During the consolidated fiscal year under review, JVCKENWOOD established an investigation committee including outside experts (hereinafter, “Investigation Committee”) and conducted an investigation into losses with respect to JVC. The results of the investigation by the Investigation Committee revealed inappropriate accounting adopted by JVC during the period between the fiscal year ended March 31, 2005, which was prior to the establishment of JVCKENWOOD on October 1, 2008, and the second quarter of the fiscal year ended March 31, 2010. It also indicated that the inappropriate accounting had a total impact of approximately 17.1 billion yen in losses. Pursuant to the Financial Instruments and Exchange Law, the JVCKENWOOD Group adjusted the earnings results of JVC for the period between the fiscal year ended March 31, 2005 and the second quarter of the fiscal year ended March 31, 2010 and those of JVCKENWOOD for the period from its establishment on October 1, 2008 through to the second quarter of the fiscal year ended March 31, 2010.
The Company, having seriously acknowledged the results of the investigation conducted by the Investigation Committee, thoroughly validated and examined the background and causes that led to the inappropriate accounting treatment. Furthermore, in response to the suggestion of the committee, we have formulated fundamental measures.
- By establishing “Standards for Decision-Making and Authorities/List of Decision-Making Matters” and ensuring that the contents are thoroughly communicated within the JVCKENWOOD Group, reconfirm awareness within the entire Group of a system that maintains a board of directors with the authority to decide important management matters.
- Establish the “JVCKENWOOD Group Code of Conduct on Compliance” (hereinafter “Code of Conduct”) that specifically outlines common values and ethical views to be shared by directors, auditors, executive officers, and employees of the JVCKENWOOD Group for taking sincere and appropriate actions, and ensure strict adherence to the Code of Conduct. In addition, emphasize that securing compliance is the most important issue under the management policy and provide education on compliance as part of the management education program.
- Ensure that all parties within the JVCKENWOOD Group are well aware of the internal whistle-blowing rules, which stipulate the reporting of any acts that deviate from the Code of Conduct and define procedures for corrective action. Also, ensure that the whistle-blowing system is operated so that a person reporting a problem is not treated unfairly.
- Establish, with respect to the subject inappropriate accounting treatment, a “committee for preventing recurrence” as an entity under the Compliance Committee of JVCKENWOOD, and first develop “improvement measures to prevent recurrence of inappropriate accounting, etc.,” applicable throughout the Group to be promoted and monitored. In addition, assign a director responsible for compliance at each Group company to strengthen the internal control system of every company.
- As part of the reexamination of the human resources system, establish working rules, dismissal regulations and other compliance-related rules as the rules of JVCKENWOOD, and apply these rules uniformly throughout the entire Group.
- Revise the current accounting system in which profits and losses are accounted for within each of the regional companies in Europe, Americas, and Asia, and establish consolidated accounting rules and develop operational workflows and systems that enable JVCKENWOOD to centrally identify the profits and losses of business companies as well as of overseas affiliates. In addition, promote a strengthening of consistent consolidated management by business segment, establish a management system over affiliated companies overseas, and revise the existing accounting rules as necessary.
- To prevent recurrence of inappropriate accounting treatment, establish a double-checking system between overseas sales subsidiaries and the accounting function of business departments, as well as a cross-checking system with the accounting department of the head office.
- JVCKENWOOD, by reinforcing the activities of its management audit office, has been widely conducting onsite examinations of business companies and their affiliates within the Group to centrally monitor the internal control status, and is making efforts to promptly detect problematic issues from a perspective that is separate from that of the business locations to heighten the capability to prevent the occurrence of problems. Further efforts are being made to strengthen and enhance the staff of the management audit office of JVCKENWOOD and ensure that a thorough monitoring function is in place.
- In order to put in place a transparent corporate culture, ensure that based on the Code of Conduct, rules are defined with respect to the reporting of unusual circumstances caused by an inappropriate action. Specifically, establish an internal whistle-blowing system as a mechanism to enable personnel in overseas affiliates also to directly access JVCKENWOOD.
- The management audit office of JVCKENWOOD, in order to validate the effectiveness of the series of measures to prevent recurrence, will collect accounting, financial, and other relevant data monthly from all related companies of the Group and analyze the data.
