBISHI LOGISTICS CORPORATION• Mitsui-Soko Holdings Co., Ltd.
• The Sumitomo Warehouse Co., Ltd.
• Toyo Logistics Co., Ltd.
• JAPAN TRANSCITY CORPORATION• Utoc Corporation• SANRITSU CORPORATION• Kintetsu World Express, Inc.
• A zuma Shipping Co., Ltd.

Information & Communication• NEC Networks & System Integration
Corporation• Systena Corporation• NS Solutions Corporation• KOEI TECMO HOLDINGS CO., LTD.
• Densan Co., Ltd• Broadleaf Co., Ltd.
• SYSTEM INFORMATION CO., LTD• MEDIA DO HOLDINGS Co., Ltd.
• V-cube, Inc.
• Encourage Technologies Co., Ltd.
• Fixstars Corporation• CARTA HOLDINGS, INC.
• TechMatrix Corporation• Z APPALLAS, INC.
• Internet Initiative Japan Inc.
• I’LL INC• MarkLines Co., Ltd.
• TERRASKY CO., LTD.
• PiPEDO HD, Inc.
• Internetworking & Broadband Consulting
Co., Ltd.
• NEOJAPAN Inc.
• R AKUS Co., Ltd.
• Akatsuki Inc.
• Kanamic Network Co., LTD• ORO Co., Ltd.
• Needs Well Inc.
• Signpost Corporation• PROTO CORPORATION• INFOCOM CORPORATION• EduLab, Inc.
• Serverworks Co., Ltd.
• Sansan, Inc.
• Trend Micro Incorporated• Toukei Computer Co., Ltd• XNET Corporation• Cybozu, Inc.
• Information Services Intl - Dentsu• ACCESS CO., LTD.
• Computer Institute of Japan, Ltd.
• Marvelous Inc.
• TBS HOLDINGS, INC.
• T V Asahi Holdings• Vision Inc.
• CROPS CORPORATION•N IPPON TELEGRAPH AND TELEPHONECORPORATION•H
 IKARI TSUSHIN, INC.
•F
 ibergate Inc.
•N
 TT DATA CORPORATION•P CA CORPORATION•C APCOM CO., LTD.
•S CSK Corporation•N SD CO., LTD.
• J BCC Holdings Inc.
•N
 TT DOCOMO, INC.
•T
 he Asahi Shimbun Company

Wholesale Trade•O LBA HEALTHCARE HOLDINGS, Inc.
• J ALUX Inc.
•T
 OKYO ELECTRON DEVICE LIMITED•S ojitz Corporation•A LFRESA HOLDINGS CORPORATION•S HINYEI KAISHA•g remz,Inc.
•Y ashima Denki Co., Ltd.
• J UTEC Holdings Corporation•C ominix CO., LTD•W IN-Partners Co., Ltd.
•S HIP HEALTHCARE HOLDINGS Co., Ltd•M
 EIJI ELECTRIC INDUSTRIES CO., LTD.
•F UJI KOSAN COMPANY, LTD.
•S ATORI ELECTRIC CO., LTD.
•H AKUTO CO., LTD.
•M
 EDIPAL HOLDINGS CORPORATION• HAGIWARA ELECTRIC HOLDINGS CO., LTD.
•S UZUDEN CORPORATION•D OSHISHA CO., LTD.
•H
 ASHIMOTO SOGYO HOLDINGS CO., LTD.
•S IIX CORPORATION•T AKASHIMA & CO., LTD.
•T SUBAKIMOTO KOGYO CO., LTD.
•S UMITOMO CORPORATION•U chida Yoko Co., Ltd.
•S ATO SHOJI CORPORATION•R yoyo Electro Corporation•T okyo Sangyo Co., Ltd.
•S
 hinsho Corporation•H ANWA CO., LTD.
• IWATANI CORPORATION•S HOKO CO., LTD.
•K
 yokuto Boeki Kaisha, Ltd.
•S AN-AI OIL CO., LTD.
• Inabata Co., Ltd.
•M
 itsuuroko Group Holdings Co., Ltd.
•M OS FOOD SERVICES, INC.
•S ODA NIKKA CO., LTD.
•P
 ALTAC Corporation•M ITANI SANGYO CO., LTD.
•K OA Shoji Holdings corporation•K ATO SANGYO CO., LTD.
•Z AOH COMPANY, LTD.

