A statutory auditor or kansayaku is an official found in Japanese kabushiki kaisha (business corporations). Statutory auditors are elected by shareholders and hold a position in the hierarchy alongside the board of directors.
A K.K. must have at least one statutory auditor, unless the transfer of shares is restricted in the articles of incorporation. If the company is classified as a "large" company (i.e. with more than ¥500 million in paid-in capital or ¥20 billion in liabilities), it must have three statutory auditors (at least half of whom are from outside the company), or an audit, compensation and nominating committee system similar to that used by public companies in the US.
Statutory auditors have several functions:
- They initiate derivative suits against the board of directors on behalf of the shareholders, and represent the company in those suits. Until a few years ago, this right was reserved for the auditor; however, thanks to precedent from a recent lawsuit against Daiwa Bank, groups of shareholders can now file suits themselves without going through the auditor.
- In "mid-size" and "large" companies (i.e. with more than ¥100 million of paid-in capital), they have the right to attend board meetings to keep tabs on what the directors are doing.
- In "mid-size" companies, they audit the financial reports submitted by the company.
- In "large" companies, they oversee auditing performed by outside accountants.
The position is rather prestigious. Statutory auditors are often selected from among the senior management of the company, or are former directors of related companies (such as suppliers or keiretsu partners).