In recent years, several cases of fraudulent financial reporting were identified in documents filed under the Financial Instruments and Exchange Act of Japan. Accordingly, the subcommittee on auditing standards under the Business Accounting Council of the Financial Service Agency of Japan (FSA) has deliberated on effective audit procedures to address the risk of material misstatements due to fraud. In December 2012, an exposure draft - “Standard to Address Risks of Fraud in an Audit (provisional name)”- was published. JICPA will continue to be actively involved in the relevant discussions to ensure that the standard will be in the public interest.

FSA is expected to finalize the standard by the end of March 2013, effective for audits of financial statements for periods ending on or after March 31, 2014. JICPA will revise related Auditing Standards Committee Statements and Quality Control Standard Committee Statement 1, and ensure that members are well prepared in its application.

In late June 2012, JICPA published an exposure draft of the interim report, summarizing the continuing discussions related to the future of CPA profession in Japan. The report was intended to develop institute’s views and understanding of the matters surrounding the profession, and raised specific issues to be considered, such as the mission and role of CPA, professional engagements, license and certification, education and examination, and JICPA and its role.

JICPA plans to consider carefully the views and opinions put forward by members to the report, and through public hearings and discussions with related parties.

The introduction of accrual based accounting for governments in Japan has not progressed to an acceptable degree, with only a limited number of local governments adopting the principle. As a result, in general, the public sector accounting system has not　　considerably improved, and the audit of government financial statements has yet to be initiated.

As we believe that improving the public sector accounting system is essential, as a minimum, for the governments to fulfill their accountability, we will continue to emphasize the importance of moving to accrual based accounting for governments.

Furthermore, based on past studies and findings from the recent research conducted on the standard setting activities of overseas public sector accounting standard setters, we plan to present our views about the accounting standard setting activity for the public sector; with a vision for a new standard setting organization and an appropriate standard setting mechanism for the Japanese public sector.

As part of the effort by the central government to improve governance in local governments, discussions are underway to reform their financial accounting and auditing system. Given that reform in local governments would stimulate and further enhance transparency and accountability in the overall government sector, we established a special team to study the issues and initiate action in this area. We will continue to appeal to the Legislature and the members of the Diet to achieve reform in financial accounting and auditing system for local governments.

JICPA is working closely with related parties so that Japan’s plan of action for the implementation of IFRS will be presented. At the same time, we will be continuing to organize various seminars and other events to prepare our members in this area.

Last year, a new committee on professional accountants in business (“PAIB”) was established at JICPA to help increase the areas of service for members working as PAIBs, and to enhance the mobility of accounting professionals. Through a PAIB Network specially created on our website, we will accelerate our efforts to empower our members working in business by providing valuable information on seminars, meetings, and other events.