Last update: June 26, 2019
1Audits by the Audit & Supervisory Board Members
The Company’s Audit & Supervisory Board develops audit plans with the basic audit policies of ensuring sound and sustainable growth of the Company and its Group companies and establishing high-quality corporate governance systems to respond to public trust. The Audit & Supervisory Board sets the establishment and management of internal control systems, and the system to promote legal compliance and risk management, as key audit items.
The Audit & Supervisory Board Members attend the Board of Directors meetings and other important meetings. They conduct audits in the following manner: exchanging opinions with the Representative Directors and periodically interviewing Directors and others on the status of business execution; viewing important documents for approval such as request forms; and surveying the status of operations and assets at the Head Office and others. For subsidiaries, they share information with the Directors and Audit & Supervisory Board Members of subsidiaries, visit the subsidiaries’ Head Offices, stores, logistics centers and other sites to survey the actual status of operations in accordance with the audit plans, and receive reports.
Audits of overseas business locations
Based on the growing importance of overseas business in the Group, the Company’s Audit & Supervisory Board has formulated “Confirmation of the management framework for overseas business” as one of its key audit items, and conducts audits.
In FY2018, all of the Audit & Supervisory Board Members, including the Outside Audit & Supervisory Board Members, visited each business location (stores and offices, etc.) of SEVEN-ELEVEN (CHINA) CO., LTD. (including the Chinese subsidiaries owned by that company) and Chengdu Ito-Yokado Co., Ltd. The members held dialogues directly with local officers and employees about the business and management situation of each company, and conducted audits.
In FY2019, the Standing Audit & Supervisory Board Members visited business locations (headquarters, stores, dedicated production facilities, etc.) of 7-Eleven, Inc. The members held dialogues directly with local officers and employees about the business and management situation, and conducted audits. In addition, the Company’s Audit & Supervisory Board conducted interviews with the officers, etc., of the above overseas operating company, and confirmed the business and management situation.
These kinds of audits at overseas locations are not only straightforwardly effective for strengthening the internal controls in overseas businesses, but also provide an opportunity for the Audit & Supervisory Board Members to directly confirm and learn about the new ways that each overseas subsidiary is continuing to devise, in order to establish and manage appropriate internal controls according to the requirements of each business locations, leading to an overall improved level of auditing by the Audit & Supervisory Board Members, including in Japan.
Looking ahead, the Company’s Audit & Supervisory Board will continue to work closely with the Audit & Supervisory Board Members and other officers of domestic and overseas subsidiaries, to establish and maintain high-quality corporate governance systems with the emphasis on visiting and conducting on-site audits of overseas locations.
Appointment of Audit & Supervisory Board Members with considerable knowledge of finance and accounting
The Company has appointed the following Audit & Supervisory Board Members who have considerable knowledge of finance and accounting.
? Standing Audit & Supervisory Board Member Mr. Yoshitake Taniguchi was engaged in operations relating to finance and accounting in the finance and accounting division in the Company and its Group companies.
? Audit & Supervisory Board Members Mr. Kazuhiro Hara and Ms. Kaori Matsuhashi are certified public accountants.
Overview of accounting audits
|1. Name of the accounting auditor||KPMG AZSA LLC|
|2. Non-audit operations during the fiscal year ended February 28, 2019||The Company made payment of consideration to the accounting auditor for its work in supporting the application of the accounting standard related to revenue recognition and preparing the comfort letter associated with the issuance of U.S. dollar-denominated unsecured straight bonds, neither of which services are included in the scope of services prescribed in Article 2, Paragraph 1 of the Certified Public Accountants Act (non-auditing services).|
|3. Policy for determining the dismissal or non-reappointment of the accounting auditor||In the event any of the reasons stipulated in the items of Article 340, Paragraph 1 of the Companies Act becomes applicable to the accounting auditor, the Company’s Audit & Supervisory Board will consider the dismissal of that accounting auditor, and if dismissal is deemed appropriate, the accounting auditor will be dismissed based on the unanimous agreement of the Audit & Supervisory Board Members. In the event the Company’s Audit & Supervisory Board determines that circumstances related to the accounting auditor’s performance of its duties and the Company’s audit system necessitate a change in the accounting auditor, the Company’s Audit & Supervisory Board will make a decision to propose a resolution for the non-reappointment of the accounting auditor to a Shareholders’ Meeting.|
|4. Summary of the liability limitation agreement||None.|
|5. Details of the evaluation of the accounting auditor by the Audit & Supervisory Board||The Company’s Audit & Supervisory Board conducted ongoing evaluations of the accounting auditor, such as by coordinating with the accounting auditor and accompanying the accounting auditor on the audits of business locations during the fiscal year. Based on the standards prescribed by the Audit & Supervisory Board, including those concerning the evaluation of the adequacy of audits by the accounting auditor, there were judged to be no particular problems with the audits conducted by the accounting auditor, KPMG AZSA LLC, and it was resolved to reappoint KPMG AZSA LLC as the accounting auditor.|
In order to enhance and reinforce its internal auditing function, the Company has appointed, within the Auditing Office, the “operational auditing staff” and the “internal control evaluation staff,” which are independent internal auditing divisions. The “operational auditing staff” has an oversight function to verify and provide guidance on internal auditing, including the status of the maintenance and management of compliance systems, by core operating companies or to directly audit them, and an internal auditing function for auditing the Company, the holding company, and performs these operations. The “internal control evaluation staff” evaluates internal controls regarding the financial reporting of the whole Group.
