AUP Procedures

We provide Agreed Upon Procedures (AUP) services in response to requests from overseas subsidiaries under Japanese companies.

When a Japanese company installs overseas subsidiaries, its bases are often required by local governments to provide third-party assurance of financial soundness of a parent company in Japan, particularly to show that there are no short-term (usually within one year) cash flow issues. Additionally, when the Japanese parent company provides financial support to the subsidiary, it may be required by public institutions to obtain third-party assurance that continuous financial support is possible.

However, this kind of third-party assurance is not anticipated on the practical guidelines published by the International Auditing and Assurance Standards Board (IAASB) or Japanese Institute of Certified Public Accountants (JICPA). As a result, Big4 audit firms normally decline to provide these assurances from the perspective of governance and risk management although the Japanese company is able to provide sufficient financial support.

Furthermore, even with high financial stability of the Japanese parent company, it is extremely rare for Big4 audit firms to issue assurance reports that do not comply with the practical guidelines published by IAASB or JICPA. This means that a lot of subsidiaries under Japanese capital often find themselves in difficult situations, unable to submit reports in the formats required by foreign governments and public institutions.

Advantage of our services

The decline of such third-party assurances by Big4 firms can be attributed to their strict governance and risk management policies. Even if the risk is almost negligible, the quality control systems of Big4 firms compel them to refuse these engagements. In contrast, accounting firms operated by a smaller number of managing partners can provide more flexible responses.

Moreover, one reason foreign governments and public institutions make these requests is that, even though the parent company involved is well-known publicly traded on the stock exchange market in Japan with sales reaching JPY 1 trillion, it may not be widely recognized in the overseas country. When we prepare AUP reports, we address these issues and financial stability. And then, we proceed with the work while consulting with the personnel of the overseas subsidiaries to satisfy the requirements of the institutions to which the report will be submitted.