Section 5. Harmonious Coexistence with Society

2. Developing an Internal Control System

In the U.S., the Sarbanes–Oxley Act was passed in 2002 to prevent corporate bankruptcies due to accounting fraud, as exemplified by the energy company Enron Corporation and the telecommunications company WorldCom. In Japan as well, the occurrence of accounting fraud at major corporations led to a heightened awareness of the need for internal controls at corporations. The Companies Act, enacted in May 2006, imposed an obligation on large companies to establish and disclose general internal controls. Moreover, the Financial Instruments and Exchange Act (J-SOX), which was established in June 2006, required exchange-listed companies to establish internal controls concerning financial reporting.

In May 2006, the Board of Directors decided on a basic policy concerning the development of an internal control system, and in February 2007, the Internal Controls Promotion Team was inaugurated. The team worked to develop a system that would conform to the purposes of internal control systems: effectiveness and efficiency of operations, reliability of financial information, compliance with laws and regulations related to business activities, and safeguarding of assets.

The task of setting up the system was handled jointly with MOL Kosan, KPMG AZSA LLC, and the Japan Research Institute, with whom Daibiru signed a consulting contract. The system was in place by April 2008.

Afterward, periodic evaluations of the internal control system were conducted, and in every case the system was found to be effective.