Japanese firms juggle audit and consulting responsibilities.

TLDR:

Japanese accounting firms are working to meet ethics code revisions that require full separation of audit work from consulting and advisory lines. The revised code aims to eliminate conflicts of interest and self-review threats by ensuring auditors maintain objectivity. Firms vary in their approaches to compliance one year after the revisions took effect.

Key Elements:

• Japanese accounting firms must separate audit work from consulting and advisory services to comply with ethics code revisions
• Revised code aims to eliminate conflicts of interest and self-review threats for auditors

Japanese accounting firms are grappling with how best to meet year-old ethics code revisions that require them to fully separate their audit work from affiliated consulting and advisory lines of business. The ethics code revisions by the Japanese Institute of Certified Public Accountants, the industry’s self-regulating body, are designed to eliminate so-called “self-review threats”—situations where auditors check their own work or that of their colleagues, compromising their objectivity. The revised code took effect on April 1, 2023, less than two weeks before Ernst & Young LLP shelved its plan to split into an audit firm and a separate, publicly traded entity.