Retail Trade• ASKUL Corporation• PAL GROUP HOLDINGS CO., LTD• Halows CO., LTD.
• Alpen Co., Ltd.
• Qol Holdings Co., Ltd.
• DOUTOR NICHIRES Holdings Co., Ltd.
• BRONCO BILLY CO., LTD.
• Treasure Factory Co., LTD.
• MarketEnterprise Co., Ltd.
• Torikizoku Holdings Co., Ltd.
• Yossix Co., Ltd.
• ASAHI CO., LTD.
• Seven & i Holdings Co., Ltd.
• TSURUHA HOLDINGS INC.
• TORIDOLL Holdings Corporation• FOOD & LIFE COMPANIES LTD.
• Right-on Co., Ltd.
• Ryohin Keikaku Co., Ltd.
• G -7 HOLDINGS Inc.
• MARCHE CORPORATION• SRS HOLDINGS CO., LTD.
• Totenko Co., Ltd.
• LIFE CORPORATION• TEN ALLIED CO., LTD.
• AOYAMA TRADING CO., LTD.
• SHIMAMURA CO., Ltd.
• Takashimaya Company, Limited• H2O RETAILING CORPORATION• K intetsu Department Store Co., Ltd.
• IZUMI CO. LTD.
• K’S HOLDINGS CORPORATION• YAMADA HOLDINGS CO., LTD.
• AIGAN CO., LTD.
• S agami Holdings Corporation• SAC’S BAR HOLDINGS INC.

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

87

as of June 30, 2021

Banks

Services• The Shimane Bank, Ltd.
• JAPAN POST BANK Co., Ltd.
• San ju San Financial Group, Inc.
• Daishi Hokuetsu Financial Group, Inc.
• Hirogin Holdings, Inc.
• Sumitomo Mitsui Trust Holdings, Inc.
• Sumitomo Mitsui Financial Group, Inc.
• Tsukuba Bank, Ltd• The Bank of Iwate, Ltd.
• The Ogaki Kyoritsu Bank, Ltd.
• The Fukui Bank, Ltd.
• THE SHIMIZU BANK, LTD• THE NANTO BANK, LTD.
• The Hyakugo Bank, Ltd.
• The Kiyo Bank, Ltd.
• The Chugoku Bank, Limited• The Iyo Bank, Ltd.
• THE AWA BANK, LTD.
• Seven Bank, Ltd.
• THE BANK OF KOCHI, LTD.
• Yamaguchi Financial Group, Inc.
• The Bank of Nagoya, Ltd.
• North Pacific Bank, Ltd.
• The Aichi Bank, Ltd.

•C HUCO CO., LTD.
•T
 AKEEI CORPORATION•E
 J Holdings Inc.
•A
 rtner Co., Ltd•G CA Corporation•C OOKPAD Inc.
•S
 AINT-CARE HOLDING CORPORATION•D IP Corporation•D IGITAL HOLDINGS, Inc.
•S hin Nippon Biomedical Laboratories, Ltd.
•B
 rass Corporation•H akuhodo DY Holdings Inc.
•G
 urunavi, Inc.
•F
 @N Communications Inc.
•L
 IKE Co., Ltd.
•A
 dways Inc.
•D
 entsu Group Inc.
•T
 AKE AND GIVE. NEEDS Co., Ltd.
•N
 ippon Air Conditioning Services Co., Ltd•O RIENTAL LAND CO., LTD.
•R ESORTTRUST, INC.
•U SS CO., LTD.
• Interworks, Inc.
•K
 eePer Technical Laboratory Co., Ltd•S ANKI SERVICE CORPORATION• J APAN MATERIAL Co., Ltd.
•C AREERLINK Co., Ltd.
•E
 RI HOLDINGS CO., LTD.
•W ILL GROUP, INC.
•E
 scrow Agent Japan, Inc.
• J apan Post Holdings Co., Ltd.
•S
 trike Co., Ltd.
•S olasto Corporation•G ameWith, Inc.
•S
 oldOut, Inc.
•R
 PA Holdings, Inc.
•S PRIX co., ltd.
•F
 orum Engineering Inc.
•F
 rontier Management Inc.
•P IALA Inc.
•C OPRO-HOLDINGS. Co., Ltd•T OSHO CO., LTD.
•N OMURA Co., Ltd.
•K NT-CT Holdings Co., Ltd.
•S ECOM CO., LTD.
•D
 aiseki Co., Ltd.

