Internal Control and Audit

Governance

Internal Control and Audit

アンカーリンク

Policy / Basic Approach
Structure
Initiatives

TOYOTA TSUSHO CORPORATION Sustainability Management Group, DFF Inc.

Policy / Basic Approach

Basic Policy of Internal Control System

1. System to ensure that members of the Board of Directors and employees execute their responsibilities in compliance with relevant laws and regulations and the Articles of Incorporation

Directors ensure that compliance with laws, regulations and social ethics are the basis for business activities by repeatedly communicating to officers and employees the spirit of the Toyota Tsusho Group’s fundamental philosophy through documents and through their words and actions.
The Company appoints multiple outside directors with expert, objective perspectives and appropriately makes decisions through its Board of Directors.
Senior Executive Officers and Executive Officers receive decisions from the Board of Directors and carry out subsequent operational management as appropriate.
For its company-wide sustainability management issues, the Company has a Sustainability Management Committee chaired by the President & CEO, established a company-wide sustainability activities policy in order to inculcate it among all officers and employees, and establish a sustainability promotion structure.
The Company promotes information sharing and mutual checks and balances among officers to establish a structure that enables decision-making that exercises company-wide control by means of various committees and other cross-organizational deliberative bodies in addition to the executive deliberative bodies consisting of the Board of Directors, Executive Board Members Meeting, and Executive Officers Meeting.
By practicing their segregated duties, involved departments evaluate, control, check, and monitor business execution in business processes and endeavor to improve management systems by means such as collecting and enlightening the latest information on compliance and identifying and rectifying problems.
A Chief Financial Officer has been appointed as the person in charge of enhancing systems to ensure the reliability of financial reporting.
The officer responsible for the Compliance & Crisis Management Department is in charge of building a compliance system.
The officer responsible for the Audit Department, which is under the direct control of the President & CEO, evaluates and reports on the effectiveness of the internal control concerned with financial reporting.
The Audit Department regularly conducts internal audits and reports results to officers in charge of the audited organization submitting recommendations for improvement and correction of problems, after reporting to the officer in charge of the audit department. The Audit Department has individuals in charge at audited organizations report the status of responses to audit findings and confirm in follow-up audits the status of improvement of any matters the general manager of the Audit Department considers necessary.
By building a system for the Audit Department to report directly as appropriate toward demonstrating the functions of the Board of Directors and Audit & Supervisory Board, ensures cooperation between the Audit Department and the Directors and Audit & Supervisory Board members.
While assuming a smooth reporting, communication, and consultation framework through the organizational structure, to supplement this framework, we have established a domestic and international whistle-blowing system, separate from the organizational structure, to ensure anonymity, and are striving to collect information from Audit & Supervisory Board members, the Compliance & Crisis Management Department, or outside experts. Depending on the importance of the information reported or received, the Compliance & Crisis Management Department respond and endeavor to prevent recurrences together with the Legal Department or the relevant department.
There are several measures in addition to rigorous compliance programs to support systems for ensuring proper business operations. One activity is frequent education and study programs that also serve to increase motivation. Another activity is the distribution in print or electronically of the Global Code of Conduct & Ethics and a handbook version of these standards for the purpose of enhancing an environment in which people can constantly check their own behavior regarding how they perform their jobs every day.

2. System to retain and manage information relating to the execution of the duties of members of the Board of Directors

The Company retains and manages in documents or electromagnetic media information concerning the execution of duties by directors in accordance with laws, regulations, and the Document Regulations. The department responsible for retention period, etc. for each document shall comply with the Handling Protocols for Management and Storage of Documents.
The Company has established Regulations for Confidential Information and Personal Information, Regulations for Management of Individual Numbers and Specific Personal Information with respect to the management of confidential information and personal information and ensured the appropriate and effective use of confidential information and personal information.