3Coordination between Audit & Supervisory Board Member audits, internal audits, and accounting audits
In order to improve the overall quality of audits, the Company ensures that the Audit & Supervisory Board Members (including the Outside Audit & Supervisory Board Members), the Auditing Office, and the auditing firm proactively exchange information and endeavor to maintain close ties with each other, by such means as periodically holding tri-partite meetings. In the meeting, the Audit & Supervisory Board Members (including the Outside Audit & Supervisory Board Members) receive reports from the auditing firm on, among other matters, the performance of accounting audits, and reports from the Auditing Office on, among other matters, the performance of internal audits, respectively, and request explanations as necessary.
Furthermore, the Company periodically holds reporting sessions for accounting audits, which are attended by the Representative Directors and other officers, as well as the Standing Audit & Supervisory Board Members and the Auditing Office, etc. In the sessions, they receive reports from the auditing firm on the accounting audits, and confirm, among other matters, the results of accounting audits.
Furthermore, the Standing Audit & Supervisory Board Members and the Auditing Office hold meetings, basically once a month. In the meetings, the Auditing Office reports on the results of operational audits and the progress of internal control evaluations, etc., and also actively exchanges opinions with the Standing Audit & Supervisory Board Members regarding, among other matters, priority matters that should be examined in order to improve the quality of audits. With these efforts, the two parties aim to ensure comprehensive sharing of audit information between each other.
In the Audit & Supervisory Board meetings and other meetings, the Standing Audit & Supervisory Board Members report to the Outside Audit & Supervisory Board Members on, inter alia, the status of the reporting session for accounting audits and the contents of the meeting with the Auditing Office, respectively described above, and thereby share and discuss issues to be addressed and the like. Furthermore, by providing the Auditing Office and the auditing firm with feedback on the matters thus discussed, the Standing Audit & Supervisory Board Members aim to ensure that i) audits by the Audit & Supervisory Board Members, including the Outside Audit & Supervisory Board Members; ii) internal audits; and iii) accounting audits are linked with each other in a timely manner.
Further, the Auditing Office reports on the performance and the results of internal audits in the Audit & Supervisory Board meetings from time to time, and provides explanations in response to questions and so on from the Audit & Supervisory Board Members (including the Outside Audit & Supervisory Board Members).
At each audit, the Audit & Supervisory Board Members (including the Outside Audit & Supervisory Board Members), the Auditing Office, and the auditing firm receive reports and materials, etc. from the internal control divisions, and request explanations as deemed necessary, and the internal control divisions cooperate in the appropriate performance of these audits.
4Framework for checking related party transactions
[CGC Principle 1.7]
With regard to transactions with related parties, the Company investigates and identifies related parties and checks if there are any transactions with related parties and the details thereof. The Company discloses the transactions in accordance with the Companies Act, the Financial Instruments and Exchange Act, and other applicable laws and regulations, as well as the regulation of the Tokyo Stock Exchange.
Furthermore, with regard to any competing transactions and conflict-of-interest transactions between the Company and any Directors, the Company makes it a rule for the Directors to obtain approval of the Board of Directors in accordance with laws and regulations and the Board of Directors Regulations and to report material facts if the Directors carry out such transactions.