Summary of the Act to Amend Part of the Certified Public Accountant Law

The mission of certified public accountants, who are professionals of auditing and accounting, is to promote fair corporate activities and to protect investors and creditors by securing, from an independent position, reliability of financial information including financial statements. By so doing, CPAs shall contribute to sound development of national economy.
CPAs must always (a) maintain their dignity; (b) seek to enhance their knowledge and skills; and (c) act with integrity and fairness in providing service.

(Articles 1 through 1-2)

1. Those who meet all three of the following requirements shall be qualified to be CPAs.

   1. To pass the CPA examination or exempted from it.
   2. To have two or more years of internship or certain other work experience.
   3. To complete the practice training course followed by the confirmation by the Prime Minister.
2. The title of junior certified public accountant will be abolished after the new examination system is in place.

(Article 3)

The new examination system shall be comprised of two steps, namely multiple choice tests and essays.(The three levels in current system will be reduced to one level.)

(Article 5)

1. The multiple choice tests consist of the following subjects.

   1. Financial accounting and reporting (including bookkeeping and financial statement accounting)
   2. Managerial accounting (including cost accounting)
   3. Auditing
   4. Business law (including the Commercial Code)

2. The essay tests consist of the following subjects.

   1. Accounting (financial accounting and managerial accounting)
   2. Auditing
   3. Business law
   4. Tax laws (including the Corporate Tax Law)
   5. One elective required subject from: Business administration, economics, the Civil Code, or statistics

(Article 8)

1. Those who have been bestowed a certain academic degree designated by a Cabinet Office ordinance are exempt from the subject or subjects designated by a Cabinet order.
2. Those who have passed the licensed tax accountant examination and those who are exempt from the licensed tax accountant examination shall be exempt from financial accounting and reporting. Those who are accredited by a Cabinet order to have more than seven years of work experience in a subject or subjects of the multiple choice tests shall be exempt from the subject or subjects designated by the Cabinet order.
3. Successful candidates in the multiple choice tests as a whole shall be granted exemption from the multiple choice tests for two years after the announcement of the results.

(Article 9)

1. Those who have passed the licensed tax accountant examination and those who are exempt from the licensed tax accountant examination shall be exempt from tax laws.
2. The result of each subject shall be shown separately. Those who receive a passing grade in any subject or subjects shall be granted credit for the subject or subjects on the condition that the candidates pass an examination in the remaining subject or subjects during the next two years after the announcement of the results.

(Article 10)

1. The required internship may be attained either before or after the CPA examination. Internship, which is required to take the level III examination presently, shall be required to register as a CPA.

(Articles 3 and 15)

1. Practice training bodies authorized by the Prime Minister shall provide practice training courses. The Prime Minister can order necessary arrangement if the contents or methods of the courses are inappropriate.
2. Practice Training bodies shall report to the Prime Minister in writing as soon as a trainee finishes the practice training course. The Prime Minister shall confirm the completion of the course by the trainee based on the report.

(Article 16)

1. CPAs are not allowed to provide statutory audit and attestation services to the certain large corporations designated by the Special Law of the Commercial Code or the Securities and Exchange Law (hereinafter referred to as "Large Corporations") if they receive non-audit service fees from them continuously. The range of the non-audit services will be described in a Cabinet Office ordinance.

   (Article 24-2)

2. After providing audit and audit-related services to a Large Corporation for the consecutive accounting periods designated by a Cabinet order (which will not exceed seven periods), CPAs are not allowed to provide audit and audit-related services to the Large Corporation until certain periods (designated by a Cabinet order) elapses. However, this rule does not apply if there is a justifiable cause for failing to comply and the Prime Minister approves, in due consideration of conditions, the provision of such services to such corporation by the CPAs. This permission has to be sanctioned every accounting period.

   (Article 24-3)

3. In performing audit and attestation services on Large Corporations, CPAs must work jointly with another CPA or other CPAs, or use another CPA or other CPAs as an assistant or assistants. However, this rule does not apply if there is a justifiable cause for failing to comply.

   (Article 24-4)

CPAs must take the continuing professional education provided by the Japanese Institute of Certified Public Accountants (JICPA) for the purpose of improving the competency of CPAs.

(Article 28)

CPAs are not allowed to take executive positions with their audit clients until the end of the accounting period following the one in which they provide audit/attestation services to those clients. However, this rule does not apply if there is a justifiable cause for failing to comply and the Prime Minister approves it in due consideration of conditions.

