Reliability of Financial Reporting(2011)

DIC has built and currently manages internal control systems to ensure reliability in financial reporting at all domestic and overseas group locations. We will continue to improve these systems in an effort to remain a trustworthy and dependable organization.

Past Initiatives and Future Direction

While working on the improvement of internal regulations and documentation of operating procedures, the DIC Group has also monitored the design and operational status of internal controls from a standpoint independent of the business activities, and by constantly designing, assessing, and improving its efforts, has devised internal control systems.

We are also promoting the consolidation and standardization of our business operation through a shared service center in order to balance the maintenance and securing of a reasonable level of internal controls and the operational efficiency.

The establishment of systematic internal controls in the DIC Group was prompted by Companies Act that became effective in 2006 and by the implementation of J-SOX*1 in 2008. While we at first made effort on establishing the controls to meet the requirement of the Act, adequate level of internal controls are now in place, allowing us to further improve internal controls by promoting unification and standardization of business operation, better IT control, and other continuous improvement efforts.

  • *1J-SOX: A term used to refer to certain provisions of the Japanese Financial Instruments and Exchange Law that were adopted to prevent accounting fraud and are modeled after the U.S. Sarbanes-Oxley Act.

Promoting Global Activities

In the course of expanding its business globally, it is essential for the DIC Group to design and verify internal controls both at domestic and overseas locations. We have therefore pushed to set up internal controls in the Japan, U.S., Europe, China, and Southeast Asia/ Oceania regions while sharing information and ideas among them. For the next stage, we will be integrating ERP systems as we plan how to build globallybased internal controls. Making IFRS (international financial reporting standards)*2–expected to be implemented soon—the driving force behind global work standardization and streamlining, we will create our global accounting policy during FY 2011 and aim to make this a template into which we will integrate IFRS.

  • *2IFRS (International Financial Repor ting Standards): Refers to the accounting standards set by the International Accounting Standards Board (IASB).

Enhancing Internal Audits

After J-SOX was implemented, internal audits functioned as an independent monitoring tool for verifying internal controls to ensure reliability of financial reporting. Now, audits are done to maintain and improve internal controls in a broad sense, and we are expanding the scope of audits to facilitate effective and efficient achievement of corporate targets. At the same time, we are taking a risk-based approach, standardizing audit procedures, and expanding the use of self-assessment to streamline audits.

VOICE

Efforts to establish reliability of financial reporting in the Asia/Oceania region

Since 2005, the entities in the Asia Pacific Region have evolved continuously with the Regional Headquarters working with DIC Headquarters evaluating business risks while ensuring reliable financial reporting. The journey started with the introduction of the standardized accounting policies, the document flow charts and rules of authorization all of these forming the basic internal control structure that we all come to be familiar. I have seen over the year a greater awareness being demonstrated by everyone on the need for good and strong internal control procedures. The last 5 years saw the Group introducing J-SOX controls and going forward it would be IFRS. Even Internal Audit team will see changes in our methodology of internal audit moving towards a more IT based approach. Overall, I am glad to see the improvements made in the control environment, and high degree of financial reporting standard practiced over the Region. This is a success story and could only be achieved when everyone works together as a team and sharing a common vision.

Bhaskar Kumar Basu Advisor, Regional Internal Audit (former Regional Internal Audit Director)  DIC Asia Pacific Region

Bhaskar Kumar Basu
Advisor, Regional Internal Audit
(former Regional Internal Audit Director)
DIC Asia Pacific Region

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