The Audit & Supervisory Board

The Audit & Supervisory Board Initiatives

The Audit & Supervisory Board Members are entrusted by shareholders to audit Directors' execution of duties from an independent standpoint, aiming to achieve the sound and sustainable growth of Kao Group and establish governance that meets the trust of stakeholders. We provide in a detailed explanation of the activities of the Audit & Supervisory Board in FY2022 under review to enhance the transparency of audits and the effectiveness of dialogue with stakeholders as below

Audit Policies

In FY2022, we conducted auditing activities with a shared sense of urgency and the necessity of reforms recognized by management with regard to the status of implementation of corporate strategy and the status of response to management environmental risks. We adopted a policy which recognizes that stakeholders are demanding a higher level of effective governance and an active disclosure of information.

Particularly important points in Audit & Supervisory Board Members' activities

Lively exchange of opinions

The Audit & Supervisory Board Members attend important meetings and put emphasis on decision-making process for reaching resolutions, and express their opinions as appropriate.

Dialogue with people at the actual sites (Genba)

In addition, the Audit & Supervisory Board Members conduct on-site audits and interviews of each division and subsidiary and affiliates. By placing importance on dialogue with people at the Genba, they confirm the degree of how well corporate strategy is being shared and whether proactive efforts are being made. They also identify any issues that occur at Genba. At least one Outside Audit & Supervisory Board Member has participated in approximately 70% of the interviews.

On-site audits and interviews at Wakayama Plant

Composition and execution of duties of the Audit & Supervisory Board

The Audit & Supervisory Board consists of two Full-time Audit & Supervisory Board Members with internal execution experience and diverse knowledge and three Outside Audit & Supervisory Board Members with respective expertise and abundant experience.
In January 2022, the Office of the Audit & Supervisory Board (with five members) was newly established, to assist the Audit & Supervisory Board Members with their duties and to allow the members to serve concurrently as Auditors of subsidiaries.

Please find the link below for Audit & Supervisory Board Members.

Deliberations by the Audit & Supervisory Board

Number of meetings held: 9 / Attendance rate: 100%
Duration: Average of 2 hours and 14 minutes

17 resolutions: Audit policy, division of duties, critical auditing items, annual plan, audit report, internal control matters, Accounting Auditor matters (including agreement on compensation, deliberation on reappointment, and non-assurance services), appointment and compensation of Audit & Supervisory Board Members, evaluation of effectiveness, etc.
38 matters considered: Audit findings on critical auditing items, group governance (the Group's structure of Auditors and the direction of future governance), closely monitoring issues concerning internal control, non-assurance services by the Accounting Auditor, exchange of opinions with Representative Directors and Outside Directors, etc.

Evaluation of the effectiveness of the Audit & Supervisory Board: The evaluation is made once a year. Discussions at the Audit & Supervisory Board based on the results of the questionnaire led to the conclusion that the system at the Board as a whole was functioning effectively during FY2022.

Major contents of the evaluation

  • The Audit & Supervisory Board conducts frank exchanges of opinions.
  • The agenda items are proactively selected matters to be considered.
  • Information sharing and support by the newly established Office of the Audit & Supervisory Board have been also strengthened.

Going forward, we hope to deepen discussions on the skill matrix of the Audit & Supervisory Board, which aims for greater diversity

Key audit items, achievements and evaluation of effectiveness

Key audit items Audit method Activity results and evaluation of effectiveness Audit role
Full-time Outside
Status of
execution of
duties by
Directors		 Attend meetings of the Board of Directors
to confirm the status of deliberations		 All Audit & Supervisory Board Members attended all
meetings. All of them actively expressed their opinions		 ✓ ✓
Attend important meetings such as the
Management Board to confirm decision-
making process and request explanations
as necessary		 Attendance rate was 100%, reviewed decision-making
process and commented on matters to be considered.		 ✓ N/A
Exchange opinions with Management Representative Directors of Kao (5 times); Outside
Directors (2 times); Executive Officers with titles (6 times),
Representative Directors of important subsidiaries (3
times); Recognition of management issues and future
governance were shared through frank exchanges of
opinions		 ✓ ✓
Conduct On-site audits and interviews of
worksites, divisions, domestic and
overseas subsidiaries and affiliates
(including confirmation of priority audit
items such as internal control.)		 114 cases
  • Emphasis on dialogue (1,136 comments from Audit & Supervisory Board members)
  • Confirmation of improvement status at a later date for completion of audit findings. Share with executive officers along with excellent on-site initiatives
✓ ✓
Attend the Committee for the Examination
of the Nominees for Directors and Audit &
Supervisory Board Members and
Compensation Advisory Committee for
Directors and Executive Officers		 11 times N/A ✓
Effectiveness of
the Group
governance
  • Systematize and improve the effectiveness of the Kao Group's structure of Audit & Supervisory Board Members. (Kao, subsidiaries, affiliates)
  • Improve the effectiveness of audit activities under the group management
  • Commenced a system in which members of the Office of the Audit & Supervisory Board concurrently serve as Auditors of subsidiaries
  • All Auditors of subsidiaries and affiliates regularly exchanged opinions to identify and review risks (6 times)
  • Introduced effectiveness evaluation of the Audit & Supervisory Board to important subsidiaries, and provided training to improve their skills
✓ At any time
  • Exchange opinions between the Accounting Auditor and Audit & Supervisory Board Members and report accounting audit results to Meetings of Board of Directors
Exchanged opinions (21 times); Reported to Meetings of
Board of Directors (2 times)
  • Audit plan, accounting audit results, key audit matters, non-assurance services management, audit quality, etc.
  • Held global meetings to exchange opinions with domestic and overseas auditors
✓ ✓
Development and
operation of
internal control		 On-site audits and interviews of worksites,
divisions, domestic and overseas
subsidiaries and affiliates		 Confirmed results of self-inspections and external audit,
and also the status of
development and operation of internal control systems		 ✓ At any time
  • Conduct Interviews with the departments in charge of the second line of internal control
  • Attend or check minutes of Internal Control Committee and each affiliate committee
  • Check the response status of the Compliance hotline
Conducted quarterly or semi-annually
  • Self-inspections and monitoring are taking hold, and responses to issues to deal with have been handled appropriately in principle.
  • Timely reports are also made to Audit & Supervisory Board Members.
✓ At any time
Exchange information with the Department
of Internal Audit which is the division
responsible for internal auditing		 4 times ✓ At any time
Evaluate the construction and operation
status of the internal control system using a
checklist		 Generally valid ✓ N/A
Proactive
disclosure		 Evaluated the Company's disclosure status
by investigating external requests and
disclosure status.
  • Recommended the points that can be evaluated and points for improvement when exchanging opinions with Management and to related departments. Confirmed the development of the promotion system and the information disclosure status
  • Proactively disclosed activities of the Audit & Supervisory Board Members
✓ N/A

Corporate Governance

Corporate Governance

Page Top