Securities and Commodities Futures/
Insurance/Other Financing Business• Mercuria Holdings Co., Ltd.
• Daiwa Securities Group Inc.
• TOYO SECURITIES CO., LTD.
• THE KOSEI SECURITIES CO., LTD.
• Monex Group, Inc.
• AIZAWA SECURITIES CO.,LTD.
• Japan Post Insurance Co., Ltd.
• MS&AD Insurance Group Holdings, Inc.
• Dai-ichi Life Holdings, Inc.
• JACCS CO., LTD.
• ORIX CORPORATION• NEC Capital Solution Limited• Aflac Life Insurance Japan Ltd.
• SUMITOMO LIFE INSURANCE COMPANY• Meiji Yasuda Life Insurance Company

Real Estate• Star Mica Holdings Co., Ltd.
• The Global Ltd.
• Sansei Landic Co., Ltd• Tenpo Innovation CO., LTD.
• Mitsui Fudosan Co., Ltd.
• HEIWA REAL ESTATE CO.,LTD.
• DAIBIRU CORPORATION• Sumitomo Realty & Development Co., Ltd.
• Sunnexta Group Inc.

Cities•S
 endai City•S
 hizuoka City•H
 amamatsu City

National Universities•H OKKAIDO UNIVERSITY•H
 irosaki University•M iyagi University of Education• Ibaraki University•U niversity of Tsukuba• Utsunomiya University• SAITAMA UNIVERSITY• Tokyo University of Foreign Studies• Niigata University• UNIVERSITY OF FUKUI• Hamamatsu University School of Medicine• Aichi University of Education• TOYOHASHI UNIVERSITY of
TECHNOLOGY• Tokai National Higher Education andResearch System• Shizuoka University• Mie University• SHIGA UNIVERSITY OF MEDICALSCIENCE• Kyoto University of Education• K YOTO INSTITUTE OF TECHNOLOGY• Osaka University• Osaka Kyoiku University• Hyogo University of Teacher Education• Kobe University• Nara University of Education• Nara Women’s University• Nara Institute of Science and Technology• Wakayama University• Okayama University• HIROSHIMA UNIVERSITY• Yamaguchi University• UNIVERSITY OF TOKUSHIMA• Naruto University of Education• Kochi University• Kyushu Institute of Technology• Oita University• University of Miyazaki• Kagoshima University• Inter-University Research InstituteCorporation, National Institutes for
the Humanities• Inter-University Research InstituteCorporation, Research Organization ofInformation and Systems• Inter-University Research InstituteCorporation, National Institutes of
Natural Sciences

Incorporated Administrative
Agencies etc.
• Organization for Postal Savings, Postal Life
Insurance and Post Office Network.
• Japan External Trade Organization• Japan Water Agency• National Printing Bureau• Japan Mint
• Organization for Small & Medium Enterprises
and Regional Innovation, JAPAN• RIKEN Institute of Physical and Chemical
Research• New Energy and Industrial Technology
Development Organization• Japanese Red Cross Society* The companies listed on the First Section of the Tokyo Stock Exchange are presented in the order of securities code.

88© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

Compliance with the Audit Firm Governance CodeKPMG AZSA has adopted the Audit Firm Governance Code. We are implementing
further improvements to our governance in order to fulfill our social responsibilityof supporting the capital markets and continuously enhance audit quality.

[The Role of the Audit Firm]
Principle and Guidance
Principle

1

Guidance

1-1

An audit firm should recognize its public interest roleand clearly express the tone at the top so that the top
management and the firm personnel will proactively
accomplish their respective roles, as well as so that all
partners of the firm duly undertake their responsibilities todevelop the operational structure of the firm.

