Material weaknesses requiring disclosure in internal control over financial reporting
baby calendar Inc.
Advertising revenue receipts, including YouTube and Google AdSense, and petty cash management
The concentration of authority and information with the former director and CFO; deficiencies in the review procedures for advertising revenue receipts and petty cash management; insufficient checks and balances provided by the accounting department, internal audit department and risk management framework; inadequate coordination among the three types of audits; the failure to identify deficiencies in the process for establishing and operating internal controls; and insufficient selection and operation of the scope for evaluating controls over exceptional transactions and transactions in new business areas, as well as for detecting deficiencies in the sales process.
Company response
Established on 13 February 2026. A Special Investigation Committee comprising external attorneys and certified public accountants (chairperson: Not disclosed)
① Emergency measures directly related to the misconduct: strengthening approval and verification procedures for changes to the bank accounts receiving advertising revenue and related matters; reconciling the revenue amounts on external platforms, accounts receivable recorded in the accounting system and bank deposit statements; and reviewing the rules for petty cash management and receipts and disbursements. ② Strengthening management accountability and the risk management framework: reviewing the systems for appropriately consolidating and reporting information to the Board of Directors; strengthening the functions of the Risk and Compliance Committee; and strengthening checks and balances by reviewing the segregation of duties and authority. ③ Strengthening accounting and financial reporting processes: strengthening staffing and management systems in the accounting department; strengthening checks relating to monthly closing and receipt management; and establishing verification procedures for exceptional transactions and transactions in new business areas. ④ Strengthening authority management and IT controls: reviewing authority management for critical systems and external platforms; conducting an inventory and monitoring of administrator privileges and authority to change receiving bank accounts; and clarifying approval procedures for granting, changing and deleting access rights. ⑤ Improving the effectiveness of internal audits, audit and supervisory board audits, and the three-way audit: strengthening the audit framework led by the Internal Audit Office; strengthening coordination among the audit and supervisory board members, accounting auditor and internal audit department; and improving the provision of information to the Board of Directors and Audit and Supervisory Board. ⑥ Fostering compliance awareness and strengthening the operation of the internal whistleblowing system: continuing compliance training for officers and employees; raising awareness of the internal whistleblowing system and improving the effectiveness of reporting channels; and establishing a framework that makes it easier to consult and report when inappropriate conduct is identified.
The embezzlement of sales proceeds and cash by the former director and CFO was confirmed. The specific details of any reduction in executive compensation, resignation or other disciplinary action are Not disclosed
Fiscal year ended December 2024 (reflected in the amended financial statements, interim financial statements and quarterly financial statements)
The company will steadily implement the announced measures to prevent recurrence and the internal control improvement plan, and will continue to establish and operate its internal controls. It will continue to implement these measures and continuously verify the effectiveness of its internal controls. The overall remediation process had not been completed as of the submission date of this document, and the company will work toward completing the remediation promptly.
| Item | Details |
|---|---|
| Event name | Material weaknesses requiring disclosure in internal control over financial reporting |
| Date of occurrence | 31 December 2024 (material weaknesses requiring disclosure existed in internal control over financial reporting as of that date) |
| Date recognized / date notice received | 31 March 2026 (the investigation report was received from the Special Investigation Committee) |
| Subject Entity | baby calendar Inc. |
| Target Locations / Products | Advertising revenue receipts, including YouTube and Google AdSense, and petty cash management |
| Cause | The concentration of authority and information with the former director and CFO; deficiencies in the review procedures for advertising revenue receipts and petty cash management; insufficient checks and balances provided by the accounting department, internal audit department and risk management framework; inadequate coordination among the three types of audits; the failure to identify deficiencies in the process for establishing and operating internal controls; and insufficient selection and operation of the scope for evaluating controls over exceptional transactions and transactions in new business areas, as well as for detecting deficiencies in the sales process. |
| Accounting period in which recognized | Fiscal year ended December 2024 (reflected in the amended financial statements, interim financial statements and quarterly financial statements) |
| Investigation structure | Established on 13 February 2026. A Special Investigation Committee comprising external attorneys and certified public accountants (chairperson: Not disclosed) |
| Measures to prevent recurrence | ① Emergency measures directly related to the misconduct: strengthening approval and verification procedures for changes to the bank accounts receiving advertising revenue and related matters; reconciling the revenue amounts on external platforms, accounts receivable recorded in the accounting system and bank deposit statements; and reviewing the rules for petty cash management and receipts and disbursements. ② Strengthening management accountability and the risk management framework: reviewing the systems for appropriately consolidating and reporting information to the Board of Directors; strengthening the functions of the Risk and Compliance Committee; and strengthening checks and balances by reviewing the segregation of duties and authority. ③ Strengthening accounting and financial reporting processes: strengthening staffing and management systems in the accounting department; strengthening checks relating to monthly closing and receipt management; and establishing verification procedures for exceptional transactions and transactions in new business areas. ④ Strengthening authority management and IT controls: reviewing authority management for critical systems and external platforms; conducting an inventory and monitoring of administrator privileges and authority to change receiving bank accounts; and clarifying approval procedures for granting, changing and deleting access rights. ⑤ Improving the effectiveness of internal audits, audit and supervisory board audits, and the three-way audit: strengthening the audit framework led by the Internal Audit Office; strengthening coordination among the audit and supervisory board members, accounting auditor and internal audit department; and improving the provision of information to the Board of Directors and Audit and Supervisory Board. ⑥ Fostering compliance awareness and strengthening the operation of the internal whistleblowing system: continuing compliance training for officers and employees; raising awareness of the internal whistleblowing system and improving the effectiveness of reporting channels; and establishing a framework that makes it easier to consult and report when inappropriate conduct is identified. |
| Directors' and officers' liability | The embezzlement of sales proceeds and cash by the former director and CFO was confirmed. The specific details of any reduction in executive compensation, resignation or other disciplinary action are Not disclosed |
| Outlook | The company will steadily implement the announced measures to prevent recurrence and the internal control improvement plan, and will continue to establish and operate its internal controls. It will continue to implement these measures and continuously verify the effectiveness of its internal controls. The overall remediation process had not been completed as of the submission date of this document, and the company will work toward completing the remediation promptly. |
Items this document does not state (14)
These are items the company does not state in this document. We do not leave them blank, nor fill them in from other sources or by inference.
The reasons the company gives
The company's own explanation, not something inferred from the numbers.The concentration of authority and information with the former director and CFO, deficiencies in the review procedures for advertising revenue receipts and petty cash management, insufficient checks and balances provided by the accounting department, internal audit department and risk management framework, inadequate coordination among the three types of audits, and deficiencies in the selection and operation of the scope for evaluating internal controls, among other factors.