Integrated Report 2020

102/112

Basic Framework of Internal Control over Financial ReportingMakoto Hattori, Representative Director, President, CEO and COO of LINTEC Corporation, and Yoichi Shibano, Executive Officer and Chief Financial Officer of LINTEC Corporation, are responsible for designing and operating adequate internal control over financial reporting for the consolidated financial statements of LINTEC Corporation (the “Company”) and its consolidated subsidiaries in accordance with the basic framework set forth in the “Standards and Practice Standards for Management Assessment and Audit concerning Internal Control Over Financial Reporting” issued by the Business Accounting Council.Internal control achieves its objectives to a reasonable extent given that all individual components of internal control are integrated and function as a whole. Internal control over financial reporting for the consolidated financial statements may not completely prevent or detect misstatements in financial reporting.Scope of Assessment, Assessment Date and Assessment ProceduresWe assessed the effectiveness of internal control over financial reporting for the consolidated financial statements as of March 31, 2020 in accordance with the standards for assessment of internal control over financial reporting generally accepted in Japan. For this assessment, we first evaluated the company-level controls which would have a material impact on the reliability of overall financial reporting on a consolidated basis. We then selected the process-level controls to be assessed based on the results of the company-level control assessment. For the process-level control assessment, we evaluated the effectiveness of internal control by analyzing processes in scope, identifying key controls that would have a material impact on the reliability of the financial reporting, and assessing the design and operation of such key controls.We determined the scope of assessment by selecting consolidated subsidiaries based on their materiality of impact on the reliability of financial reporting. We determined their materiality of impact by considering both quantitative and qualitative aspects. The scope of our process-level control assessment was determined based on the results of our assessment of company-level controls, which included the Company and its 21 consolidated subsidiaries. We excluded 20 consolidated subsidiaries from the scope of the company-level control assessment since their quantitative and qualitative impacts were deemed insignificant.For the purpose of determining the scope of process-level controls assessment, we selected two business locations as “Significant Business Locations,” which contributed approximately two thirds of the Company’s net sales on a consolidated basis for the fiscal year ended March 31, 2019. For the Significant Business Locations, we primarily included business processes related to sales, accounts receivable, and inventory in the scope of assessment as the aforementioned accounts were closely associated with the Company’s business objectives. In addition, we included certain business processes in the scope of assessment not only from “Significant Business Locations” but also from all subsidiaries and affiliates, which were related to significant accounts involving estimates and management’s judgment or include high-risk operations and/or transactions, as “business processes with a material impact on financial reporting.”Assessment ResultBased on the results of our assessment with the above-mentioned scope, date and procedures, we concluded that Company’s internal control over financial reporting for the accompanying consolidated financial statements as of March 31, 2020 was effective.LINTEC Integrated Report 2020Financial Information100Management’s Report on Internal Control over Financial Reporting