Fortifying Internal Control

(1)The Board of Directors of Z Holdings Corporation (“ZHD”) has resolved on the “systems for ensuring the properness of business activities” as stipulated in the Companies Act and Regulation for Enforcement of the Companies Act, established this internal control system in its Basic Policy for Internal Control, and set up internal audit as a role to check various controls from within the company.
In addition, for the purpose of ensuring the reliability of its financial reports and fulfilling the obligation as a responsible listed company, ZHD conducts SOX assessments in line with the internal control report system required by the Financial Instruments and Exchange Act.

(2) As the division assuming this role, the Internal Audit Department, an organization directly reporting to Co-CEOs, is established. ZHD receives reports from this department on a regular basis, and shares information and cooperates with its Audit and Supervisory Committee members and accounting auditors to realize even more effective and efficient internal control.

Audit Functions

ZHD, in its Regulations for Internal Audits, has set forth the following definition and purposes of internal audit, in accordance with the Internal Audit Standards (Chapter 1: The Essence of Internal Audit (1.0.1)) set by The Institute of Internal Auditors-Japan:

For the purpose of contributing to the effective achievement of the management objectives of the organization, and from the perspective of legitimacy and rationality and standpoint of fairness and independence, internal audit consists of: assurance activities that evaluate the performance of management activities related to governance processes, risk management, and controls, conducted with an attitude of compliance with the discipline of an internal auditor, and that provide objective opinions, advice, and recommendations based on these evaluations; and advisory activities that provide assistance to specific corporate management activities.

In recent years, based on the expansion of the entire Group's business and changes in society's expectations, ZHD has selected more important business areas and audit themes based on the risk approach, and for their implementation, it has established a Group-wide internal audit system and provides necessary guidance and active cooperation in its operation.

SOX Assessments

ZHD has formulated its “Basic Plans and Policies for Establishing Internal Control over Financial Reporting” in line with the “Standards and Practice Standards for Management Assessment and Audit concerning Internal Control Over Financial Reporting” set by the Financial Services Agency.

The company redefines the scope of assessments according to the status of its business operations every fiscal year; develops and operates company-level control, financial statement control, process-level control, and IT control; prepares the internal control report relating to financial reporting; and submits them to an audit of internal control by an independent auditor.