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- Internal Controls - How do internal controls and self-assessment of risk ensure accurate financial reporting? An internal control mechanism is vital to any business. In addition to following various laws and regulations we carry out self-assessments in order to advance the level of internal controls and to be able to disclose reliable financial data. the Bank exploring potential problems (Self), then evaluating Internal Controls the steps already planned to deal with those problems Internal controls are activities to ensure legal compliance, (Control), and then proposing improvements. The basic idea reliability of financial reporting and risk specification and here is that the people doing business are in the best position countermeasures and are carried out by all staff and to understand that department's risks. Based on this principle, managers. We need to continuously improve our internal each of control functions and adopt self-regulating mechanisms that our divisions requires its staff to assess the significant can cope with various types of risk. We strive to always be business risks in their area, aiming to further strengthen conscious of the check and balance functions within the internal controls. organization and to specify the risks located in each business Internal controls on financial reporting (responding to area in order to be able to cope with risks before they article 404 of the Sarbanes-Oxley Act) materialize. End business-level staff draw up counter In order to gain the trust of a company's investors, article 404 measures, which we then incorporate into systems, rules and of the U.S. Sarbanes-Oxley Act ("SOX") requires companies to procedures. Accurate processes as a result of strict procedures strengthen internal controls related to financial reporting. The are also required in the area of financial data disclosure where same movement is evident in Japan as well, where the correct representations of the company's true conditions are legislature has been considering the strengthening of internal required. controls related to financial reporting and disclosure for listed Carrying out control self-assessments (CSA) companies since last year. We are introducing a Risk Control Self-Assessment system in MUFG, BTM's parent company, is listed on the New York order to make our business safer, more accurate, and more Stock Exchange and SOX will be applicable to non-U.S. efficient. Since we started to work on this system, a number of companies from the closing of fiscal 2006 (March 2007). We other industries have begun to employ similar measures for will make preparations in line with MUFG. Our preparation for internal control, risk management, and internal audit. compliance with SOX represents a planned step towards These assessments involve each business group within improved internal controls, and as a result we expect to be able to disclose even more accurate and reliable financial data. *1: Article 404 of the Sarbanes-Oxley Act ("SOX"): In July 2002, after a series of corporate scandals, the United States Congress passed the Sarbanes-Oxley Act ("SOX") in order to restore investor confidence. Article 404 of SOX requires the following actions to prevent inaccurate and false financial reporting: 1: A statement of management's responsibility for establishing and maintaining an adequate internal control structure and procedures for financial reporting; 2: Management's own assessment of the effectiveness of the company's internal control structure and procedures for financial reporting. 3: An audit certificate by an external auditor. CSA workshop SOX work-out session Bank of Tokyo-Mitsubishi CSR Report 2005 13