(Article 28-2)

The Prime Minister may issue necessary instructions when CPAs violate this Law or an order thereunder. The Prime Minister may impose sanctions on the CPAs if they disobey the instructions.

(Articles 31 and 34-2)

The legal procedures for incorporation, dissolution, mergers, and the amendment to the articles of incorporation of audit corporations shall be changed from approval basis to filing basis.

(on Articles 34-7, ex-34-8, 34-10, 34-18, and 34-19)

1. Audit corporations may designate one or more partners for specific attestation services.
2. With regard to designated attestations, only the partner or partners designated for the services shall have the right and the obligation to render the services. The designated partner or partners represent the audit corporation with regard to the designated attestations.
3. When audit corporations are, with all its assets, unable to clear its liabilities arising from designated attestations and payable to the audit clients or others, only designated partners shall be jointly and severally liable.

(Articles 34-10 and 34-10-5)

When an engagement partner for an audit client gets an executive position in the client, the audit corporation may not provide audit/attestation services to such client until the end of the following accounting period.

(Articles 34-11)

1. Audit corporations may not provide audit/attestation services to the Large Corporations from which they regularly receive fees for non-audit services specified by Cabinet Office ordinances.

   (Article 34-11-2)

2. After having a partner provide audit-related services to a Large Corporation for the consecutive accounting periods designated by a Cabinet order (which will not exceed seven periods), audit corporations may not have the partner provide audit-related services to such a Large Corporation until certain periods (designated by a Cabinet order) elapses.

   (Article 34-11-3)

The partners of audit corporations who have performed audit/attestation services are not allowed to take executive positions with their audit clients until the end of the accounting period following the one in which they provide audit/attestation services to those clients. However, this rule does not apply if there is a justifiable cause for failing to comply and the Prime Minister approves it in due consideration of conditions.

(Article 34-14-2)

Such deregulation as abolishing advertisement restrictions and allowing audit corporations to set their fiscal years more freely shall take place.

(on Articles ex-28, ex-34-13, and 34-15)

The Prime Minister may issue necessary instructions when audit corporations violate this Law or an order thereunder or when their performance of audit/attestation services is materially inappropriate. The Prime Minister may impose disciplinary actions such as admonishment on the audit corporations if they disobey the instructions.

(Article 34-21)

The CPA Examination and Investigation Board shall be renamed as the "CPA and Auditing Oversight Board (CPAAOB)."

(Article 35)

1. The chairperson and members of the CPAAOB shall independently exercise their powers.
2. The CPAAOB shall consist of the chairperson and less than ten members. The chairperson shall be a full-time position. One of the members may take a full-time position as well.
3. The chairperson and the members shall be appointed by the Prime Minister with the consent of both Houses of the Diet.
4. The term of the chairperson and the members shall be three years.
5. The chairperson and the members shall not be discharged of their positions against their will unless they are deemed unfit for their positions due to physical or mental disability.
6. There shall be provisions on the duties of confidentiality, prohibition on political activities, prohibition of dual employment, and the duties of the chairperson and the members.

(Articles 35-2 through 37-6)

(Article 41)

(Article 41-2)

The JICPA shall conduct surveys on audit/attestation services its members perform. The JICPA shall report the results to the Prime Minister periodically or when necessary.

(Article 46-9-2)

When the JICPA violates laws or regulations or fails to take necessary actions against its members despite their violation of laws or regulation, the Prime Minister may order the JICPA to modify its way of operations or to take necessary actions stipulated in the JICPA Charter or other relevant rules.

(Article 46-12-2)

The present clause that entitled the Prime Minister to discharge any directors of the JICPA shall be abolished.

The Prime Minister may conduct an on-the-spot inspection of CPAs or audit corporations with regard to audit/attestation services when he or she considers it necessary and appropriate in light of the public interest or investor protection.

(Articles 49-3)

The Prime Minister shall delegate his or her authority to inspect CPAs, audit corporations, and the JICPA to the CPAAOB.

(Article 49-4)

Necessary clauses for sanction shall be developed with regard to the provision of audit/attestation services without license.

(Articles 50 through 55-2)

This law shall be effective beginning April 1, 2004. However, I-2 and II shall be effective beginning January 1, 2006.