A common challenge foreign companies with relatively small subsidiaries in Japan face is monitoring over the operation of the Japanese subsidiary.
Especially when it comes to financial reporting.
This might not be an issue for companies that engage with the large international audit firms like PwC, Deloitte, KPMG and EY. Their counterparts in Japan will usually take care of Japan related matters. This obviously comes at a high cost.
Or perhaps the group internal audit team can perform internal audits.
But often will they get a chance to fly across the Pacific to perform these procedures?
Would they know the Japanese language and tax and other regulations in Japan?
We can all agree that being able to order tuna rolls at a sushi restaurant in Tokyo does not necessarily translate into being able to perform an effective audit.
Under such circumstances, engaging a CPA firm which consists of bilingual US and Japan CPAs (and a US lawyer) could be the best alternative.
Quantum Accounting Inc. is an accounting consulting firm located in Tokyo, Japan, specializing in US GAAP, IFRS, and JGAAP technical matters. Most of the firm’s members are former KPMG partners and managers, including former CEO of KPMG Japan. The founder and CEO of the firm, Masato Minamizuka, is a licensed CPA in Delaware, and has 20 years of experience in audit and accounting advisory both in US and Japan. Other members of the firm include a former EY partner from New York, KPMG managers from New York, Atlanta and Silicon Valley, etc.
We consider ourselves to be the most international accounting firm in Japan.
Today, we are excited to announce a new addition to our service line.
We will be offering audit and other attestation services (review, compilation and agreed upon procedures) of financial statements and/or reporting packages of Japanese subsidiaries of US and other international companies.
Our service includes the following:
1) Audit and review of financial statements and/or reporting packages to the parent company, as prepared under US GAAP or IFRS.
2) Perform certain audit or review procedures in limited areas, accounts and scope as agreed-upon with the client. This includes attendance to physical inventory counts, certain audit procedures over revenue and accounts receivable, limited audit over cash flows, etc. Clients can effectively focus resources on areas within the subsidiary that they consider to have inherent risks.
3) Preparation of financial statements and/or reporting packages. If the subsidiary is not yet at a stage that requires an external audit but rather needing assisting resources, we can provide such assistance as advisory services. This includes gap conversion from Japanese GAAP to US GAAP (or IFRS). In addition, we can help prepare accounting policies/manuals and related internal rules and controls.
4) Payroll and corporate tax services. Our internal Tax Accountant and Labor and Social Security Attorney can provide one-stop shop services to the client. In most cases, Japanese subsidiaries will need to file several tax returns, including income tax, consumption tax (equivalent to sales tax) and property tax.
5) We can assist HQ internal audit over the Japanese subsidiary, including translation and interpretation.
6) Design and implement SOX structure to the Japanese subsidiary (Internal control design, implementation, documentation, management testing)
7) Accounting valuation services such as impairment testing (impairment of tangible and intangible assets, goodwill) and valuation of the Japanese subsidiary (Investment valuation)
What you need to know about our service The team will be led by US GAAP, IFRS, SOX, US Audit, Group Audit professionals
The team members that will be assigned to the audits will include CPAs that specialize in financial statement audits in Japan and the US.
When performing group audits, the key to successful execution is open communication between the subsidiary audit team and the parent company audit team.
Team members that have over 10 years of audit experience at the Big 4 will ensure that the audit goes smoothly.
Team members will be physically located in both the US and Japan to ensure quick response times
The team members will be physically present in Japan (Tokyo) and the US (New York and Silicon Valley) so we can respond to your various needs.
Communication with the audit team members can be done in both English and Japanese.
The team members will provide HQ management with the up-to-date status of the audit at the subsidiary.
By providing management in both HQ and the Japanese subsidiary with consistent communication, we will ensure that there are no surprises at the end of the audit.
Why we are providing this new service
For US and other international companies that are thinking about expanding into the Japanese market, financial statement audits of the subsidiary are becoming a challenge.
If the auditor of the parent company is a large auditing firm, the audit of the subsidiary can be performed by a member firm in Japan so in that case it doesn’t become an issue.
However, if the auditor of the parent company is not a large auditing firm, finding an auditor with the right skillset could be difficult in Japan.
In addition, if the Japanese subsidiary is relying on third parties to prepare the financial statements, the parent company in the US may not have a firm grip over the financial reporting process and the foundation for an audit may not be present at the subsidiary level.
This problem is further exacerbated if the Japanese subsidiary is reporting under US GAAP or IFRS as acquiring the right talent could be a challenge.
Finding the right team with the appropriate experience and know-how is difficult and we can provide a solution.