CEO repeatedly issues messages on continuous
activities to maintain and enhance audit quality. An
organizational system of quality control is in place
wherein each hierarchical layer of the Four Defense
Lines carries out its respective responsibility foraudit quality.

An audit firm should define the values to be commonly
maintained by its personnel and also develop the code of
conduct to put these values into practice.

A sense of oneness as an organization is establishedby sharing our firm’s basic principles of Purpose,
Values, Vision and Strategy.

The firm fosters true professionals in accordancewith our Human Resource Development Principles
and conducts appropriate evaluations with afocus on performance and efforts related to audit
quality. For partner evaluations the most importantevaluation areas are quality and quality control.
Provision of non-audit services to audit clients is
excluded from evaluation.

P.68 Human Resource
Development

An audit firm should develop an organizational cultureof openness which encourages its personnel to shareissues, knowledge and experiences related to audits andproactively participate in a dialogue and discussion.

Through repeated reorganizations an openorganizational culture is created, sharing the firm’s
principles regardless of former affiliation.
Fostering an organizational culture of openness
among all of the organization’s people and making
it stick is an ongoing challenge. We are working
as an organization to address this through internal
communications and more sophisticated knowledge
sharing techniques.

1-4

An audit firm should clarify its stance toward non-audit
services (provided by the firm and its group organizations).

1-5

P.39 Responsibility for
Quality Control

An audit firm should appropriately motivate its personnel
in order to raise their morale and help them to fully
maintain and demonstrate their professional competence
and skepticism.

1-3

Guidance

P.36 Quality Control Based on
Our Four Defense Lines

P.56 Initiatives forCompliance andInformation Security

1-2

Guidance

AZSA Quality 2021/22

Point for further reinforcement
We will ensure that all individual members of thefirm are aware that the maintenance of high ethicalstandards and constant self-improvement as
professionals are the basis of the trust placed in ourfirm. We will also steadily implement various measuresfor compliance with the firm’s Code of Ethics. In
particular, we will conscientiously work on preventing
the recurrence of inappropriate conduct relating
to e-Learning by strengthening our internal control
system, and strive to restore trust.

Guidance

Guidance

Status of Action Taken

An audit firm has the public interest role to ensure the credibility of corporate financial information through the audits, seek to protect
stakeholders such as participants in the capital market and thereby contribute to the sound development of the national economy. In
order to accomplish this role, the audit firm should encourage its personnel to have frank and openminded dialogue, enhance mutual
development, promote their full competence, and continuously enhance the audit quality on a firm-wide basis.

With respect to the provision of non-audit services,
the firm maintains a system to strengthen governanceof not only KPMG AZSA but also the entire group
including subsidiaries that provide advisory services,
as well as a mechanism to appropriately monitor
independence and conflicts of interest.

P.25 Shared Basic Principles
That are the Foundationof Our Audit Quality

P.26 Management fromDiverse Backgrounds
P.26 A Corporate Culture
Encouraging Free andOpen Communication

P.55 Clarification of
Policy for Providing
Non-audit Services
P.82 Discussing theManagement of KPMG
in Japan Among theMain Member Firms© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

89[Organizational Structure]
Principle and Guidance
Principle

2

Status of Action Taken

An audit firm should establish an effective management
structure to ensure its effective management and operations.

Guidance

2-1

The firm clarified responsibility for management
by designating its Senior Executive Board andExecutive Board as the decision-making andexecutive bodies respectively.
We are working to strengthen the firm’s organizational
management foundation in order to respond to thechallenges represented by the firm’s increasing sizeand changes in the external environment.
Point for further reinforcement
We will strengthen discipline in the allocation of
resources and the implementation timing of initiatives
to ensure the effectiveness of initiatives and improve
corporate governance.

An audit firm should clarify the role of the management inimportant operations, including the following matters, inorder to meet the public expectations of audits and ensure
its effective management and operations:• Development of organizational structure to ensure
appropriate judgments of the audit firm on important
issues that potentially have a significant influence on
the reliability of audit quality from the capital market,
and proactive involvement in those significant issues byutilizing the structure mentioned above;

Guidance

2-2

AZSA Quality 2021/22

An audit firm should have effective management in order to develop its organizational operations as a whole for the continuous
enhancement of the audit quality.

