Japan

In Japan, general corporate financial reporting requirements are established primarily by the Companies Act of 2005 and the Financial Instruments and Exchange Act of 2006 (FIEA). The Companies Act governs the preparation of financial statements for companies incorporated in Japan, while the FIEA establishes disclosure and reporting requirements for listed companies, companies seeking listing, and other entities subject to securities regulation.

Accounting standards for the private sector are developed by the Accounting Standards Board of Japan (ASBJ) under the auspices of the Financial Accounting Standards Foundation (FASF). Standards issued by the ASBJ are subject to endorsement by the Financial Services Agency (FSA). Japanese generally accepted accounting principles (Japanese GAAP) remain one of the permitted financial reporting frameworks in the jurisdiction.

Japan permits the use of four accounting frameworks for consolidated financial statements of listed companies: Japanese GAAP, Designated International Financial Reporting Standards (IFRS), Japan’s Modified International Standards (JMIS), and United States generally accepted accounting principles, subject to applicable conditions. Since 2010, eligible companies have been permitted to apply IFRS voluntarily for consolidated financial statements. The endorsement process is prescribed in the Cabinet Office Ordinance on Terminology, Forms, and Preparation Methods of Consolidated Financial Statements, and each standard is designated by the Commissioner of the FSA.

JMIS were introduced in 2015 and comprise IFRS Accounting Standards as issued by the International Accounting Standards Board together with ASBJ modification standards. Market disclosures continue to indicate that there are no companies currently applying JMIS. The voluntary use of IFRS continues to expand among listed companies in Japan.

Statutory audit requirements arise under both the FIEA and the Companies Act. Under the FIEA, statutory audits apply to listed companies, companies in the process of listing, companies that have filed securities registration statements, and companies with shareholders above the specified threshold. Under the Companies Act, statutory audits apply to companies with capital stock of JPY 500 million or more or total liabilities of JPY 20 billion or more as of the latest fiscal year-end, companies adopting specified committee-based governance structures, and companies that voluntarily appoint external auditors. Statutory audits are also required for certain other entities under sector-specific legislation, including some educational institutions, financial institutions, incorporated administrative agencies, and local governments.

Audits in Japan are conducted in accordance with Japanese generally accepted auditing standards (Japanese GAAS). These comprise the auditing standards issued by the Business Accounting Council (BAC), which operates under the FSA, together with implementation guidance issued by the Japanese Institute of Certified Public Accountants (JICPA), including Statements on Auditing Standards and Statements on Quality Management Standards. JICPA regularly revises these standards to maintain convergence with international standards.

There is one professional designation in Japan, Certified Public Accountant (CPA), which is protected and regulated under the Certified Public Accountants Act. The Act establishes the legal framework for the profession, including the scope of services to be provided by CPAs, qualification and registration requirements, the establishment and regulation of audit corporations, professional duties and responsibilities, the role and organization of the Japanese Institute of Certified Public Accountants (JICPA), and the applicable disciplinary and criminal sanctions. The Act also provides that all registered CPAs and audit corporations are members of JICPA.

Individuals seeking the CPA designation must pass the national CPA examination conducted by the Certified Public Accountants and Auditing Oversight Board (CPAAOB), complete the required practical experience, complete the professional accountancy education program, and satisfy the final assessment and registration requirements. The practical experience and professional education requirements are implemented through the statutory framework and the education and training arrangements overseen by JICPA and relevant institutions.

The Financial Services Agency (FSA) and the CPAAOB oversee distinct aspects of the profession. The CPAAOB is responsible for administering the CPA examination, conducting inspections of audit firms, and overseeing the quality control review system. The FSA retains overall supervisory authority, including administrative and disciplinary actions, oversight of JICPA’s activities, and the registration and supervision of audit firms.

Under the oversight of these bodies, JICPA serves as the sole professional accountancy organization for CPAs in Japan and carries out key regulatory functions. These include establishing ethical requirements for members, supporting the implementation of auditing and accounting standards, administering continuing professional development requirements, conducting quality assurance reviews, maintaining the member register, and carrying out investigative and disciplinary procedures.

Independence requirements applicable to CPAs and audit corporations are established under the Certified Public Accountants Act, related regulations, and the JICPA Code of Ethics. These include restrictions on employment and financial relationships with audit clients, limitations on certain non-audit services, and mandatory partner rotation requirements for listed entities and other specified entities. For public interest entity audits, key audit partners are generally subject to a seven-year rotation period followed by a cooling-off period.

