Omron 2009 Annual Report Download - page 91

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NOTE TO READERS:
Following is an English translation of management’s report on internal control over financial reporting filed under the Financial
Instruments and Exchange Act of Japan. Readers should be aware that this report is presented merely as supplemental
information.
Readers should be particularly aware of the differences between an assessment of internal control over financial reporting
(“ICFR”) under the Financial Instruments and Exchange Act (“ICFR under FIEL”) and one conducted under the standards of the
Public Company Accounting Oversight Board (United States) (“ICFR under PCAOB”);
• In an assessment of ICFR under FIEL, there is detailed guidance on the scope of an assessment of ICFR, such as quantitative
guidance on business location selection and/or account selection. In an assessment of ICFR under PCAOB, there is no such
detailed guidance. Accordingly, regarding the scope of assessment of internal control over business processes, we selected
locations and business units to be tested based on the previous year’s consolidated net sales (after the elimination of transactions
between consolidated companies), and the companies whose net sales reaches two-thirds of total sales for the previous
year on a consolidated basis were selected as “significant locations and/or business units.” At selected “significant locations
and/or business units” we tested business processes leading to sales, accounts receivable and inventories as significant
accounts that may have a material impact on our business objectives. Further, in addition to selected significant locations
and/or business units, we also selected for testing, as business processes having greater materiality, business processes
relating to (i) greater likelihood of material misstatements and/or (ii) significant accounts involving estimates and the manage-
ment’s judgment and/or (iii) a business or operation dealing with high-risk transactions, taking into account their impact on the
financial reporting.
MANAGEMENT’S REPORT ON INTERNAL CONTROL
1. Matters relating to the basic framework for internal
control over financial reporting
Hisao Sakuta, President and Chief Executive Officer is respon-
sible for designing and operating effective internal control over
financial reporting of Omron Corporation (the “Company”) and
has designed and operated internal control over financial report-
ing in accordance with the basic framework for internal con-
trol set forth in, “The Standards and Practice Standards for
Management Assessment and Audit Concerning Internal
Control Over Financial Reporting (Council Opinions),” released
by the Business Accounting Council.
The internal control is designed to achieve its objectives
to the extent reasonable through the effective function and
combination of its basic elements. Therefore, there is a pos-
sibility that misstatements may not be completely prevented or
detected by internal control over financial reporting.
2. Matters relating to the scope of assessment, the basis
date of assessment and the assessment procedures
The assessment of internal control over financial reporting was
performed as of March 31, 2009 which is the end of this fiscal
year. The assessment was performed in accordance with
assessment standards for internal control over financial report-
ing generally accepted in Japan.
In conducting this assessment, we evaluated internal con-
trols which may have a material effect on our entire financial
reporting on a consolidation basis (“entity-level controls”) and
based on the results of this assessment, we selected busi-
ness processes to be tested. We analyzed these selected
business processes, identified key controls that may have a
material impact on the reliability of the Company’s financial
reporting, and assessed the design and operation of these key
controls. These procedures have allowed us to evaluate the
effectiveness of the internal controls of the Company.
We determined the required scope of assessment of inter-
nal control over financial reporting for the Company, as well
as its consolidated subsidiaries and equity-method affiliated
companies, from the perspective of the materiality that may
affect the reliability of their financial reporting. The materiality
that may affect the reliability of the financial reporting is deter-
mined by taking into account the materiality of quantitative and
qualitative impacts on financial reporting. In light of the results
of assessment of entity-level controls conducted for the
Company and its consolidated subsidiaries, we reasonably
determined the scope of assessment of internal controls over
business processes. Regarding a certain number of consoli-
dated subsidiaries and equity-method affiliated companies, we
concluded that the material impact they would have on the
consolidated financial statements would be insignificant and,
thus, did not include them in the scope of assessment of enti-
ty-level controls.
Regarding the scope of assessment of internal control over
business processes, we selected locations and business units
to be tested based on the previous year’s consolidated net
sales (after the elimination of transactions between consoli-
dated companies), and the companies whose net sales reach-
es two-thirds of total sales for the previous year on a consoli-
dation basis were selected as “significant locations and/or busi-
ness units.” At selected “significant locations and/or business
units” we tested business processes leading to sales, accounts
receivable and inventories as significant accounts that may
have a material impact on the business objectives of the
Company. Further, in addition to selected significant locations
and/or business units, we also selected for testing, as busi-
ness processes having greater materiality, business processes
relating to (i) greater likelihood of material misstatements and/or
(ii) significant accounts involving estimates and the manage-
ment’s judgment and/or (iii) a business or operation dealing
with high-risk transactions, taking into account their impact on
the financial reporting.
3. Matters relating to the results of the assessment
The aforementioned assessments determined that the
Company’s internal control over financial reporting was effective
as of the last day of the current fiscal year examined.
4. Additional matters
Not applicable.
5. Particular matters
Not applicable.
Hisao Sakuta
President
Chief Executive Officer
Omron Corporation
Internal Control Section
Management’s Report on Internal Control