Status of Audit

Status of internalaudit and company auditStatus of internalaudit and company audit

① Status of Audit by Audit & Supervisory Board

The Company adopts an Audit & Supervisory Board system. The Audit & Supervisory Board, which consists of three board members (two of whom are outside board members) holds Audit & Supervisory Board Meetings once a month. The board conducts an audit to determine if the operations carried out by each director--primarily full-time Audit & Supervisory Board Members--are in compliance with the law and company statute. The board also conducts an audit in close cooperation with Internal Control to determine whether or not operations are being performed according to laws and regulations.

The accounting auditor and Audit & Supervisory Board Member exchange approrpriate information, working to gather information as well as maintain the auditing environment. Outside Directors gather necessary information by attending meetings with the Compliance & Risk Management Committee and by meeting with Audit & Supervisory Board Members to exchange ideas. Additionally, Outside Directors receive the results of the internal audit from the Audit Office and exchanges appropriate ideas so both groups can mutually gather information.

② Status of Internal Audit

The Group has in place an Internal Audit Division (led by one person) which conducts both an internal audit designed to investigate rule violations and underlying risks as well as an independent, internal audit corresponding to the Company's business contents. The results of the internal audit are submitted as an audit report to the company president. The findings are given as direct instructions for improvement to the manager of the relevant department, who reports the status of the improvements using an Audit Results Improvement Report.

In addition, an Audit Report which is circulated among the executives and department managers involved helps the department in charge to improve their duties. Furthermore, the Company works to prevent actions that are disadvantageous to the Company before those actions occur through the establishment of a "Corporate Ethics Consultation Desk" within the Internal Audit Division which serves as a consultation service for internal reports.

The Company's Internal Audit Division monitors the results of subsidiary's internal audit with the goal of ensuring sound operations at the subsidiary and offers advice or suggestions to the subsidiary's Internal Audit Division if necessary. Additionally, upon the discovery of improper or deviant behavior, the Company will conduct a direct audit of the subsidiary in order to be used as instructions for improvement so long as the conduct does not violate law.

③ Status of Accounting Audit

a.Name of audit corporation
Grant Thornton Taiyo LLC

b.Names of certified public accountants who conduct the audit

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Name of certified public accountant who conducted the
Company’s accounting audit
Audit corporation to which
the accountant belongs
Consecutive years of audit
Ryouichi Komatsu
Representative Partner, Managing Member
Grant Thornton Taiyo, LLC Three years
Takeshi Iwasaki
Representative Partner, Managing Member
Grant Thornton Taiyo, LLC One year
Takuya Ishigami
Representative Partner, Managing Member
Grant Thornton Taiyo, LLC Three years

Note:11 certified public accountants, 3 CPA passers and 15 others provide supplementary assistance in the accounting audit.

c. Configuration of individuals who assist with audit
There are 12 Certified Public Accountants, 5 people who hold CPA certification, and 17 others.

d. Reason for selecting the audit corporation and selection policy
As a policy for selecting an audit corporation, the Company has established "standards for selection and evaluation of candidate for external accounting audit corporation" and "assessment of independence and expertise sought by external accounting auditor", as required by Supplementary Principle 3-2 of the Corporate Governance Code, and makes a decision about the possibility of selection based on those principles.
① Quality control of auditing corporation
② Auditing team
③ Audit fees
④ Communication with Audit & Supervisory Board Members
⑤ Relationship with company executives
⑥ Group audit
⑦ Risk of inappropriate conduct
This evaluation is conducted when making a site visit to the audit corporation's overseas subsidiary in addition to when voting on the selection of the audit corporation and the auditing fees, and is conducted from many angles to see if, for instance, their auditing operations are appropriate. No particular issues were found during the evaluations that took place during the business year in question, so the Company believes that a proper audit took place.

f.Change in audit corporation
On July 2nd, 2018, YUSEI Audit & Co., from which the Company originally received its audit certification, merged with Grant Thornton Taiyo LLC and changed its name to Grant Thornton Taiyo LLC. An extraordinary report was issued with regard to the name change. The items listed in that report are as follows,

