Auditing System and Internal Control System

Audit & Supervisory Board Member Audits

Chugai has an Audit & Supervisory Board, and audits of management decision-making and business execution are conducted independently from business operations by five Audit & Supervisory Board members, including three outside members.

Audit & Supervisory Board members express their opinions in real time from the standpoint of appropriate corporate governance in a variety of situations including at meetings of the Board of Directors, the Executive Committee (full-time Audit & Supervisory Board members only) and the Audit & Supervisory Board.

Internal Audits

We have established the Internal Audit Department, which currently has 19 certified internal auditors and certified fraud inspectors, as an internal auditing organization. The Audit Department conducts audits of the status of business execution of the entire Group, including its subsidiaries, from the perspectives of effectiveness, efficiency, and compliance of business activities. It ensures the effectiveness of internal audits by reporting and making recommendations to the Executive Committee, while also reporting directly to the Board of Directors and the Audit & Supervisory Board. In addition, the Audit Department is in charge of the Audit & Supervisory Board Members of subsidiaries. The Audit & Supervisory Board Members of subsidiaries collaborate with the Audit & Supervisory Board Members through mid-term reports, year-end reports, and other means to strengthen the governance of Group companies. In addition, to ensure the reliability of financial reporting under the Financial Instruments and Exchange Act, we evaluate that effective internal controls are in place and operated in accordance with generally accepted standards of internal control.

Accounting Audits

KPMG AZSA LLC handles accounting audits and internal control audits.

Cooperative Auditing

From the viewpoint of mutual complementation and efficiency of audits, the three parties of the Audit Department, Audit & Supervisory Board Members, and Accounting Auditors regularly exchange information and conduct audits in close cooperation with each other.

The Audit & supervisory board members and Accounting Auditor cooperate closely by regularly sharing information and exchanging opinions over matters including the confirmation of each other’s audit plans, sharing of issues on accounting audits and related standards and institutional trend, etc., reports on mid-term audit results, and reports on fiscal year-end audit results. Audit & Supervisory Board members and the Audit Department, the internal audit organization, maintain close cooperation. Together with the reporting of audit results from the Audit Department to the members, both parties share and exchange opinions on their respective audit plans and identification of issues. In addition, the Audit Department staff serve as Audit & Supervisory members at subsidiaries with whom Audit & Supervisory Board Members of the Company coordinate on first half reports, fiscal year-end reports and other matters, in an effort to strengthen governance at Group companies.

On May 18, 2006, the Company approved the Board of Directors’ resolutions concerning the Internal Control System as its basic policies in maintaining systems for ensuring appropriate business operations. In 2017, it was specified that the Board of Directors should regularly examine the functions of the Board of Directors. Resolutions revised as necessary in a timely manner in light of trends in related legislation, social demands, and other factors. The progress of each resolution is periodically monitored through interviews with business execution departments, and the results are reported at Board of Directors meetings.