Understanding the Role and Impact of Audit Committees in Japanese Corporate Governance

Introduction

Corporate governance in Japan has undergone significant transformation in recent years, particularly in light of economic fluctuations and global market dynamics. A critical aspect of this evolution is the role of audit committees, which serve as a vital component in ensuring accountability and transparency within corporate entities. This paper aims to explore the function and influence of audit committees in the framework of Japanese corporate governance. By examining the structure, responsibilities, and effectiveness of these committees, the report will elucidate their importance in fostering ethical practices and enhancing stakeholder trust in Japanese corporations.

Main Body

Audit committees in Japan are integral to the corporate governance structure, primarily tasked with overseeing financial reporting, compliance, and risk management processes. Traditionally, Japanese firms relied heavily on external auditors and internal controls, but the introduction of the Corporate Governance Code in 2015 has spurred a more formalized approach to the establishment and functioning of audit committees. This code emphasizes the need for