Internal Control

Our Group's basic policy of the internal control system is to base our corporate activities on legal compliance and compliance with social ethics. Specifically, we adopt a system by which the Audit & Supervisory Board, the Compliance Committee, the Compliance Promotion Department, the Human Resources & General Affairs Department, and the Auditing Department supervise if relevant laws and regulations have been complied with, on the very basic internal understanding of the Corporate Ethics Charter. Additionally, we have established the Auditing Council to prepare appropriate financial statements while ensuring to comply with all laws and regulations, to safeguard the company's assets, and to carry out our business activities efficiently. We have also created the Risk Management Committee, establishing a system to conduct research on all management risks within the company group and to conduct prior check of importance and necessity of the outstanding issue. Furthermore, we set up contact points for whistleblowing in order to grasp and improve various other issues of problems to accomplish further improvement and reinforcement of the internal control system.

Basic Policies on Financial Reporting

In the interests of reliable financial reporting, we ensure adequate disclosure of financial information and implement transparent, sound corporate management in accordance with the following basic policies.

1. We will comply with standards and legislation, formulate accounting and other applicable regulations, and put in place the necessary IT environment to adequately process our accounts.
2. We will design organizations and systems to ensure that all information pertaining to financial reports is provided quickly and accurately, both inside and outside the group.
3. We will rigorously implement risk management as part of all operating processes within the group, and strive to create internal control systems that are both efficient and transparent.
4. We will regularly evaluate the standard and implementation of internal controls in accordance with generally accepted standards, and continue to improve our operations on an ongoing basis.
5. We will continue to improve and implement internal controls in relation to financial reporting, and submit valid and adequate internal control reports.

Internal Audit

The Auditing Department, established as a department directly reporting to the president, oversees the internal control and internal audit functions and conducts audits, including of subsidiaries and affiliates. The Auditing Council, set up to maintain sound internal controls, is tasked with monitoring management activities and risk management and thereby strengthens governance. The results of audits are reported to directors and auditors at monthly meetings of the Auditing Council and also to accounting auditors for information sharing.

Audit by the Audit & Supervisory Board Members

The Audit & Supervisory Board Members, including two outside members out of comprising four, attend the important meetings such as the Board of Directors' meetings to understand critical decision-making processes and the directors' performance of duties. They also conduct operational status investigations and regular opinion exchange with President and CEO to raise the effectiveness of audits. The Audit & Supervisory Board Members and the accounting auditor hold quarterly debriefing meetings and other meetings as needed.
As described above, the Auditing Department, the Audit & Supervisory Board Members, and the accounting auditor work closely to try to achieve efficient internal audits and audits by the Audit & Supervisory Board Members.

Audit by CPA

Leopalace21 has hired Grant Thornton Taiyo ASG to audit its financial statements. The auditing contract we signed is for audits to be performed in accordance with Japanese legislation, the Companies Act, and the Financial Instruments and Exchange Act.