Nidec Announces Material Weakness About Nidec’s Internal Control Over Its Financial Reporting
May 24 2024 - 4:00AM
Business Wire
Nidec Corporation (TOKYO: 6594; OTC US: NJDCY) (the “Company”)
announces today that it has identified a material weakness in its
internal control report for the fiscal year ended March 31, 2023
audited by our auditor that the Company submitted to the Kanto
Local Finance Bureau in accordance with Article 24-4-4(1) of the
Financial Instruments and Exchange Act. Accordingly, pursuant to
Article 24-4-5(1) of the Act, the Company stated, in the amendment
report for its internal control report for the same fiscal term
that it submitted to the Kanto Local Finance Bureau, that the
Company’s internal control over financial reporting is not
effective, as described below.
1.
Details of the material weakness
It became clear that, at Nidec Drive
Technology, a consolidated subsidiary of the Company, the wrong
data was identified for part of the adjustment, such as sales
accompanied by transactions between consolidated subsidiaries of
the Company’s business group in its consolidated account closing
procedure, resulting in sales recorded in an inflated manner. As it
became necessary to cancel the sales amount recorded in an inflated
manner, the Company came to the conclusion that it should correct
the financial results of the fiscal year ended March 31, 2023. The
Company’s rules on internal control over its account closing and
financial reporting processes are that journals prepared by their
issuers must be approved by someone with approval authority.
Nonetheless, this error occurred because of insufficient
communications among concerned organizations, which led to an
insufficient understanding of the proper and comprehensive
information that is necessary when identifying cases that require
adjustments, and also to an insufficient system to monitor book
closing. As a result, the Company was unable to discover this
material misrepresentation. This is how the Company decided that
this error is a material weakness in the internal control over its
account closing and financial reporting processes.
2.
Reasons as to why corrections could not be
made by the end of the consolidated fiscal year
Corrections could not be made by the end
of the consolidated fiscal year because the aforementioned fact
became evident after the final day of the consolidated fiscal year
ended March 31, 2023.
3.
Correction policy for the material
weakness
The Company sufficiently understands the
importance of internal control over financial reporting. Therefore,
to correct the material weakness, the Nidec Group will promptly
design and implement recurrence prevention measures such as a
multiple viewpoints-based verification of the book-closing process
and having the person with approval authority introduce a stricter
approval procedure, to secure the reliability of its financial
reporting. Specifically, the Company will:
(1)
Thoroughly review consolidated closing
entries included in documents disclosed in past fiscal years and in
corrected consolidated financial statements, to identify other
related issues, and to better process and present accounts;
(2)
Update the Company’s policy on its
consolidated account closing procedure, enhance the system to
understand the proper and comprehensive information when
identifying adjustment-requiring cases that are related to
transactions between consolidated subsidiaries, and hold lectures
focused on the verification of consolidated book closing and on the
approval process by those with approval authority; and
(3)
Enhance the comprehensive monitoring
function of the Company’s and its subsidiaries’ accounting and
financial managers over the consolidated account closing procedure,
and enhance the reviewing and approval procedures on the
coordination of transactions between consolidated subsidiaries in
account closing and financial reporting processes.
4.
Impact of the material weakness on the
Company’s consolidated financial statements
All the necessary corrections attributed
to the aforementioned material weakness are reflected in the
Company’s consolidated financial statements.
5.
Audit opinions in the consolidated
financial statements’ audit report
They are unqualified opinions.
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version on businesswire.com: https://www.businesswire.com/news/home/20240524599508/en/
Teruaki Urago General Manager Investor Relations +81-75-935-6140
ir@nidec.com