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Status of Audits

Status of audit by the Audit Committee and the Directors elected as Audit Committee Members

For the latest consolidated fiscal year, Mr. Norio Igarashi (outsider/chairperson), Ms. Keiko Shimizu (outsider), and Mr. Toshisumi Taniai (insider/full-time) hold meetings of the Audit & Supervisory Committee and conducted audits by the Committee Members. Mr. Igarashi has expertise and rich experience in finance and accounting as a CPA and a university professor and a broad insight into management primarily based on experience as an outside officer for listed companies. Ms. Shimizu also has expertise and rich finance and accounting experience as a CPA and a university professor and a broad insight as a qualified IT security auditor. Mr. Taniai had held several positions, including Director and Vice Presidents in charge of personnel and administration, corporate planning, and corporate governance of the Company. Applying such experience, he made efforts to grasp internal information promptly and appropriately and flexibly conducting audits and related activities. Ms. Shimizu and Mr. Taniai retired from the office due to the expiration of their term at the close of the General Meeting of Shareholders held on June 24, 2021.

At the same meeting, four of Mr. Norio Igarashi, Ms. Nozomi Ueda, Mr. Junichi Aoyagi, and Mr. Toru Wakinaga were selected as Directors on the Audit & Supervisory Committee. Subsequently, the Committee is formed by four members above, including three independent Outside Directors. Also, at its session held on the same date, the Audit & Supervisory Committee appointed Mr. Norio Igarashi as a chairperson and Mr. Toru Wakinaga as a full-time member. Ms. Ueda (new/outsider) has rich experience and expertise as a lawyer. Mr. Junichi Aoyagi (new/outsider) has rich experience and expertise in finance and accounting as a CPA. And Mr. Toru Wakinaga (new/insider/full-time) has held executive positions, such as Vice President and Senior Executive Officer of the Management Audit Department; thereby, he has detailed knowledge about the Company’s businesses and audit work.

The Company has, for the purpose of maintaining and enhancing the quality of audits by the Audit Committee, established the Management Audit Department as a body that supports business operations of the Audit Committee, and has assigned full-time personnel with experience as executive officers. The Audit Committee works in coordination with the Management Audit Department, the Accounting Auditor and the Internal Auditing Center (the Global Audit Department).

Activities of the Audit & Supervisory Committee

The Audit & Supervisory Committee stipulates the “Rules of the Audit & Supervisory Committee” and its by-laws to work on many activities. Concretely, at the beginning of every business year, it selects a chairperson of the Committee and full-time personnel; allocates audit work among the members; determines other matters necessary for fulfilling their duties as the Committee members; reviews the result of audits for the previous term; assesses risks in managerial issues for a new business year; and deliberates and draws up its audit policy, prior items for audit, and an annual audit plan.

For the latest consolidated fiscal year, the Audit & Supervisory Committee conducted its audit activities, placing audit priorities on the development and operation status of the internal control system and the progress of addressing management challenges.

The audit activities conducted during the term were as follows: attendances at meetings of the board; exchanges of opinions with the senior management; visits to business departments and domestic or overseas subsidiaries, which were identified as the priority audit sites for field audits, interviews, and the like; hearing of reports from the Accounting Auditor; and exchanges of information at quarterly liaison meetings among three audit-related departments (the Audit & Supervisory Committee, the Accounting Auditor, and the internal audit department). At the end of the business year, it organized audit records prepared during the term, scrutinized the Business Report and Financial Statements, prepared audit working papers and an Audit Report, and did related work, and gave the audit report to the shareholders at the relevant ordinary general meeting of shareholders.

Besides, full-time Audit & Supervisory Committee Members worked on the following activities, together with the Management Audit Department’s staff: improvement of the audit environment and gathering of information in the Company; monitoring of the status of information provision from the senior management; attendances at monthly meetings of the Management Strategy Conference and other material meetings, such as the board meetings of domestic and overseas subsidiaries; presence at inventory audits; access to important documents, such as those submitted for managerial decisions (kessai) and written contracts; hearing of reports from both the internal audit department and the internal control department quarterly and timely; sharing of information with non-full-time Audit & Supervisory Committee Members; check upon the operation status of the internal control system daily, and audit on its properness.

While the chairperson led discussions at meetings and formulated an opinion of the Committee, all the non-full-time Committee members presented their objective thoughts on the overall business execution from the independent and neutral position by attending the board and the Audit & Supervisory Committee. They also conducted field audits as required.

For the latest consolidated fiscal year, nine sessions of the Audit & Supervisory Committee were held with perfect attendance. At the regular meetings of the Board of Directors held in May and July 2020, the Committee made reports on the results of audit activities conducted (during the year), the material matters necessary in fulfilling their duties determined by the Committee, the outline of the scheduled annual audit plan, and related issues.

Status of internal audit, etc.

For the purpose of internal audit, the Global Audit Department conducts operational audit, while providing guidance and support to the internal audit departments in each Group company. Furthermore, it shares roles with responsible operational departments and committees as necessary, with a view to strengthening and enhancing corporate control, where for example, day-to-day monitoring of export management is carried out by the departments responsible for export management, while the Global Audit Department conducts internal audit based on the results of such monitoring. The department reviews the results of audits conducted in the previous fiscal year. Based on case studies of recent scandals from other companies, guidance from top management and the Audit Committee, and past findings and corrective actions, the department establishes an audit policy and annual audit plan and executes operations in accordance with them.