An organizational system of quality control is in place
wherein each hierarchical layer of the Four Defense
Lines carries out its respective responsibility foraudit quality. The final responsibility for quality control
rests with the CEO; however, the Senior Executive
Board member appointed by the CEO to oversee
quality control is responsible for developing
overall quality control policies and for monitoring
how such quality control policies are followed.
Point for further reinforcement
We are making appropriate preparations for theapplication of revised standards in response to thescheduled revision of practical guidelines on quality
management for audits in Japan.

• The development of an environment that allows audit
teams to conduct a macroscopic analysis based on anunderstanding of the economic environment and frank andin-depth dialogue with audited companies in order to identify
the risks of material misstatements and to respond to theassessed risks appropriately;Frank and in-depth exchanges of opinions areenabled through two-way communication with audit
committees and by receiving feedback from clients on
the quality of services provided.

• Setting an appropriate environment for people
development, human resources management andperformance evaluation in order to raise the moraleof the firm personnel and help them to maintain anddemonstrate their professional competence; andThe firm fosters true professionals in accordancewith our Human Resource Development Principles
and conducts appropriate evaluations with a focus on
performance and efforts related to audit quality. For
partner evaluations the most important evaluation areas
are quality and quality control. Provision of non-audit
services to audit clients is excluded from evaluation.

P.28 Management/
Execution, Supervision
and Evaluation
P.28 Decision-making
Management andExecution

P.36 Quality Control Based on
Our Four Defense Lines
P.39 The CEO Bears
Final Responsibility for
Audit Quality

P.40 Improvement throughFeedback from Clients(ACCESS)
P.42 Communication with
Stakeholders

P.68 Human Resource
Development

Point for further reinforcement
We will develop a sustainable work environment toaddress increased workloads resulting from stricter
auditing standards.
• C onsideration and development of the effective
utilization of information technology (IT) in order toenhance the efficiency and effectiveness of audits, witha view to accommodating the anticipated advanced
utilization of IT by audited companies.

In addition to introducing electronic audit tools, we
are working on developing and introducing audit
methods utilizing cutting-edge digital technologies
such as advanced statistical analysis, AI/RPA,
and infrastructure technologies. We are also
continuously improving our IT infrastructure to
support remote working.
Point for further reinforcement
We will monitor the status of digital audits for individual
audit engagements and support the further introductionof tools and methods. We will also continue efforts forrobust implementation of information security measures.

Guidance

2-3

90

An audit firm should appoint members of its management
team not only by taking into account their thoroughknowledge and experience of audit practice but also by
ensuring the effectiveness of the management function for
its organizational operations as the team.

All officers including the CEO, Senior Executive
Board members and Executive Board members
are selected through direct election by all partners
thereby ensuring the firm’s organizational operation.

P. 6

Audit Transformation

P.43 Manual-based Utilizationof Electronic Audit Tools

P.28 Election System© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality[Organizational Structure] Continued
Principle and Guidance
Principle

3

Guidance

3-1

Guidance

3-2

An audit firm should establish a function to supervise andevaluate the effectiveness of its management and thereby
support to enhance its effectiveness, and clarify the role ofthe function.

The firm established the Management OversightCommittee comprising partners who are not involved
in firm management.

An audit firm should appoint independent third persons as
the members of the function responsible for the supervisionand evaluation, and effectively utilize their knowledge andexperience to deal with the issues recognized by the firmfrom the perspective to ensure the effective management
and organizational operations and accomplish its public
interest role.

The firm established the Public Interest OversightCommittee as an independent supervisory body.

An audit firm should clarify the role of independent third
persons to participate in the supervision and evaluation
structure within the firm considering that those persons
are expected to be involved in the following matters,for example:

The Public Interest Oversight Committee receives
reports from the Management Oversight Committee
on important firm activities and projects and engages
CEO or Senior Executive Board members in discussion.
The Committee also supervises from a public interest
standpoint whether or not the supervisory andevaluation processes of the Nomination Committee
and Compensation Committee are appropriately
carried out.

