Publication,FSA Weekly Review No.707 October 20, 2026

Key dates

2026-10-16

The FSA published the exposure-draft consultation materials prepared by the Audit Standard Committee of the Business Accounting Council.

2026-11-16 Deadline

Public comments close at 5:00 p.m. JST.

Suggested considerations

• Audit firms should review the exposure draft against current Japanese Auditing Standards, the Standard to Address Fraud Risks, ISA 240, and ISA 570, and identify differences in required procedures, documentation, communications, and reporting.
• Issuers and other audited entities should assess whether their going-concern assessment process, cash-flow forecasts, stress testing, remediation plans, and financial-statement disclosures can support a more demanding auditor review.
• Finance and audit-committee functions should consider whether management’s documented assessment period extends to at least 12 months after the financial statements’ authorization date, as indicated by independent commentary on the draft.
• Audit committees and supervisory boards should consider whether existing oversight of fraud-risk assessment, management override, whistleblowing, unusual transactions, and remediation of control deficiencies addresses issues highlighted by recent Japanese fraud cases.
• Eligible stakeholders should consider submitting comments to the FSA by 5:00 p.m. Japan Standard Time on November 16, 2026, particularly on transition timing, the scope of enhanced going-concern reporting, and the interaction between the Japanese standards and international standards.
• Multinational groups should monitor the final Japanese requirements and compare them with the going-concern and fraud-audit requirements applied to the group under ISA or other local auditing frameworks.

What changed

The consultation proposes revisions requiring auditors to take more appropriate and consistent actions regarding the going-concern assumption and to enhance explanations and information provided about going-concern matters, while maintaining consistency with international auditing standards. It also initiates a review of the alignment between International Standards on Auditing, Japanese Auditing Standards, and Japan’s Standard to Address Fraud Risks, including whether the standards adequately address lessons from recent fraud cases. Independent commentary indicates that the draft may require auditors to assess management’s going-concern evaluation for at least 12 months after the financial-statement authorization date, include a distinct audit-report section even where no material uncerta

Who is affected

• Japanese listed companies and other entities subject to statutory audits under Japan’s Financial Instruments and Exchange Act or Companies Act
• Japanese audit firms and certified public accountants
• Corporate finance, accounting, audit committee, and supervisory board functions at Japanese public-interest and listed entities
• Foreign groups with Japanese subsidiaries whose statutory financial statements are audited under Japanese auditing standards

Related regulations

• Japanese Auditing Standards
• Japanese Standard to Address Fraud Risks
• International Standard on Auditing 240
• International Standard on Auditing 570
• Financial Instruments and Exchange Act of Japan
• Companies Act of Japan