In order to implement effective and efficient audits in the fiscal year ended March 31, 2021, the department worked to strengthen collaboration by exchanging views with the Audit Committee and Management Audit Department periodically and as necessary on matters such as audit policy, audit plans and status, and reporting after audits were implemented. It also holds trilateral audit liaison meetings with the Audit Committee and the Accounting Auditor on a regular basis, with a view to enhancing the effectiveness of mutual audits.

We will continue to further enhance the audit quality and streamline audits and related operations through utilizing the hitherto accumulated audit knowhow and carrying on with the useful approach developed over the years.

Status of accounting audit

The audit firm currently appointed by the Company as its Accounting Auditor is KPMG AZSA LLC. The audit firm has continuously conducted accounting audits of the Company since the fiscal year that started from April 1, 1970 and ended on March 31, 1971. It rotates engagement partners as appropriate. As a general rule, engagement partners are not involved in audit operations in more than seven consecutive fiscal years (five fiscal years for the lead engagement partner). The certified public accountants who executed accounting audits of the Company in the fiscal year ended March 31, 2021 were Tatsunaga Fumikura (for a sixth consecutive year including the current fiscal year, of which five consecutive years were as lead engagement partner) and Hiromasa Niinaya (for a second consecutive year including the current fiscal year), who belong to KPMG AZSA LLC. Four certified public accountants, four persons who have passed the certified public accountant examination and 14 other staff members assisted the accounting audit of the Company.

The Audit Committee of the Company shall appoint the Accounting Auditor, pursuant to the internal rule of the Audit Committee “Standard for the Evaluation and Appointment of the Accounting Auditor” (based on “Practical Guidelines for Audit & Supervisory Board Members in the Evaluation and Appointment of Accounting Auditors” issued by Japan Audit & Supervisory Board Members Association). As a result of the evaluation conducted by the Accounting Auditor KPMG AZSA LLC based on the aforementioned evaluation standard for evaluation items including status of quality management, independence and fraud risk, KPMG AZSA LLC is considered to meet the evaluation standard in all of these items. Moreover, audit activities to cover the Group’s global business development can reasonably benefit from utilizing the global network of KPMG AZSA LLC, while the firm is recognized to be working hard to maintain excellent communication with the accounting departments as well as internal control departments of the Company. In view of all these positive factors, we decided to continuously appoint KPMG AZSA LLC as the Accounting Auditor of the Company. For reference, our policy for determining the dismissal or non-reappointment of the Accounting Auditor is as follows.

Policy for determining dismissal or non-reappointment of the Accounting Auditor

The Audit Committee shall, based on the unanimous consent of the Audit Committee Members, dismiss the Accounting Auditor, in the event that it is found to fall under any of the items of Article 340, Paragraph 1 of the Companies Act.

The Audit Committee shall, if it is believed necessary in the case of hindrance to the execution of duties by the Accounting Auditor or other circumstances, decide the details of the proposal concerning the dismissal or non-reappointment of the Accounting Auditor, which shall then be submitted to the general meeting of shareholders from the Board of Directors.

Details, etc. of the audit fees

a. Details of the fees paid to certified public accountants and others engaged in the accounting audit

Classification 2019 2020
Compensation based on audit certification work (Millions of yen) Compensation based on non-auditing services (Millions of yen) Compensation based on audit certification work (Millions of yen) Compensation based on non-auditing services (Millions of yen)
Anritsu 77 - 77 -
Consolidated Subsidiaries 11 - 11 -
Total 88 - 88 -

b. Compensation for same network (KPMG Group) as auditing CPA (excluding a.)

Classfication 2019 2020
Compensation based on audit certification work (Millions of yen) Compensation based on non-auditing services (Millions of yen) Compensation based on audit certification work (Millions of yen) Compensation based on non-auditing services (Millions of yen)
Anritsu - - - -
Consolidated Subsidiaries 113 11 105 10
Total 113 11 105 10

Content of non-auditing services for consolidated subsidiaries includes advisory work relating to accounting and taxes.

c. Other material forms of compensation based on audit certification work

Not applicable

d. Nature of non-auditing services by certified public accountants for Anritsu

Not applicable

e. Policies to determine audit fees

The Company shall, subject to the consent of the Audit Committee, determine the amount of audit fees, after verifying whether it is deemed sufficient for fully conducting the necessary audit, in light of effectiveness and efficiency of the audit. For the fiscal year ended March 31, 2020, the amount of audit fees was appropriately determined based on the consent of the Audit Committee, and fully in consideration of the audit plan, description and scale of the audit, and the amount of time required to carry out the audit for the certified public accountants and others engaged in the accounting audit.

f. Reason for consent of the Audit Committee on the fees, etc. for the Accounting Auditor

The Audit Committee gave consent to the amount of fees, etc. for the Accounting Auditor under Article 399, Paragraph 1 and 3 of the Companies Act, after it judged that the audit plan and the estimated audit fees for the fiscal year ended March 31, 2020 were appropriate, following the verification and deliberation on the appropriateness and adequacy of the audit plan of the Accounting Auditor and the basis for calculating the estimated fees for the fiscal year, along with the review over the execution of duties by the Accounting Auditor and the actual amount of fees paid thereto in the previous fiscal years, all based on the reports with essential supporting materials regarding the fees for the Accounting Auditor received from the concerned parties within the Company, including responsible Executive Directors and accounting departments, as well as from the Accounting Auditor.

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