(1)Name of certified public accountants whom the change concerns

① Summary of certified public accountant which will continue to exist

Name Grant Thornton Taiyo LLC
Address 1-2-7 Motoakasaka, Minato-ku, Tokyo

② Outline of certified public accountant that will cease to exist

Name YUSEI Audit & Co.
Address Marunouchi Trust Tower, N Building, 9th Floor
1-8-1 Marunouchi, Chiyoda-ku, Tokyo

(2)Date of applicable change
July 2nd, 2018

(3)Most recent date of appointment of certified public accountants that will cease to exist
June 27th, 2018

(4)Matters concerning opinions, etc.in audit reports which the certified public accountant has written in the past three years
None

(5)Decision regarding change or reasons and background which led to the change On July 2nd, 2018, the Company's auditor YUSEI Audit & Co. merged with Grant Thornton Taiyo LLC. Consequently, Grant Thornton Taiyo LLC became the certified public accountant which conducts the Company's audit.

(6)Opinion of certified public accountant that will cease to exist with regard to the mention of reason and background of (5) above No opinion in particular.

④ Contents of Audit Fees

Transitional measures are applied to regulations specified in (56) d (f) i, ii, and iii of the instructions of Form No. 2 “Cabinet Office Ordinance on Disclosure of Corporate Affairs, etc.“ after revision made by “Cabinet Office Ordinance to partially revise the Cabinet Office Ordinance on Disclosure of Corporate Affairs, etc.” (Cabinet Office Ordinance No. 3 of January 31, 2019)
a. Audit fees of Certified Public Accountant, etc. for Audits

Category Previous Consolidated Fiscal Year Current Consolidated Fiscal Year
Compensation based on audit certification
(in units of 100 million yen)
Compensation based on non-audit duties
(in units of 100 million yen)
Compensation based on audit certification
(in units of 100 million yen)
Compensation based on non-audit duties
(in units of 100 million yen)
Reporting Company 200 - 220 -
Consolidated Subsidiary 61 - 48 -
Total 261 - 268 -

b. Other Major Compensation
(Previous consolidated fiscal year)
The Company and its consolidated subsidiaries have paid the following compensation to certified public accountants who belong to the same network as the Company's certified public accountant.

Company Name Payment Made to Details Amount (in units of 100 million yen)
J Trust Co., Ltd. Kosasih, Nurdiyaman,
Mulyadi, Tjahjo & Rekan
Compensation for Audit 21
PT Bank JTrust Indonesia Tbk. Kosasih, Nurdiyaman,
Mulyadi, Tjahjo & Rekan
Compensation for Audit 24
Compensation for Non-Audit Duties, etc. 1
PT JTRUST INVESTMENTS INDONESIA Kosasih, Nurdiyaman,
Mulyadi, Tjahjo & Rekan
Compensation for Audit 9
PT JTRUST INVESTMENTS INDONESIA Crowe Horwath First
Trust LLP
Compensation for Audit 1

(Current Consolidated Fiscal Year)
The Company and its consolidated subsidiaries have paid the following compensation to certified public accountants who belong to the same network as the Company's certified public accountant.

Company Name Payment Made to Details Amount (in units of 100 million yen)
J Trust Co., Ltd. Daejoo Accounting Compensation for Audit 16
PT JTRUST OLYMPINDO MULTI FINANCE Gani Sigiro & Handayani Compensation for Audit 2

c.Policy for determining audit compensation
As a policy for determining audit compensation for the Company's certified public auditing accountants, the Company has determined compensation based on listings in the audit contract after taking into consideration elements such as the particular nature of duties and making a judgement appropriately.

d.Reasons why the Audit & Supervisory Board agreed to the auditor compensation
With regard to the compensation for auditing accounts proposed by the Board of Directors, the reason why the Company's Audit & Supervisory Board agreed to Paragraph 1, Article 399 of the Company Law (which requires the Audit & Supervisory Board's consent for providing compensation to auditors) is that the Company determined there were no issues with the explanation of the overall picture and contents of the audit, the number of hours of service, and unit price. In addition, the auditors' efforts to streamline the audit process were made clear.