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Legal and Regulatory Framework of the CPA Profession

The CPA Act

The Certified Public Accountants Act ("CPA Act") provides the basic framework for the audit profession in Japan. It includes the scope of services to be provided by Certified Public Accountants (CPA), establishment of the national CPA examination, requirements for CPA qualification, establishment of audit corporations, duties and responsibilities of CPAs, roles and organization of the Japanese Institute of Certified Public Accountants (JICPA), roles of the regulatory authority, and the disciplinary and criminal sanctions applicable to CPAs. The CPA Act grants the Financial Services Agency (FSA) the authority to oversee CPAs and the JICPA. The CPA Act has been amended twice over the last several years.

FSA

As noted above, the FSA has oversight responsibilities over the audit profession in Japan. The CPA examination is conducted by the Certified Public Accountants and Auditing Oversight Board (CPAAOB), an arm of the FSA (Article 35 of the CPA Act). Amendments to the CPA Act in 2003 changed the legal procedures for incorporation, dissolution, mergers and amendments to the articles of incorporation of an audit corporation from an approval basis to a filing basis with the FSA (Article 34-9-2, 34-10, 34-18 and 34-19). CPAs are subject to the FSA's requirements as to reporting and submission of certain materials (Article 49-3), and are subject to disciplinary sanctions including suspension of practice or revocation of qualification registrations (Articles 29 through 31, and 34-21). CPAs are subject to examinations and inspections by the FSA (Articles 32, 33 and 34-21). The FSA also oversees the JICPA.

CPAAOB

The amended CPA Act in 2003 stipulates the establishment of the CPAAOB as a public oversight body to monitor and oversee CPAs and the JICPA quality control review by reorganizing the CPA Investigation and Examination Board, which formerly oversaw CPA examinations and disciplinary actions for CPAs. Further details of the CPAAOB regarding the monitoring function.


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