3. Rules and systems related to the management of risk of loss

The Company has formulated a Risk Management Basic Policy and related regulations with respect to risks surrounding the Company. Departments responsible for risks conduct risk assessments and monitoring, striving for early detection and prevention of risks.
In light of the importance of risk identification, assessment, monitoring, and management, the Company is upgrading its framework for identification and management in business processes of the following risks requiring particular diligence in the Company’s business execution.
1. 1For risks relating to investments and loans, the Company assesses these risks at the Investment and Loan Meeting and Investment and Loan Committee from perspectives such as profitability, strategic value, safety, viability, and compliance (including bribery preventions) in accordance with the investment guidelines and endeavors to appropriately respond to risks and reduce risk.
2. 2For credit risks, the Company has established Transaction Management Regulations and endeavors to prevent the occurrence of bad debt and other unforeseen losses. For market risks, the Company has established necessary regulations for each type of risk in accordance with the Basic Policies on Market Risk Management to identify and manage risks appropriately.
3. 3For risks relating to occupational safety and environmental conservation, the Global Safety & Environmental Promotion Department provides guidance and education for the entire Group and strives to prevent disasters, accidents, and pollution.
4. 4For risks related to occupational health, the Global Human Resources Department endeavors to maintain and improve employees’ health through Group-wide guidance and education.
In addition, the Company appropriately manages prevention of operational risks in areas such as the management system in emergency situations on a department-by-department basis.
The Company has formed an Integrated Risk Management Committee as a cross-organizational management body and established a structure that contributes to enhancement of corporate value by endeavoring to identify risks and discover problems on a companywide basis and implementing necessary countermeasures.

4. System to ensure that members of the Board of Directors exercise their duties efficiently

In accordance with the Regulations of Board of Directors, the Board of Directors meeting is held once a month, in principle, as well as extraordinary meetings as necessary. Important management policies, business plans and other matters are discussed in advance at the appropriate, separately established institutions.
The Company has introduced an Executive Officer System for executing the directors duties. The executive officers are appointed by the Board of Directors.
The Board of Directors assigns responsibilities to executive officers based on board-authorized institutional design and segregation of duties and monitors operational execution status.
For every matter for which operational executive-making authority has been delegated to executive officers, the Company ensures appropriate and efficient operational execution by explicitly delineating operational authority, designating a party responsible for the matter, defining the party’s responsibilities through the Administrative Authority Regulations, the Regulations for Approval of Important Matters and other internal regulations, and establishing clearly defined decision-making processes, including deliberative bodies.
The Company shares with outside directors the details of deliberations in meeting and committees to enable outside directors to engage in appropriate decision-making at meetings of the Board of Directors.
The Company organizes its business under operating divisions based on the value we provide to society and customers, products or geographic regions. Each division is headed by an executive officer. The Division CEO practice expeditious management in close contact with frontline personnel.
The Board of Directors approves the Global Vision, which sets the Group’s long-term direction, and shares it throughout the Group.
The Board of Directors approves mid-term business plan with a frontline-centric orientation and shares it throughout the Group.
The Board of Directors approves effective annual policies and plans that include specific targets, resource allocations and risk factor analyses to achieve the medium-term business plan.
The Board of Directors receives monthly reports in the form of timely accounting data on progress toward achieving the annual plan.
Annual plan progress is reviewed quarterly in addition to monthly. In the event of a major deviation from a target, the cause of the deviation is analyzed, remedial measures are devised and the outlook is revised if necessary. Revised outlook is to be approved by the Board of Directors.

