Epson 2010 Annual Report Download - page 34

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Epson’s Principles of Corporate Behavior categorically state that the Company will not be involved with
anti-social elements in any way.
Risk management
Epson’s risk management system is founded on regulations that define the organization, procedures, and other
key elements of this system.
Overall responsibility for risk management resides with the president, with the persons responsible at each
operations division in charge of risk management at their respective businesses and subsidiaries.
The Trust-Based Management Council was established to deliberate risk management issues under the leadership
of the president. The Council identifies important Group risks and manages programs to control them. When
major risks become apparent, the president leads the entire company in mounting a swift initial response in line
with Epson’s prescribed crisis management program.
The president periodically reports to the board of directors on risk management issues and formulates
appropriate measures to respond to these issues.
(2) Audit system
Internal audit
Epson’s compliance system guards against potential legal and internal regulatory violations in departmental
operations, and the Audit Office reports directly to the president the results of routine internal audits, including
those conducted at Epson subsidiaries. The Audit Office evaluates the effectiveness of the governance process
and requests improvements where needed.
Statutory audit
Epson has assigned three outside statutory auditors to its five-member board of statutory auditors to ensure
greater independence and transparency of audits.
Based on corporate regulations governing auditors and audit procedures, statutory auditors have the authority to
conduct hearings with directors and other personnel whenever they deem such hearings necessary. Statutory
auditors are also authorized to attend important business meetings, which enables the auditors to conduct audits
based on the same information as that available to directors. Statutory auditors also routinely review important
documents related to management decision making.
Epson has established an Audit Staff Office with specialized personnel to assist the statutory auditors in their
duties. The views of the board of statutory auditors are given a great deal of weight in the evaluation and transfer
of personnel assigned to this office.
To improve the effectiveness of their audits, statutory auditors consult on a regular basis with the Audit Office
and independent public accountants.
Statutory auditors hold regular meetings with representative directors to directly assess business operations.
(3) Outside directors and outside statutory auditors
Outside statutory auditors
Each of Epson’s three outside statutory auditors draws on a wealth of experience and keen insight when
conducting audits, and offers frank opinions to the board of directors.
There is a high degree of independence between Epson and its three outside statutory auditors because, at present,
there are no conflicts of interest between Epson and said auditors, or between Epson and other companies by
which the auditors are employed.
There is no particular system of coordination between outside statutory auditors and audit functions in the
Group; however, statutory auditors actively consult with the Audit Office and independent public accountants.
Each time an issue is identified by an audit, details are passed on to the outside statutory auditors to keep them
informed as appropriate. Moreover, statutory auditors take seats on the Trust-Based Management Council, which
manages the operational effectiveness of internal controls, and they actively seek explanations from departments
where there has been an important incident involving internal control. Statutory auditors are thus kept abreast of
operational issues and the status of measures to address those issues.