Japan Post Group Basic Policy on Internal Auditing

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Japan Post Holdings Co., Ltd. establishes this Basic Policy for the purpose of denoting the basic viewpoints regarding internal audits conducted by each Group company based on the Japan Post Group Management Agreements (hereafter, the "Group company").

Internal auditing serves the purpose of adding value to, as well as improving upon, the Japan Post Group’s business operations by making an independent assessment based on an objective investigation and by providing advice that contributes to management.
The Internal Audit Department systematically conducts risk-based assessments of, as well as makes improvements to, the effectiveness of each process involved in risk management, control, and governance with the discipline of a professional internal auditor for the purpose of supporting the Japan Post Group in its efforts to achieve its management goals.

The Internal Audit Department follows the basic viewpoints in the "Core Principles for the Profession of Internal Auditing," "Code of Ethics," "International Standards for the Professional Practice of Internal Auditing," and "Definition of Internal Auditing," which form the required structural elements of the "International Professional Practices Framework" provided by the Institute of Internal Auditors.

The Group company’s internal auditing covers all operations (including outsourced operations) conducted and all organizations maintained by the Group company, their subsidiaries, and their indirectly owned subsidiaries within a scope that does not conflict with arrangements between companies and other such requirements, or with laws and regulations.

The Internal Audit Department maintains the responsibility for conducting the following matters.

(1)
The Department must submit an Internal Audit Plan at least once per year to the representative director as well as appropriate bodies in accordance with the Group company’s governance structure, such as the Board of Directors, Audit Committee, and Audit and Supervisory Board (hereafter, the "Board of Directors, etc."), and seek their approval, consent, or opinions.
(2)
The Department must report to the representative director and the Board of Directors, etc. regarding any major changes made midway to the Internal Audit Plan and any impacts on the Plan due to limitations on auditing resources.
(3)
The Department must document the goal and scope setting, appropriate allocation and management of auditing resources, operations programs, and audit results as part of individual internal audit duties, and convey suggestions for making appropriate conclusions from, as well as improvements to, the results thereof, and convey such to the appropriate interested parties.
(4)
The Department must follow up on matters discovered during, as well as on improvement measures taken as part of, individual internal audit duties. When effective improvement measures have not been taken, the Department must report such to the representative director and the Board of Directors, etc. on a regular basis.
(5)
The Department must pay attention to changes in the environment and new issues that may potentially affect the Group company, as well as to internal audit trends and best practices from within and outside the company. As necessary, the Department must report on such to the representative director and the Board of Directors, etc.
(6)
The Internal Auditor must fully comply with rules regarding honesty, objectivity, and confidentiality, and must, on an ongoing basis, strive to acquire and improve upon knowledge, skills, and other abilities required to fulfill its own responsibilities.
(7)
The Internal Audit Department must develop human resources in order to expand upon the knowledge, skills, and other abilities required to fulfill the Department’s responsibilities as a whole, and must, in an ongoing manner, strive to improve upon the quality of internal audit duties.
(8)
The Internal Auditor must possess a level of professional skepticism and, as professionals, pay proper attention to the target, scope, methods, resource allocation (cost-effectiveness), and other aspects of audits for the purpose of achieving the goals of internal audit duties.

The Internal Audit Department possesses the authority to fully access all departments, committees, assets, and individuals in regard to the execution of internal auditing duties in a free, unfettered manner. It also possesses the authority to request the submission of, as well as explanations regarding, materials and records. However, the Internal Audit Department is aware that requesting such coincides with accountability regarding confidentiality and the integrity of information.

(1)
The Internal Audit Department must be ensured to have organizational independence, and the Internal Auditor must ensure objectivity when executing internal audit duties.
(2)
Organizational independence is effectively secured by having the director in charge of the Internal Audit Department report directly to, as well as communicate directly with, the representative director and the Board of Directors, etc.
(3)
The Internal Audit Department must not be subject to any manner of limitation or pressure when fulfilling its responsibilities for internal audits, including, but not limited to, decisions on the scope of internal audits, execution of duties, and results reporting.
(4)
The Internal Auditor must maintain a fair and unbiased attitude, and must avoid any situations in which interests as a professional and interests as an individual conflict in a way that causes difficulties in carrying out duties in a fair manner.

(1)
The director in charge of the Internal Audit Department must construct a process designed to assess and improve upon the quality of internal audits in order to reliably achieve the goals of internal audits, and to ensure that the internal audit duties have earned the trust of related parties, including the Board of Directors, etc. and the audited departments.
(2)
Internal audit quality assessments are made through internal and external evaluations.
Internal evaluations are made through ongoing monitoring incorporated into the practices of the regular work of the Internal Audit Department and through regular self-assessments.
External evaluations are conducted at least once every five years by an eligible independent evaluator that is not an employee of the Group company.

The Audit Committee and the Audit and Supervisory Board of the Group company conduct the following matters to ensure that the Internal Audit Department can fulfill its duties in an appropriate manner.

(1)The Audit Committee conducts the following matters.

・
Receiving reports from the Internal Audit Department on the status of the execution of duties and responsibilities, as well as the content and implementation of measures to continuously upgrade and strengthen internal auditing, including auditing techniques and human resource development; and reviewing and evaluating the development and operation of the internal audit function
・
Receiving reports on important matters related to internal audits such as the situation of execution of internal audit, its results, and communication with executive bodies; discussing these matters; and as necessary, requesting investigation or giving instructions
・
Receiving explanations on Internal Audit Plans, risk assessment which serves as the basis of the Plans, important audit items, and staffing plans; discussing these matters; and giving consent to the final Internal Audit Plans
・
Giving consent to important personnel plans of the Internal Audit Department

(2)The Audit and Supervisory Board conducts the following matters.

・
Receiving reports from the Internal Audit Department on the status of the execution of duties and responsibilities, as well as the content and implementation of measures to continuously upgrade and strengthen internal auditing, including auditing techniques and human resource development; and reviewing and evaluating the development and operation of the internal audit function
・
Receiving reports on important matters related to internal audits such as the situation of execution of internal audit, its results, and communication with executive bodies; and giving opinions as necessary
・
Receiving explanations on Internal Audit Plans, risk assessment which serves as the basis of the Plans, important audit items, and staffing plans; and giving opinions as necessary
・
Receiving explanations on important personnel plans of the Internal Audit Department and giving opinions as necessary