• Oversight of the evaluation of the effectiveness ofthe management;• O versight of the process of the election or appointment,
retirement, evaluation and remuneration of the
management team members;
Guidance

3-3

Status of Action Taken

AZSA Quality 2021/22

An audit firm should have a function to supervise and evaluate the effectiveness of its management from the independent viewpoint andthereby support to enhance the effectiveness of the management.
P.28 Management/
Execution, Supervision
and Evaluation
P.30 Supervision and Evaluationof Effectiveness ofManagement Functions
P.28 Management/
Execution, Supervision
and Evaluation
P.30 Supervision and Evaluationof Effectiveness ofManagement Functions• Oversight of developing the policies for people
development, human resources management,
performance evaluation and remuneration;

P.28 Management/
Execution, Supervision
and Evaluation
P.30 Supervision and Evaluationof Effectiveness ofManagement Functions• O versight of the evaluation of the status of developmentof policies and procedures regarding whistle-blowing
from within the audit firm and external sources, andthe status of verification and utilization of provided
information; and• In fulfilling their oversight role, independent third
persons should also be involved in dialogue with audited
companies, shareholders and other participants in thecapital market.

Guidance

3-4

An audit firm should develop an environment in which
necessary information is provided to the members of thefunction responsible for supervision and evaluation in atimely and appropriate manner, and in which assistanceis provided in the execution of its operations so that themembers can effectively fulfill their responsibilities.

The firm established a secretariat to assist
the effective execution of the activities of theManagement Oversight Committee and Public
Interest Oversight Committee and maintains anenvironment to support its smooth operation
including the provision of any necessary information.

P.30 Supervision and Evaluationof Effectiveness ofManagement Functions© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

91

[Operation]
Principle and Guidance
Principle

4

Guidance

4-1

Guidance

4-2

An audit firm should develop a structure that allows its
management to share necessary information from each
audit team in a timely manner and also disseminate theirphilosophy and defined values throughout the organization.
The management should effectively utilize such a structurein the operations of the firm. In addition, a proactive
dialogue and discussion for improvement of the audit
quality should be encouraged within the firm.

Point for further reinforcement
We will incorporate issues and improvement
measures identified in the Audit Quality Enhancement
Project into our firm policies and implement them.
In order to appropriately address sector-specificaudit risks and key audit matters amid the COVID19 pandemic, we will ensure the proper functioningof the quality management structure establishedthrough the organizational restructuring to enhance
expertise by consolidating sector insights.
The firm fosters true professionals in accordancewith our Human Resource Development Principles
and conducts appropriate evaluations with a focus on
performance and efforts related to audit quality. For
partner evaluations the most important evaluation areas
are quality and quality control. Provision of non-audit
services to audit clients is excluded from evaluation.

An audit firm should pay particular attention to thefollowing points:

An organizational system of quality control is in place
wherein each hierarchical layer of the Four Defense
Lines carries out its respective responsibility foraudit quality.
The audit divisions are responsible for appropriately
assigning personnel.
Point for further reinforcement
We will aim to further promote diversity from various
viewpoints such as gender, job type, nationality
and age, in order to increase our competitive-edge
through the acceptance of a diversity of values andbroad-based utilization of our people.

Guidance• Providing the firm personnel with opportunities to gain
extensive knowledge and experience relevant to audit,
such as experience in non-audit service and/or temporarytransfer to companies outside the audit industry; and• A ppropriate evaluation and well-planned utilization of thefirm personnel with extensive knowledge and experience.

True professionals are fostered based on the firm’s
Human Resource Development Principles. Human
resources are actively developed by providing diverse
work experiences including secondments to outside
public institutions and companies in addition to job
rotation inside KPMG AZSA.
Point for further reinforcement
We will aim to further expand the digital knowledgeof our partners and employees to address theadvanced digitalization occurring in society and in our
audit environment.

Guidance

4-4

Guidance

4-5

92

AZSA Quality 2021/22

Management policies are disseminated andinformation shared at audit work sites through twoway internal communication facilitated by the Four
Defense Lines.

