KUDO International Federation
Internal Audit Reportfor the Fiscal Year from April 2022 to March 2023
To: Mr. Hideaki TAKAHASHIHead Director of the KUDO International Federation (NPO)
Prepared by Mr. Takeshi SATO and further endorsed by Mr. Fabien SIMON, both auditors of the KUDO
International Federation (NPO)
August 8, 2023

Takeshi SATO

Fabien SIMONThe Auditor, Mr. Tsuyoshi Sato, reviewed how the Board of Directors discharged its duties over the courseof FYE2022, starting April 1, 2022 and ending on March 31, 2023. The methods and outcomes of such review
are mentioned below.
1. Audit method and content
The Auditor communicated with relevant parties such as directors and employees, endeavoring to collectinformation and enhance the internal control environment. Practically this was done through(1) Attending board meetings and other important meetings, receiving reports from directors andemployees on the status of execution of their duties, requesting explanations as necessary, inspecting
important documents pertaining to decision-making, activities and financials.
(2) Examining Board Resolutions pertaining to the establishment of processes necessary to ensure propercompliance with by the Articles of Incorporation and practices pertaining to the operations of an NPO,and the conduct of activities reported by the Board. When necessary this entailed asking forexplanations and expressing opinions.
(3) Maintaining an independent position as an accounting auditor, monitoring and verifying whether
activities were being carried out appropriately, receiving reports on activities, and requesting
explanations as necessary.
2. Outcome of the Audit (Auditor’s Opinion)(1) Outcome of the Audit of Activity Report.
① We acknowledge that the Activity Report and its annexed schedules accurately represent thecircumstances of the Federation and are in accordance with the Articles of Incorporation.
② We do not find any breach or material violation of the Articles of Incorporation in relation to theperformance of their duties by the directors.
③ The content of the Board of Directors' resolution regarding the internal control system wasdeemed appropriate, and internal audits were conducted accordingly. We do however point out

below improvement items regarding the contents of the business report as it pertains to internal
control and the execution of duties by the directors, and request that the FYE2023 report beimproved in that regards.
(2) With regards to the audit of financial statements and asset records, we recognize that activity reports,
accounting-related documents and asset records are appropriate.
Auditor’s opinion① On conduct of activities
The Board of Directors was appropriately informed, for instance via email, of matters relevant toelections of directors, activity reports, etc. Sounding of opinions, votes on Board Resolutions, andrequests for approvals were conducted as needed.
We believe that there were no irregularities or problems in the presentation of proposals and the votingprocess.
② Regarding financial statements
We are of the view that the contents of the financial report are appropriate and that they contain no
misrepresentation or wrong information.
The following reference material was obtained from the Head Director, Mr. Takahashi on August 5:"Business Report Submission Form" of KIF for FYE2022, addressed to the Tokyo MetropolitanGovernment”"General Ledger of KIF"
③ About financial statements
In FYE2024, we request that the secretariat present the materials promptly after the end of the fiscalyear on the last day of March (from mid-April to early May).
④ Membership fee income (Japan Domestic membership fee)
The auditor finds that the domestic membership fee for FYE2022 is properly apportioned between KAJFand KIF. The membership fee, arising from 4,411 domestic members (taking into account membershipfee exemptions) was ¥3,732,850.
Reference material
For KAJF (May 29, 2023) "KUDO All Japan Federation Financial Report" by Ms. Rieko Tanaka,
Accounting Auditor"Business Report Submission Form" of KIF for FYE2023, addressed to the Tokyo Metropolitan
Government (Obtained on August 5, 2023)⑤ Overseas Membership Fee Income (JPY6,622,050, from 29,190 overseas members)
From FYE2023 onwards, we request the secretariat of the Federation to promptly provide at the end of
the fiscal year supporting material evidencing the number of overseas members and related membershipfee income, for both KMS and non-KMS managed memberships.
Reference material"Business Report Submission Form" of KIF for FYE2022, addressed to the Tokyo Metropolitan
Government (Obtained on August 5, 2023)⑥ The membership fee income for the "Business Report Submission Form" addressed to the Metropolitan
Government of Tokyo only takes into account amounts actually received during the fiscal year, withoutaccruals. Article 12 (Membership Fees Receiving) of NPO Accounting Standards indeed states that,“Membership Fees Income will be recorded as income when the payment is actually made, except insome cases.
⑦ Regarding Overseas Branch Membership Fees
For overseas branch, membership fee amount is branch-specific.
For the purpose of facilitating audits, but also to allow for budgeting and financial forecasting by theBoard of Directors, it is recommended that the secretariat studies a way to present the latest conditions,
support materials, payments status, and how to escalate and handle payment delinquencies.
Membership fees are currently paid by KMS or via other means (cash payment to the secretariat, Banktransfer together with other expenses), resulting in report by the secretariat of cases of inconsistencies
between the respective branches’ explanations and the Federation’s understanding.

We also request that this data be presented as reference materials.
⑧ About the New Japanese Tax Regime called “Qualified Invoice System”
NPO with taxable income of 10 million yen or less in the base period are not obligated to file tax returns
for both corporate tax and consumption tax.
However, with the introduction of the new Qualified Invoice System, the decision to register of not may
have a material impact to the Federation, depending on the counterparties. If registering, a need toprepare for tax payments may arise.
We therefore recommend that a tax accountant be consulted to determine what impact may arise before
a decision be made to register or not.
End of document.