In Japan, the Certified Public Accountants and Auditing Oversight Board (CPAAOB) serves as the independent public audit oversight authority. The CPAAOB is established as an independent regulatory body within the Financial Services Agency (FSA) and exercises its statutory authority independently from the FSA. Its responsibilities include administering the CPA examination, overseeing the quality control review system, conducting inspections of audit firms and JICPA’s review activities, and deliberating disciplinary actions and recommendations for administrative measures.

The FSA and the CPAAOB jointly oversee the regulatory activities of the Japanese Institute of Certified Public Accountants (JICPA) and the audit profession more broadly. The CPAAOB examines reports submitted by JICPA and conducts on-site inspections of JICPA and audit firms, as appropriate. Where deficiencies are identified, the CPAAOB may recommend that the FSA take administrative actions, including orders to improve business operations.

The CPAAOB is a member of the International Forum of Independent Audit Regulators (IFIAR) and actively participates in international cooperation and information-sharing arrangements relating to audit oversight.

The Japanese Institute of Certified Public Accountants (JICPA)

The Japanese Institute of Certified Public Accountants (JICPA) was established in 1966 under the Certified Public Accountants Act as the sole professional accountancy organization representing Certified Public Accountants (CPAs) in Japan. Membership is mandatory for all individuals and audit corporations registered under the Act and authorized to practice as CPAs.

Under the oversight of the Financial Services Agency (FSA) and the Certified Public Accountants and Auditing Oversight Board (CPAAOB), JICPA carries out key regulatory and professional functions in the jurisdiction. These include establishing ethical requirements for members, supporting the implementation of auditing and accounting standards, conducting quality assurance reviews, administering continuing professional development and other professional education requirements, maintaining the register of members and audit corporations, and conducting investigative and disciplinary procedures.

JICPA also supports the profession through technical guidance, research, publications, seminars, and implementation support related to auditing, accounting, ethics, sustainability reporting, and quality management standards. In addition, it works closely with national standard-setting and regulatory bodies, including the Accounting Standards Board of Japan (ASBJ) and the Business Accounting Council (BAC), to support the development and implementation of standards in the jurisdiction.

In addition to its membership in IFAC, JICPA is a member of the Confederation of Asian and Pacific Accountants (CAPA) and the Global Accounting Alliance (GAA). JICPA also maintains active international engagement through cooperation with regional and global standard-setting and professional organizations.

In Japan, the Japanese Institute of Certified Public Accountants (JICPA), the Financial Services Agency (FSA), and the Certified Public Accountants and Auditing Oversight Board (CPAAOB) share responsibility for the quality assurance review system for statutory audits. JICPA has conducted quality control reviews since April 1999. Amendments to the Certified Public Accountants Act in 2003, effective in April 2004, established the system in law and placed it under the monitoring of the CPAAOB.

JICPA operates the quality assurance review system through its Quality Control Committee and Quality Control Review Team. The system covers audit firms performing statutory financial statement audits, including firms auditing listed companies under the registration framework for listed company audit firms. JICPA issues review reports, recommendation reports where improvements are required, and follows up on remediation through improvement plans and subsequent reviews.

The International Standard on Quality Management 1 (ISQM 1) and International Standard on Quality Management 2 (ISQM 2) are adopted in Japan through the quality management standards issued by JICPA. The quality management framework includes standards aligned with ISQM 1 and ISQM 2 and requires audit firms to design, implement, and operate systems of quality management on a risk-based basis.

The CPAAOB receives and examines reports on JICPA’s reviews and, where necessary, conducts inspections of audit firms and JICPA’s review activities. Where deficiencies are identified, the CPAAOB may recommend that the FSA take administrative measures, including orders to improve business operations.

JICPA states that it conducts quality control reviews in compliance with Statement of Membership Obligation 1 (SMO 1). Based on the legal framework, the operational scope of the system, and the adoption of ISQM 1 and ISQM 2, the quality assurance review system is assessed as aligned with SMO 1 requirements and remains Adopted.

Current Status: Adopted

The Certified Public Accountants Act establishes the requirements to become a Certified Public Accountant in Japan. These include passing the national CPA examination administered by the Certified Public Accountants and Auditing Oversight Board (CPAAOB), completing the required practical experience, completing the professional accountancy education program, and passing the final assessment administered by the Japanese Institute of Certified Public Accountants (JICPA).

Candidates are required to complete a minimum of three years of relevant practical experience, which may be obtained in audit and accounting firms or in industry, either before or after the CPA examination. Successful examination candidates must also complete the three-year professional accountancy education program provided by the Japan Foundation for Accounting Education and Learning (JFAEL). JICPA states that the curriculum is established taking into consideration the requirements of the International Education Standards (IES).