5. System to ensure the propriety of business operations of the corporate group consisting of the Company and its subsidiaries

In the Toyota Tsusho Group, in accordance with policies on divisional consolidated management, a consolidated business plan including subsidiaries has been formulated, and the Board of Directors supervises the information ascertained and managed about the financial details and important matters of business execution in accordance with management policies aligned with the systems and other characteristics of each subsidiary.
Each subsidiary establishes Board of Directors Regulations and determines the execution of duties of each director and key employee.
Each subsidiary establishes regulations for approval of important matters, administrative authority, etc., clearly define responsibilities and the decision-making process, and establishes a structure in which duties are executed properly and efficiently.
The Company clearly defines approval authority in subsidiaries in the regulations of each subsidiary, exercises shareholder rights at the General Meeting of Shareholders of each subsidiary while placing importance on the autonomy and independence of subsidiaries, and requires advance consultation or reporting on important matters pertaining to the Toyota Tsusho Group.
The divisions responsible in cooperation with involved departments, provides necessary support for the development and operation of systems to ensure the propriety of business operations of subsidiaries and conducts internal audits at the Company’s Audit Department. If necessary, depending on the systems and other characteristics of subsidiaries, the Company dispatches directors and Audit & Supervisory Board members to oversee and audit business operations.
In accordance with the Basic Policy for Risk Management, the Company engages in necessary examination and monitoring of business processes of subsidiaries and strives for early detection and prevention of risks.
The Company and Group companies share the spirit of the Toyota Tsusho Group’s fundamental philosophy and ensure compliance with laws, regulations, and social ethics. The Company sets up and operates group wide management committees for mutually sharing information among subsidiaries.

6. Matters relating to employees requested by Audit & Supervisory Board members to assist in their duties and matters relating to ensuring the independence of such employees from members of the Board and the effectiveness of instructions given to such employees

The Company assigns one or more employees to assist in the duties of Audit & Supervisory Board members (assistants).
Transfers and disciplinary actions relating to assistants require the advance consent of Audit & Supervisory Board members.
Audit & Supervisory Board members perform job performance evaluation of assistants in order to ensure the effectiveness of instructions given to assistants by Audit & Supervisory Board members.
In addition to the above, the Company respects the opinions of Audit & Supervisory Board members with respect to the number, rank, and other matters relating to assistants and determines these matters through sufficient consultation with Audit & Supervisory Board members.

7. System for members of the Board and employees of the Company and directors, Audit & Supervisory Board members, and employees of subsidiaries to report to the Company’s Audit & Supervisory Board members, other system for reporting to the Company’s Audit & Supervisory Board members, and system to ensure that persons who make reports are not treated disadvantageously because of such reporting

Members of the Board and employees of the Company promptly report to Audit & Supervisory Board members matters prescribed by law, matters with material implications for the Company or the Toyota Tsusho Group, the implementation status of internal audits, and information reported or notified via the internal reporting system.
Members of the Board and employees of subsidiaries promptly report to Audit & Supervisory Board members of the Company matters prescribed by law, matters with material implications for the Company or the Toyota Tsusho Group, including important matters of subsidiaries, and the implementation status of internal audits. Audit & Supervisory Board members of subsidiaries promptly report to Audit & Supervisory Board members of the Company the details of audits they have performed in accordance with the prescribed audit purview.
Members of the Board and employees of the Company and directors, Audit & Supervisory Board members and employees of subsidiaries report to Audit & Supervisory Board members of the Company prescribed matters relating to business operations periodically, as needed, or at the request of Audit & Supervisory Board members.
Members of the Board of the Company and directors of subsidiaries put in place a framework to ensure that persons reporting to Audit & Supervisory Board members are not treated disadvantageously because of such reporting.

8. Matters relating to procedures for prepayment or reimbursement of expenses incurred in the performance of duties by Audit & Supervisory Board members and policies pertaining to processing of other expenses or debts incurred in the performance of said duties

If an Audit & Supervisory Board member has incurred expenses in the execution of duties or requests prepayment of such expenses, the Company promptly processes such expenses or debts.

