Message on accepting the position of Chairman and President

Certified Public Accountants (CPA) and independent auditing are once again at a great turning point. The need to meet the requirements of the International Financial Reporting Standards (IFRS) is pressing worldwide, and other significant changes, such as a revival of rigorous regulation, is taking place in financial and capital markets.

As economic prosperity in the global market is vital for our country, overseas influences like these are unavoidable. Since adopting IFRS means a departure from the theories and the framework that have supported the basis of traditional accounting in Japan, I believe that all of the parties involved will have to collaborate and respond to these changes as one team. We can say that we have now come to the biggest turning point since the establishment of the CPA system in Japan.

I will mention some of the major challenges that, in my view, are important to be dealt with.

The biggest challenge is the adoption of IFRS. In the short term, JICPA has to provide sufficient learning opportunities to our members working at small and medium-sized audit firms. Furthermore, we need to collaborate with regulatory authorities and other interested parties such as Nippon Keidanren (Japan Federation of Economic Organizations) to prepare for the adoption of IFRS in Japan.

With regards to IFRS application in practice, I believe JICPA has to act as a communications channel for collecting information worldwide and distributing it to the interested parties in Japan. In addition to this, there are very many other issues for JICPA to deal with, such as directing on how should the audit and application of the standards in practice be under IFRS, and in what respects small and medium-sized entities adopt IFRS in their reporting. One of our important duties is to be properly involved in the process of standard setting regarding the adoption of IFRS, as IFRS will most likely be the Japanese accounting standards in the future. It is also important for JICPA to support fundamental theoretical research related to IFRS and to develop talents who can engage in the standard setting process.

At the time of an aging society and declining population, CPA profession in Japan is one of the few business areas that are expected to grow.

With the recent changes in the CPA examination system, the number of people passing the CPA examination is rising, but at the same time, there is a serious problem that a significant number of them cannot find work.

As a response to this situation, we may, for the time being, be able only to implement the temporary emergency countermeasure of adjusting the number of people who pass the examination. The government and the Financial Services Agency (FSA) are continuing their discussions to consider measures, including the revision of the CPA Act, to re-shape the examination system as well as Continuing Professional Education (CPE) system after qualification and the CPA qualification as a whole. JICPA, together with other interested parties, is expected to voice its views and respond promptly to their move.

Also, I believe that one of the issues is our inability to date to provide a future vision of the profession in areas other than auditing. In the near future, the growth rate of the audit market will slow down. Due to that, many CPAs will have to leave the auditing area and look for other fields of services. In countries like the U.S., this situation became obvious some time ago.

Facing the situation like this, I believe it is very important for us to maintain the attractiveness of the profession as a whole in order to secure skilled and talented CPAs.

I acknowledge that the core of JICPA self-regulation quality control system, including the listed companies audit firm registration requirements and disciplinary and appeal system, meet the assumed and expected levels of standard. But in addition to these, I expect that there will be issues of transnational oversight by regulatory authorities overseas, and the exchange of such information between countries.

Due to the growth in complex financial transactions and the effects of the recent recession, the volume of review of the audit practice and disciplinary cases at JICPA keep on increasing. I believe that systematic responses to this are essential. In order to operate a self-regulatory system, including CPE system, effectively and to secure public trust in CPAs and their auditing, I believe it is vital for JICPA to have the necessary authority to rule against breach of major obligations by its members, such as departures from appropriate quality control.

Japanese entities now form an important part of the global economy. However, there is still a continuing criticism against corporate governance of Japanese entities, as those entities’ social and corporate cultural backgrounds are different from those in the U.S. and Europe.

In the area of independent auditing, on the other hand, there still remains some part that is not perfectly consistent with the corporate culture in Japan, as the system adopted after the Second World War is the system founded in the U.K. and developed in the U.S. The issues related to the appointment and dismissals of auditors, as well as the authority to set their fees are one of those. To secure the status of auditors in Japan, it is necessary to continue to work toward appropriate solutions to those issues.

JICPA has become a very large organization over the years. The influence that JICPA has on the Japanese economy is drawing attention and, at the same time, we face many challenges. Here, I have touched on only some of those challenges ahead of us.

I am determined to demonstrate initiative in leading JICPA under these difficult and challenging times, but needless to say, my experience and capabilities are limited. More than anything else, cooperation is required from the Council Members, Executive Board Members, Deputy Presidents and the Chairs of various Committees, as well as other JICPA members with extensive knowledge and experience. Therefore, I believe my most important duty is to further advance JICPA’s activities and contribute to a better CPA system as a whole by making the most of their talents.

Lastly, I would be most grateful for your continued understanding and support for the coming years.