Upon completion of the education program, candidates are required to pass final assessments conducted annually by JICPA in accounting, auditing, taxation, business administration, and rules, regulations, and ethics related to CPA services.

In addition, JICPA requires all members to fulfill continuing professional development (CPD) requirements. Members must complete 120 CPD credits over a rolling three-year period, with a minimum of 20 credits annually. Additional annual subject-specific requirements apply in professional ethics, tax, and audit quality and fraud for members engaged in statutory audits.

Based on the legal qualification framework, the structured practical experience requirement, the professional education program aligned with the IES, and the mandatory CPD requirements applicable to all members, the jurisdiction’s education requirements are assessed as aligned with the IES requirements in effect as of the time of the assessment and remain Adopted.

Current Status: Adopted

In Japan, Japanese generally accepted auditing standards (Japanese GAAS) comprise the auditing standards issued by the Business Accounting Council (BAC) under the Financial Services Agency (FSA) together with the implementation standards and guidance issued by the Japanese Institute of Certified Public Accountants (JICPA).

The standards issued by the BAC, together with the Statements on Auditing Standards (SAS) and Statements on Quality Management Standards (SQMS) issued by JICPA, comprise Japanese GAAS. All mandatory audits in Japan are required to be conducted in accordance with Japanese GAAS. Companies subject to statutory audits are identified in the Financial Instruments and Exchange Act and the Companies Act, with additional statutory audit requirements applying to certain other regulated entities under sector-specific legislation.

The BAC’s standards include the Auditing Standards, the Standard to Address Risks of Fraud in an Audit, and the Standard on Quality Management for Audits. These standards are supplemented by the SAS and SQMS issued by JICPA, which provide detailed implementation requirements and guidance.

JICPA regularly revises the SAS and SQMS to maintain convergence with the International Standards on Auditing (ISA) and the International Standards on Quality Management as issued by the IAASB. Based on the available official information, the auditing standards applicable in Japan remain aligned with the ISA in effect as of the time of the assessment, including the standards reflected in the 2025 IAASB Handbook. Accordingly, the jurisdiction’s status remains Adopted.

The International Standard on Auditing for Audits of Financial Statements of Less Complex Entities (ISA for LCE) is included in the 2025 IAASB Handbook; however, no separate adoption of the ISA for LCE in Japan has been identified as of the time of the assessment. This does not affect the adoption rating, as the full suite of ISA continues to apply to all mandatory audits.

Current Status: Adopted

Ethical requirements in Japan are established under the Certified Public Accountants Act together with the Code of Ethics issued by the Japanese Institute of Certified Public Accountants (JICPA).

JICPA has established an Ethics Committee that issues and updates the national Code of Ethics. JICPA states that its Code is developed in conformity with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA). JICPA continues to adopt revisions to the international Code on an ongoing basis, including the revisions reflected in the 2025 IESBA Handbook.

In addition to the requirements of the IESBA Code, the Certified Public Accountants Act and its implementing regulations establish certain more stringent national independence requirements. These include mandatory partner rotation requirements, cooling-off periods, and restrictions on employment relationships with audit clients.

Based on the available official information, ethical requirements in Japan are aligned with the 2025 International Code of Ethics for Professional Accountants (including International Independence Standards) and apply to all Certified Public Accountants. Accordingly, the jurisdiction’s status remains Adopted.

Current Status: Adopted

In Japan, the Ministry of Finance (MoF) is responsible for establishing public sector accounting standards for the central government, while the Ministry of Internal Affairs and Communications (MIC) is responsible for the accounting framework applicable to local governments.

Both the central and local government frameworks are based on accrual accounting principles and require the preparation of accrual-based financial statements. However, the applicable standards are national standards unique to Japan and are not the International Public Sector Accounting Standards (IPSAS) as issued by the International Public Sector Accounting Standards Board (IPSASB).

Available public sector reporting sources and international comparative assessments indicate that Japan applies accrual-basis national standards rather than IPSAS directly or IPSAS-based standards. Accordingly, the jurisdiction remains assessed as Partially Adopted under the current methodology.

Current Status: Partially Adopted

The Certified Public Accountants Act establishes the legal framework for investigation and discipline in Japan. The Japanese Institute of Certified Public Accountants (JICPA) has authority to investigate and discipline its members, while the Financial Services Agency (FSA) may take administrative and enforcement actions where necessary.

JICPA operates an investigative and disciplinary system that includes both information-based and complaints-based approaches. Complaints may be submitted by members of the public or other members and may relate to statutory audits under the Financial Instruments and Exchange Act or the Companies Act, as well as certain other statutory audits.