An audit firm should develop and operate policies for
managing people development, human resourcesmanagement and performance evaluation in order to raise
the motivation of the firm personnel and help them tomaintain and demonstrate their professional competence.
In doing so, whether the firm personnel sufficiently
exercised their professional skepticism should be fully
taken into consideration.

• Well-balanced assignment of the firm personnel torespective teams in terms of the extensive knowledge
and experience to allow the teams to exercise theirprofessional skepticism;

4-3

Status of Action Taken

An audit firm should develop an operational structure to effectively manage its organizational operations. The audit firm should also
strengthen its people retention and development and proactively engage, in dialogue and discussion within the firm and with audited
companies about the possible enhancement of audit quality.

An audit firm should make efforts for audit teams to havecandid and in-depth dialogue about audit risks with the
top management of audited companies, such as the CEO
and CFO, and those charged with governance including
the members of the audit and supervisory board as well.
It should also ensure to have sufficient dialogue anddiscussion with audited companies at each audit team level.

Sufficient opportunities for discussion with client
management and audit committees are provided.

An audit firm should develop and disclose policies andprocedures regarding whistleblowing from within the firmand external sources, and appropriately make use of theprovided information. In doing so, the audit firm should pay
particular attention to ensure that a whistleblower does nothave to be concerned about the risk of disadvantage.

The firm has established an internal compliance hotline
and contact for whistleblowing by outside informants.

P.36 Quality Control Based on
Our Four Defense Lines
P.39 Responsibility for
Quality Control

P.68 Human Resource
Development

P.36 Quality Control Based on
Our Four Defense Lines
P.41 Audit Contracts

P.68 Human Resource
Development
P.14

Talent transformation

P.42 Communication with
Stakeholders

P.56 Initiatives forCompliance andInformation Security© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

AZSA Quality 2021/22 Initiatives for Enhancing Audit Quality[Ensuring Transparency]
Principle and Guidance
Principle

5

Guidance

5-1

Status of Action Taken

AZSA Quality 2021/22

An audit firm should ensure such transparency as to allow stakeholders in the capital market to appropriately assess its audit quality, by
explaining the status of the Code’s implementation. The audit firm should also effectively utilize the internal and external assessment of
its initiatives for improvement in its management and operations.
An audit firm should explain the status of the Code’s
implementation and its initiatives for the enhancementof audit quality in plain language, in the form of publicly
available documents such as “Transparency Report,”
to allow audited companies, shareholders and otherstakeholders in the capital market to appropriately assess
its audit quality.

The firm issues AZSA Quality annually to introduce
our initiatives for enhancing audit quality.

An audit firm should explain the following matters as well:• T he tone at the top toward the continuous enhancementof the audit quality in order for the management andthe firm personnel of the firm proactively fulfill theirrespective roles;

The CEO repeatedly issues messages on continuous
activities to maintain and enhance audit quality.
An organizational system of quality control is inplace wherein each hierarchical layer of theFour Defense Lines carries out its respective
responsibility for audit quality.

• T he defined values to be commonly maintained by thefirm personnel, and way of thinking and code of conduct
to put these values into practice;

A sense of oneness as an organization is establishedby sharing our firm’s basic principles of Purpose,
Values, Vision and Strategy.

• T he stance toward non-audit services (provided by thefirm and its group organizations);

With respect to the provision of non-audit services,
the firm maintains a system to strengthen governanceof not only KPMG AZSA but also the entire group
including subsidiaries that provide advisory services,
as well as a mechanism to appropriately monitor
independence and conflicts of interest.
The firm is working to promote a sense of unity among
the KPMG entities in Japan that goes beyond a focus
on compliance and the maintenance of independence.

AZSA Quality 2021/22

P.36 Quality Control Based on
Our Four Defense Lines
P.39 Responsibility for
Quality Control

P.25 Shared Basic Principles
That are the Foundationof Our Audit Quality

P.55 Clarification of
Policy for Providing
Non-audit Services
P.82 Discussing theManagement of KPMG
in Japan Among theMain Member Firms

Guidance

5-2

Guidance

5-3• T he composition and role of the management;

The firm clarified responsibility for management
by designating its Senior Executive Board andExecutive Board as the decision-making andexecutive bodies respectively.

