Companies Act

Financial auditors audit the financial statements and the annexed detailed statements thereof, the provisional financial statements as well as the consolidated financial statements of a stock company pursuant to the provisions of the following Chapter. In these cases, financial auditors must prepare financial audit reports pursuant to the provisions of Ministry of Justice Order.

Financial auditors may at any time inspect and copy the following things or request reports on accounting from directors and accounting advisors as well as managers or other employees:

if account books or materials relating thereto are prepared in writing, relevant documents; and

if an account book or material relating thereto has been prepared as an electronic or magnetic record, anything that is used in the manner prescribed by Ministry of Justice Order to display the information recorded in that electronic or magnetic record.

Financial auditors may, if it is necessary for the purpose of performing duties of the financial auditors, request reports on accounting from a subsidiary company of the company with financial auditor, or investigate the status of the operations and financial status of the company with financial auditor or of its subsidiary company.

The subsidiary company under the preceding paragraph may refuse the report or investigation under that paragraph if there are justifiable grounds.

Financial auditors may not employ a person set forth in any of the following items in performing their duties:

a person set forth in Article 337, paragraph (3), item (i) or item (ii);

a person who is a director, accounting advisor, company auditor, executive officer or employee, including a manager, of a company with financial auditor or of its subsidiary company; or

a person who is in continuous receipt of remuneration from a company with financial auditor or its subsidiary company for operations other than the operations of the certified public accountant or audit corporation.

For the purpose of the application of the provisions of paragraph (2) to a company with nominating committee, etc., the term "directors" in that paragraph is deemed to be replaced with "executive officers, directors".

If financial auditors detect, during the performance of their duties, misconduct or material facts in violation of laws and regulations or the articles of incorporation in connection with the execution of the duties of the directors, they must report the same to the company auditors without delay.

If it is necessary for the purpose of performing their duties, company auditors may request reports on the financial auditors' audits from the financial auditors.

For the purpose of the application of the provisions of paragraph (1) to a company with board of company auditors, the term "company auditors" in that paragraph is deemed to be replaced with "board of company auditors".

For the purpose of application of the provisions of paragraphs (1) and (2) to a company with audit and supervisory committee, the term "company auditor" in paragraph (1) is deemed to be replaced with "audit and supervisory committee" and the term "company auditor" in paragraph (2) is deemed to be replaced with "audit and supervisory committee member appointed by the audit and supervisory committee".

For the purpose of the application of the provisions of paragraph (1) and paragraph (2) to a company with nominating committee, etc., the term "directors" in paragraph (1) is deemed to be replaced with "executive officers or directors", the term "company auditors" in the same paragraph is deemed to be replaced with "audit committee", and the term "company auditors" in paragraph (2) is deemed to be replaced with "committee members of the audit committee who are appointed by the audit committee".

If a financial auditor's opinion on whether or not the statements provided for in Article 396, paragraph (1) comply with laws and regulations or the articles of incorporation differs from those of the company auditors, the financial auditor (if financial auditors are audit corporation or tax accountancy corporations, referring to the members who are to perform their duties; the same applies in the following paragraph) may attend the annual shareholders meeting and state their opinion.

If a resolution that requires the attendance of financial auditors is passed at an annual shareholders meeting, the financial auditors must attend the shareholders meeting and state their opinions.

For the purpose of the application of the provisions of paragraph (1) to a company with board of company auditors, the term "company auditors" in that paragraph is deemed to be replaced with "board of company auditors or company auditors".

For the purpose of the application of the provisions of paragraphs (1) to a company with audit and supervisory committee, the term "company auditor" in the same paragraph is deemed to be replaced with "audit and supervisory committee or audit and supervisory committee members".

For the purpose of the application of the provisions of paragraph (1) to a company with nominating committee, etc., the term "company auditors" in that paragraph is deemed to be replaced with "audit committee or its committee members".

Directors must obtain the consent of the company auditor (if there are two or more company auditors, the majority of the company auditors) if the directors fix the remunerations for financial auditors or persons who are to temporarily perform the duties of financial auditors.

For the purpose of the application of the preceding paragraph to a company with board of company auditors, the phrase "company auditor (if there are two or more company auditors, the majority of the company auditors)" in that paragraph is deemed to be replaced with "board of company auditors".

For the purpose of the application of the provisions of paragraphs (1) to a company with audit and supervisory committee, the phrase "company auditor (if there are two or more company auditors, the majority of the company auditors)" in the same paragraph is deemed to be replaced with "audit and supervisory committee".

For the purpose of the application of the provisions of paragraph (1) to a company with nominating committee, etc., the phrase "company auditor (if there are two or more company auditors, the majority of the company auditors)" in that paragraph is deemed to be replaced with "audit committee".