Information is first reviewed by the Audit Practice and Review Committee. Where further examination is warranted, the matter is referred to the Investigative Committee, which determines whether there may have been violations of laws, regulations, or JICPA rules and whether sanctions should be recommended. Cases may then proceed to the Disciplinary Committee, which determines the sanctions to be imposed. Members may appeal disciplinary decisions to the Appeals Committee. The disciplinary structure is described by JICPA as independent from its Chairman and President, Deputy Presidents, Executive Board, and Council.

Available sanctions include reprimand, suspension of membership rights for a specified period, withdrawal recommendation from membership, and requests to the FSA to revoke CPA qualification or order the dissolution of an audit corporation, in accordance with the Certified Public Accountants Act. An oversight mechanism also exists through the Audit Practice Monitoring Board, which reviews the activities of the relevant committees and makes recommendations to enhance objectivity and transparency.

There is also a direct link between the quality assurance review system and the investigative and disciplinary system. JICPA’s quality control review materials state that where significant concerns arise regarding audit opinions or compliance with JICPA rules, those matters may be reported to the chairman of the committee responsible for individual case review. In addition, the Certified Public Accountants and Auditing Oversight Board (CPAAOB) examines JICPA’s quality control review reports and may recommend that the FSA take administrative actions where audits or reviews have not been conducted properly.

Based on the available official information, the investigative and disciplinary system is established and operational for all regulated professional accountants in the jurisdiction and is assessed as aligned with SMO 6 requirements.

Current Status: Adopted

In Japan, the Accounting Standards Board of Japan (ASBJ), under the auspices of the Financial Accounting Standards Foundation (FASF), is responsible for the development and deliberation of private sector accounting standards. All standards issued by the ASBJ are subject to endorsement by the Financial Services Agency (FSA).

The International Accounting Standards Board (IASB) and the ASBJ have worked together to achieve convergence between International Financial Reporting Standards (IFRS) Accounting Standards and Japanese generally accepted accounting principles (Japanese GAAP) since 2005.

Voluntary application of IFRS for consolidated financial statements by companies meeting specified criteria has been permitted since March 2010. The IFRS Foundation jurisdiction profile for Japan confirms that IFRS Accounting Standards are permitted but not required for domestic public companies.

Listed companies in Japan may use four accounting frameworks for consolidated financial statements: IFRS Accounting Standards as designated by the Commissioner of the FSA, Japanese GAAP as issued by the ASBJ, Japan’s Modified International Standards (JMIS), and United States generally accepted accounting principles with the permission of the Commissioner of the FSA.

The IFRS Foundation further confirms that all IFRS Accounting Standards in effect as of the time of the assessment have been designated by the Commissioner of the FSA prior to their effective dates.

Because IFRS Accounting Standards are permitted only for some publicly accountable entities and are not required for all domestic publicly accountable entities, the jurisdiction remains assessed as Partially Adopted under the current methodology.

The IFRS for SMEs Accounting Standard is not adopted in Japan. The IFRS Foundation jurisdiction profile states that it is neither required nor permitted and is not currently under consideration.

Current Status: Partially Adopted

Relevant Organizations

• Accounting Standards Board of Japan (ASBJ)
• Business Accounting Council (BAC)
• Certified Public Accountants and Auditing Oversight Board (CPAAOB)
• Financial Services Agency (FSA)
• Japan Foundation for Accounting Education and Learning (JFAEL)
• Japanese Institute of Certified Public Accountants (JICPA)

Relevant Legislation

• Cabinet Office Ordinance on Terminology, Forms, and Preparation Methods of Consolidated Financial Statements
• Certified Public Accountants Act (CPA Act)
• Commercial Code
• Companies Act
• Financial Instruments and Exchange Act

Relevant Publications

• Certified Public Accountants and Auditing Oversight Board, Monitoring Report, 2025.
• IFRS Foundation, IFRS Application Around the World, Jurisdictional Profile: Japan
• International Forum of Independent Audit Regulators, Member Profile: Japan / CPAAOB.
• Japanese Institute of Certified Public Accountants, Accounting Standards.
• Japanese Institute of Certified Public Accountants, Code of Ethics
• Japanese Institute of Certified Public Accountants, Continuing Professional Development
• Japanese Institute of Certified Public Accountants, Disciplinary Actions and Sanctions on CPAs
• Japanese Institute of Certified Public Accountants, Quality Control Review System
• Japanese Institute of Certified Public Accountants, Integrated Report 2025