P.28 Management/
Execution, Supervision
and Evaluation• T he composition and role of the function to supervise
and evaluate the effectiveness of the management andorganizational operations, as well as the reasons for theappointment, role and contribution of independent third
persons appointed as the members of the function; andThe firm established the Management OversightCommittee comprising partners who are not involved
in firm management. The firm established the Public
Interest Oversight Committee as an independent
supervisory body.

P.28 Management/
Execution, Supervision
and Evaluation• The assessment with respect to the effectiveness of theinitiatives for the enhancement of the audit quality, whichis carried out by the firm including the members of thefunction responsible for the supervision and evaluation.

The Management Oversight Committee areresponsible for supervising and evaluating themanagement and execution by CEO and the
Senior Executive Board Members. Results of thesupervision and evaluation are reported to thePartners Meeting and to investors and other parties
through AZSA Quality.

An audit firm should strive for proactive dialogue about
its initiatives for enhancement of the audit quality withaudited companies, shareholders and other stakeholders
in the capital market. In doing so, the audit firm should
effectively utilize the knowledge and experience ofindependent third persons.

The firm seeks to enhance communication withaudited companies by sharing information throughmarketing activities and seminars, and by periodicallyholding stakeholder dialogues. The Public Interest
Oversight Committee (independent members) attend
such events, providing management with feedback
from the perspective of an independent third party.

An audit firm should periodically assess the Code’s
implementation and the effectiveness of its initiatives forenhancement of the audit quality.

The Management Oversight Committee areresponsible for supervising and evaluating themanagement and execution by CEO and the
Senior Executive Board Members. Results of thesupervision and evaluation are reported to thePartners Meeting, and beginning next year ourmanagement and executive bodies will consider
improvement measures.

Guidance

5-4

Guidance

5-5

An audit firm should effectively utilize the useful
information obtained through the dialogue withstakeholders such as participants in the capital market
and the results of the assessment of the Code’s
implementation for improving its effective management
and organizational operations.

We periodically hold stakeholder dialogues. Throughthese events we received feedback on the capital
markets’ expectations for audit firms, and we aremaking use of this information to improve ourorganizational operations. Going forward we will
strive to continue this active exchange of opinionswith participants in the capital markets.

P.28 Decision-making
Management andExecution

P.30 Supervision and Evaluationof Effectiveness ofManagement Functions
P.30 Supervision and Evaluationof Effectiveness ofManagement Functions
P.34 Evaluation of
Effectiveness ofManagement Functions

P.42 Communication with
Stakeholders

P.30 Supervision and Evaluationof Effectiveness ofManagement Functions
P.34 Evaluation of
Effectiveness ofManagement Functions

P.42 Proactive Dialogue with
Market Participants© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

93

AZSA Quality and Related Publications

In addition to AZSA Quality: Initiatives for Enhancing Audit
Quality, KPMG AZSA also issues a Transparency Reportpublication to explain KPMG’s audit quality framework.
KPMG in Japan, which includes KPMG AZSA, also issues annual
publications that showcase our activities and initiatives.

AZSA Quality 2021/22
Intended to deepen readers’ understanding of thecurrent state of our firm’s audit quality by describing
the initiatives underway to enhance audit quality.
home.kpmg/jp/azsa-quality
Issued | October 2021

Transparency Report 2021/22
Describes the audit quality framework of
KPMG, which serves as a basis for our
firm’s audit quality.
home.kpmg/jp/transparency-report
Issued | October 2021

© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

Scope of Reporting
Data for the period July 2020 to June 2021 are reported as results
and achievements for the year ended June 2020. The report
includes certain data arising before or after this period as well as
descriptions of the firm’s planned approaches and activities.

IssuedOctober 2021

Contact
KPMG AZSA LLC
Otemachi Financial City South Tower
1-9-7 Otemachi, Chiyoda Ward, Tokyo 100-8172 Japan
JP-FM-AZSA-Quality@jp.kpmg.com© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity.
Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of thedate it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional
advice after a thorough examination of the particular situation.
© 2022 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of
the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.
All rights reserved. 22-8007
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