The Financial Services Agency plans to revise the law governing certified public accountants so they will be unable to serve as auditors at companies for more than five years, FSA officials said Friday.
The revision is intended to prevent a collusive relationship forming between auditing firms and their client corporations, the officials said.
The FSA also plans to beef up the functions of its Certified Public Accountant Examination Committee to improve monitoring of auditing firms, they said.
The officials said the FSA will submit a bill for these purposes to the Diet during the current session.
The FSA’s examination committee oversees exams for certified public accountants and is in charge of deliberations to decide punishments for accountants involved in wrongdoing.
At present, there are no rules concerning the tenure of accountants working as auditors at companies, although the Japanese Institute of Certified Public Accountants has a self-imposed rule limiting the terms to seven years.
The institute had requested the FSA take legislative action to introduce the seven-year rule, saying it is appropriate in light of the average period of service of company presidents.
But the FSA decided the period of service for a company’s auditing accountant should be five years, in line with the United States.
The U.S. recently took legislative action to introduce the five-year rule following a string of accounting scandals, including at energy giant Enron Corp.
In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.