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Audit Structure

Internal Audit

The Internal Auditing Department, which reports directly to the President and CEO, monitors the appropriateness of business execution, as well as effectiveness of internal controls throughout the Group, and reports the audit results to the Board of Directors and the Audit & Supervisory Board.
Furthermore, auditing for specialized areas, i.e. security, environment, information systems, are mainly conducted by the relevant divisions.

Audit & Supervisory Board Members’ Audits and Initiatives toward Strengthening Their Functions

Shiseido’s Audit & Supervisory Board consists of two standing members and three highly independent external members. They monitor the legality and appropriateness of directors’ performance by attending Board of Directors meetings and other important meetings. Additionally, three audit & supervisory board members (external) offer advice, proposals and views from an independent perspective, based on their abundant experience and insight in their respective fields.
Representative directors and audit & supervisory board members meet regularly to exchange opinions on actions that will resolve corporate governance issues. The Company maintains a framework to ensure that audit & supervisory board members discharge their duties effectively, such as setting up a supporting group for audit & supervisory board members.

Accounting Audits

The Company's accounting audit is conducted by KPMG AZSA LLC, an accounting auditor pursuant to the Companies Act and the Financial Instruments and Exchange Act.
The names of certified public accountants that have conducted auditing and the name of auditing firm are as follows:

Matters Concerning Accounting Auditor (As of March 25, 2022)

  • 1. Name of Accounting Auditor
    KPMG AZSA LLC
  • 2. Period of the consecutive audit by the Accounting Auditor
    The Company selected KPMG AZSA LLC as its accounting auditor on June 29, 2006. Thus, the period of the consecutive audit by the accounting auditor is 16 years of this fiscal year.
  • 3. Names of certified public accountants engaged in audit work
    Masakazu Hattori (consecutive auditing period: two years)
    Kentaro Hayashi (consecutive auditing period: two years)
    Unshil Kang (consecutive auditing period: one year)
    Note:
    The rotation of engagement partners is carried out appropriately in accordance with the policies established by KPMG AZSA LLC.
    The rotation of engagement partners at KPMG AZSA LLC is regulated by laws, regulations on independence, and the audit firm’s policies (including policies of KPMG International Limited) regarding the maximum period of time for involvement in audit and attestation services. KPMG AZSA LLC monitors rotation status from the perspective of continuous involvement and independence, including assistant auditors.
  • 4. Composition of assistant auditors
    The composition of personnel other than engagement partners is 16 certified public accountants, 8 qualified professionals, and 29 others (tax-related and IT audit staff, etc.)
  • 5. Selection policy, reason of the selection and evaluation of the Accounting Auditor
    The selection and dismissal of the Company’s accounting auditor is determined by the unanimous consent of members of the Audit and Supervisory Board after discussions based on the results of evaluations by each member of the Audit & Supervisory Board, as well as evaluations by the Director and CFO, and heads of related departments including Financial Accounting Department and Internal Audit Department.
    The Company’s policy for decision-making on dismissal or non-reappointment of the accounting auditor is as follows.
    In the event that the Company determines that keeping the accounting auditor causes material trouble to the Company for the reasons, among others, that the accounting auditor has violated its duties, negated its duties, or behaved in a manner inappropriate of an accounting auditor, the Audit & Supervisory board shall dismiss the accounting auditor pursuant to Article 340 of the Companies Act. Furthermore, suppose it is deemed that the accounting auditor is unable to carry out its duties duly or change of the accounting auditor to another audit firm is reasonably required to enhance the appropriateness of the accounting audit. In that case, the Board of Directors shall submit a proposal to the general meeting of shareholders for the dismissal or non-reappointment of the accounting auditor in accordance with the resolution of the Audit & Supervisory Board on the proposal resolved in consideration of the opinion of the executive bodies.
    The Audit & Supervisory Board evaluated the accounting audits of the accounting auditor for Fiscal 2021 in line with the following items and processes and resolved to reappoint the accounting auditor for Fiscal 2022.
    The Audit & Supervisory Board confirms such items as the appropriateness of the accounting auditor, quality control, independence and professional competence of the audit team, audit plan, and communication with Audit & Supervisory Board members. Prior to the reappointment resolution, the Audit & Supervisory Board conducts the hearings on the accounting auditor with heads of business departments (Financial Accounting Department and Internal Audit Department) and exchanges opinions with the Director and CFO at Audit & Supervisory Board meetings.

