Why a China parent may request audited statements
Typical reasons include consolidation, reporting to investors or financial institutions, requests from the China-side auditor, group internal controls and listed-company disclosure needs.
For listed groups, even the Japan subsidiary’s financial information may need a defined level of reliability.
A Japan entity may not have a statutory audit obligation
Many small and mid-sized Japan entities are not subject to statutory audit. The first step is to confirm whether headquarters really needs an audit report, a review report, a CPA confirmation or another type of financial statement support.
Audit versus review
An audit provides a higher level of assurance, but it requires more procedures, time and cost. A review is more limited and may be sufficient depending on the parent company’s requirement.
Why early consultation matters
Supporting evidence, revenue recognition records, inventory data and intercompany documentation are difficult to prepare at the last minute. Clarify the requirement as soon as the request arrives.