9. Other systems to ensure that auditing by Audit & Supervisory Board members in conducted effectively

Representative director periodically and as needed endeavors to communicate with Audit & Supervisory Board members by holding meetings to exchange opinions about company management.
The Company puts in place a framework to enable the Audit & Supervisory Board members to attend important meetings of executive deliberative bodies, examine important documents, and conduct research at departments, business sites, and subsidiaries in order to audit the status of business execution by directors and the status of development and operation of the internal control system.
Establish a system to ensure appropriate cooperation between Audit & Supervisory Board members, Independent Auditor, Audit Department, and corporate departments such as Investment and Credit Department, Legal Department, Compliance & Crisis Management Department, etc.
The Company puts in place a framework to enable Audit & Supervisory Board members to expeditiously engage external professionals through prescribed procedures when deemed necessary in the course of conducting audits.

Role of the Audit Department

Our Audit Department, established under the Internal Audit Rules, independently and objectively evaluates and verifies, across the Group, compliance with laws and internal regulations, the appropriateness and efficiency of operations, and the effectiveness of internal controls, and advises on improvements. Operating under an annual audit plan, it conducts audits in a planned manner to ensure sound management and, by strengthening corporate governance, to contribute to the preservation and enhancement of corporate value.

Scope of Audits

The Audit Department’s scope covers the parent company and our domestic and international subsidiaries and offices. As a trading company with diverse businesses, the Department audits the entire Group to confirm the appropriateness and efficiency of operations, compliance with laws and internal regulations, asset management, and information security, thereby working to strengthen internal controls across the Group.
With respect to internal control over financial reporting under the Financial Instruments and Exchange Act (J‑SOX), the Department verifies and monitors the design and operating effectiveness of control processes from an independent, objective standpoint, and prompts timely remediation where improvements are needed, contributing to the reliability of the Group’s financial reporting. Through these activities, we strengthen governance over our global operations and support sound management and the enhancement of corporate value.

TOYOTA TSUSHO CORPORATION Sustainability Management Group, DFF Inc.

Structure

Reporting Structure for Audit Results

The Audit Department reports audit findings and any required remediation requests promptly to the executive officer responsible for internal audit and to senior management, and its reports are used to inform the development and implementation of corrective measures. Items identified in audits are immediately communicated to the relevant departments and group companies with requests for remedial action, and the Department follows up on progress where deemed necessary.
In terms of reporting lines, audit results are reported directly to the President & CEO and other senior executives. The Board of Directors receives regular summaries of audit activities, results, and material findings, and the Audit & Supervisory Board is also provided with periodic reports and engages in dialogue on audit outcomes and remediation status. The Audit Department exchanges information and coordinates with the external/independent auditors as needed to prevent overlap or gaps in coverage and to enhance governance effectiveness.
Insights gained from audits are shared with relevant departments to drive company‑wide operational improvements and to strengthen internal controls.

TOYOTA TSUSHO CORPORATION Sustainability Management Group, DFF Inc.

Initiatives

Audit Methodology

The Audit Department audits the parent company and domestic and overseas group companies, aiming to achieve maximum impact with limited resources by conducting planned audits focused on key themes. In addition to core procedures—on‑site and remote reviews, evidence checks, interviews, and process walkthroughs—we are expanding the use of IT, including data analytics. As needed, we carry out special investigations to determine the causes of fraud or losses and to verify remedial measures to prevent recurrence, enabling prompt responses to management risks. We are also introducing targeted audits that reflect changes in the business environment and risk landscape and advancing data‑driven approaches to balance efficiency and comprehensiveness while improving audit quality.

Independence of the Audit Function

The Audit Department is established as an organization independent from business execution units and conducts audits objectively and independently under the authority and responsibilities defined in the Internal Audit Rules. This structure ensures audits are free from influence by audited departments and enables impartial evaluations.
The Department has a reporting line that allows it to report audit plans and results directly to the Audit Department Executive and other senior management, and to share significant matters with the Board of Directors and the Audit & Supervisory Board. While exchanging information and coordinating with external auditors as necessary, it preserves independent judgment and evaluation as an internal audit function. Through neutral and fair audits conducted from an organizationally independent position, the Department enhances the credibility of internal audit and contributes to stronger corporate governance.

TOYOTA TSUSHO CORPORATION Sustainability Management Group, DFF Inc.