Internal Audits/Internal Controls

Internal Audits

As a matter of basic policy, the Internal Audit Department conducts internal audits that contribute to management and the departments being audited. Internal auditors monitor the business activities of each department as a group directly reporting to the CEO that is independent from any other department.
The Internal Audit Department carries the dual responsibilities of conducting internal audits and evaluating internal controls.
During internal audits, the business activities of each department and Group company are audited. These audits are generally performed on-site every year, and the results are summarized in an internal audit report and distributed to both management and the departments under audit. In 2024, these audits were instead conducted through a combination of virtual and on-site visits at 75 offices and departments.
During evaluations of internal controls, internal controls related to financial reporting are evaluated based on the Financial Instruments and Exchange Act. With the release of internal control reports, management evaluates the effectiveness of internal controls and undergoes an audit by accounting auditors on an annual basis. In 2024, the overall internal controls were evaluated at 22 locations, and the internal controls related to business processes were evaluated at 14 locations.

Internal Controls

Basic Policy for Internal Controls

In accordance with the Companies Act and the Ordinance for Enforcement of the Companies Act, we stipulate the following in our Basic Policy for Internal Controls and maintain and operate an internal control system.

1. Controls to ensure that the execution of duties among THK Group directors and employees conform to laws and the articles of incorporation

2. Matters concerning the storage and management of information related to the execution of director duties

3. Regulations and other controls concerning the risk of loss for the THK Group

4. Controls to ensure the efficient execution of duties among THK Group directors

5. Controls to ensure the appropriateness of THK Group operations

6. Matters related to ensuring the effectiveness of structures relating to employees whose appointment was requested to assist the Audit and Supervisory Committee, the independence of those individuals from directors (excluding directors who are Audit and Supervisory Committee members), and directions issued to those individuals

7. Structure for directors, employees, or individuals receiving a notification from such persons to report to the Audit and Supervisory Committee

8. Controls for ensuring that no one receives unfavorable treatment on the basis of their having made a report to the Audit and Supervisory Committee

9. Matters relating to the policy for advance payment or reimbursement of expenses arising from the execution of duties among directors who are Audit and Supervisory Committee members and the processing of expenses or debts arising from the execution of other such duties

10. Other controls for ensuring effective auditing by the Audit and Supervisory Committee
Furthermore, the operational status of the internal control system is reported to the Board of Directors annually, and that information is included in business reports and the Annual Securities Report. The current version of the Basic Policy for Internal Controls can be viewed on the THK website.