Mutual Cooperation among Internal Audits, Audit & Supervisory Board Members’ Audits and Accounting Audits

The Company, in order to improve the effectiveness and efficiency of the so-called three-pillar audit system (internal audits, audit & supervisory board members’ audits, and accounting audits), has been making efforts to enhance the mutual cooperation among the parties concerned by such means as arranging regular liaison meetings to report on audit plans and audit results as well as to conduct exchanges of opinions.

Remuneration, etc. to the Accounting Auditor

Remuneration, etc. to the Accounting Auditor

Note: In the audit contract between the Company and its accounting auditor, remuneration paid for audits under the Companies Act and remuneration paid for audits under the Financial Instruments and Exchange Act are not clearly distinguished and cannot be practically separated. Therefore, the total payment for both is shown in “Remuneration paid for services rendered as the accounting auditor for the fiscal year ended December 31, 2021” above. The breakdown of “Remuneration paid for services rendered as the accounting auditor for the fiscal year ended December 31, 2021” is as follows. (i) Remuneration for the accounting auditor (remuneration paid for audits under the Companies Act and the Financial Instruments and Exchange Act) \186 million (ii) Remuneration paid for audit operations concerning the International Financial Reporting Standards (IFRS) comparative financial statements in preparation for the application of the IFRS for the fiscal year ending December 31, 2022 \59 million

Reason for Audit and Supervisory Board to Have Agreed to Remuneration, etc. to the Accounting Auditor

The Audit and Supervisory Board of the Company reviewed the status of performance of duties and basis for the calculation of the estimated amount of remuneration in the previous fiscal year as well as the validity of both descriptions in the audit plan prepared by the accounting auditor during the fiscal year and the estimated amount of remuneration, using the “Practical Guidelines for Cooperation with accounting auditors” released by the Japan Corporate Auditors Association as a guide, and by way of necessary documents obtained from directors, internal relevant departments and the accounting auditor as well as interviews to obtain information from them, and determined that the fees, etc. of the accounting auditor were appropriate, in agreement with Article 399, Paragraphs 1 and 2 of the Companies Act.

Details of Services Other Than Audit

The Company entrusted the accounting auditor with the “advisory services on the adoption of IFRS” which are services other than services under Article 2, paragraph (1) of the Certified Public Accountants Act (services other than audit). The amount of remuneration, etc. is ¥81 million that is included in the “Total cash and other remuneration to be paid by the Company and its subsidiaries to the accounting auditor” under the “2) Remuneration, etc. to the Accounting Auditor” above.

Policy Relating to Determination of Dismissal of or Not to Reappoint Accounting Auditor

In the event that the Company determines that keeping an accounting auditor as its accounting auditor causes material trouble to the Company for the reasons, among others, that the accounting auditor has violated its duties, negated its duties or behaved in a manner inappropriate as an accounting auditor, the Audit & Supervisory Board shall dismiss the accounting auditor pursuant to Article 340 of the Companies Act.

Furthermore, in the event that it is deemed that the accounting auditor is unable to carry out its duties duly or change of the accounting auditor to another audit firm is reasonably required to enhance the appropriateness of accounting audit, the Board of Directors shall submit a proposal to the general meeting of shareholders for the dismissal of the accounting auditor or not to reappoint the accounting auditor in accordance with the resolution of the Audit & Supervisory Board on the proposal resolved in consideration of the opinion of the executive agency.

 

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