2-2 Audit Corporations and CPAs
As of March 31, 2002, there were 13,721 CPAs, 4,301 junior CPAs and 147 Audit
Corporations in Japan. An Audit Corporation is a corporation that consists of only
CPAs who are all unlimited liability contributors and are also expected to participate in
management (Article 34-4). These CPAs are not legally regarded as partners since
Japanese law does not provide for this form of partnership common in the United States
and Europe for professional services (but “partner” is used hereafter for the readers of
this paper). An Audit Corporation is a legal entity performing an audit. The Audit
Corporation system was introduced by the CPA Law amendment of 1966 in order to take
advantage of a larger business base that would justify the establishment of large
professional firms to have organized audit services and acceptable competence of CPAs
that can be comparable to world best practices. It was hoped that Audit Corporations
would assist CPAs in better maintaining their independence and integrity as
professionals and increase the public trust in the profession.