• Compliance
• Basic Approach to Corporate Governance
• Corporate Governance Structure
• Internal Control System
• Board of Directors
• Corporate Officers
• Current State of Audits

Current State of Audits

Audits by the Board of Corporate Auditors

a. Organization, Composition and Procedures of the Board of Corporate Auditors

Kanamoto is a company with a Board of Corporate Auditors made up of five corporate auditors, two of whom are standing corporate auditors and three of whom are independent outside corporate auditors.
Standing Corporate Auditor Naoyuki Yokota and Outside Corporate Auditor Iwao Takeuchi have a long track record in banking. Outside Corporate Auditor Yasushi Ishiwaka has been involved in corporate accounting as a certified public accountant for many years and has extensive knowledge in both finance and accounting.

b. Corporate Auditor and Board of Corporate Auditor Activities

The primary supervisory functions of the Board of Corporate Auditors are to draft auditing policy and plans, prepare audit reports, evaluate the adequateness of accounting auditors and accounting audits, give consent to remuneration proposals, and assess the progress and operation of internal control systems, proposals for the General Meeting of Shareholders, and the adequateness of interim and year-end dividends.
Standing corporate auditors audit all business operations according to auditing policies and plans drafted by the Board of Corporate auditors through means such as attending Board of Directors and other important meetings, discussing the progress of business execution with directors and other corporate officers, reviewing important approval documents, and conducting on-site audits at branch offices and subsidiary companies. Standing corporate auditors work closely with accounting auditors from briefings on accounting plans at the beginning of the fiscal year to discussions and oversight of audits as necessary during and briefings of audit results at the end of the fiscal year.
Outside corporate auditors attend Board of Corporate Auditor meetings, Board of Director meetings, business report briefings from affiliate companies, and other meetings for discussions between the president and corporate officers as well as gather information by inspecting important bases and talking with employees. Internal auditing departments and accounting auditors work to strengthen cooperation and form opinions on auditing matters by providing and receiving reports and exchanging information.

Internal Audits

The Internal Control and Auditing Office, corporate auditors, and accounting auditors cooperate and exchange information to conduct internal audits of overall business operations according to annual auditing plans. The six-person Internal Control and Auditing Office conducts on-site internal audits of every branch once every three years to provide specific directions, corrective actions and guidance aiming to improve business operations. This fiscal year Kanamoto conducted on-site internal audits at 67 branches. Upon completion of each audit, the Internal Control and Auditing Office promptly submitted an audit report to not only the Kanamoto president, chairman of the board, and other members of management but also corporate auditors and relevant departments.

Current State of Accounting Audits

a. Auditing Firm

Ernst & Young ShinNihon LLC

b. Continuous Auditing Period

Since 1988
The continuous auditing period above is the term within the verifiable scope of Kanamoto. The actual continuous auditing period may exceed the above term.

c. Staff Assisting with Audits

The staff assisting with Kanamoto accounting audits includes 12 certified public accountants and 22 other individuals.

d. Policies and Reasons for Auditing Firm Selection

Kanamoto selected Ernst & Young ShinNihon LLC in accordance with the Criteria for Selection of Accounting Auditor Candidates drafted by the Board of Corporate Auditors after careful consideration of factors that included auditing firm overviews, matters of independence, internal control systems, and auditing fees.
The Board of Corporate Auditors has the right to dismiss accounting auditors with unanimous consent of all members if any reason under Article 340, Paragraph (1) in the Companies Act applies to the accounting auditor and the Board of Corporate Auditors determines remediation impossible.
The Board of Corporate Auditors may also dismiss or disqualify the accounting auditor if deemed necessary, such as when a proper audit cannot be carried out due to any reason arising that impairs the eligibility or independence of the accounting auditor.

e. Corporate Auditor and Board of Corporate Auditor Evaluations of Auditing Firms

Corporate Auditors and the Board of Corporate Auditors evaluate the eligibility of the accounting auditors, quality management system preparations, auditing plans, the auditing team organization, auditing results, and the quality of communication with corporate auditors in addition to other aspects of the auditing firm through communications with accounting auditors, visits to auditing sites, and other means in accordance with the Criteria for Evaluating the Independent of Auditors drafted by the Board of Corporate Auditors.
According to the results of these evaluations, the Board of Corporate Auditors has found no issue with the performance of the accounting auditors for the consolidated fiscal term under review.

Breakdown of Auditing Fees

a. Audit and Certified Public Accountant Service Fees

(Previous Consolidated Fiscal Year)
There are no non-audit services for Kanamoto or its subsidiaries for the consolidated fiscal year under review.
(Consolidated Fiscal Year Under Review)
Non-audit service fees paid by Kanamoto are for advisory services related to the adoption of revenue recognition standards. However, there are no non-audit services for its subsidiaries for the consolidated fiscal year under review.

b. Audit and Certified Public Accountant Service Fees in the Same Network (Ernst & Young Member Firms; Excluding Services Fees Outlined in [a.])

(Previous Consolidated Fiscal Year)
Non-audit service fees paid by Kanamoto for financial due diligence, tax consultation, and other services.
(Consolidated Fiscal Year Under Review)
Non-audit service fees paid by Kanamoto are for tax consultation and other services.

c. Other Essential Audit Certification Service Fees

There are no other essential audit certification service fees.

d. Policies to Determine Auditing Fees

Kanamoto determines auditing fees with the consent of the Board of Corporate Auditors by taking into account the business scale and characteristics as well as the time required for the audit.

e. Reasons for Board of Corporate Auditor Consent of Accounting Auditor Service Fees

The Board of Corporate Auditors consented to service fees for accounting auditors with reference to past performance and service fees after an overall evaluation of auditing plans and performance of the accounting auditors.