Fraudulent conduct by a former employee
VALQUA,LTD. (filing company)
The Company’s Finance and Accounting Department
The Company recognizes that the primary cause was inadequate visibility into certain financial and accounting functions, which had become concentrated in the same individual over an extended period.
Approximately ¥224 million (amount embezzled). The impact on prior-period consolidated financial statements is limited, and the Company does not plan to restate prior-period financial results.
Prior-period consolidated financial statements (the specific accounting period is not disclosed)
There will be no change to the earnings forecast for the fiscal year ending March 2026 that the Company announced on 4 February 2026.
Company response
Immediately after the above facts came to light, the Company established an investigation team that included outside professionals such as attorneys, certified public accountants and certified fraud examiners. The team conducted an internal investigation, interviews with relevant parties, a digital forensic investigation, analysis of accounting data and various supporting documents, and an investigation into similar incidents at consolidated subsidiaries.
(1) Strengthening controls over financial and accounting operations through the use of digital infrastructure, among other measures: By further expanding the use of the digital infrastructure currently being developed for financial and accounting operations, the Company will further enhance the visualization and standardization of the overall closing and financial reporting processes. It will also strengthen controls over financial and accounting operations by eliminating the concentration of duties through clearer segregation of duties and authority relating to payments and accounting procedures, rotation of responsibilities and other measures. (2) Enhancing the effectiveness of internal audits: To further improve the effectiveness of audits conducted by the Internal Audit Department, the Company will designate the financial and accounting areas related to this fraudulent conduct as a priority audit area and conduct risk-based audits. The Company will also verify the design and operating status of controls over financial and accounting operations while receiving advice from outside professionals, and will continue to make improvements. (3) Strengthening the management framework across the Group: The Company will also inspect financial and accounting operations at its domestic and overseas group companies, further clarify common Group rules and management standards, and establish a framework for continuously confirming the status of control development and operation at group companies to prevent similar incidents from occurring. (4) Conducting training and strengthening human resources development: The Company will conduct group-work-based training and other programs for departments responsible for financial and accounting operations. Going forward, it will also promote the development of personnel capable of improving their sensitivity to fraud risks and responding to risks proactively and swiftly, thereby thoroughly preventing similar fraudulent conduct from recurring.
Related procedures
Pursuit of civil and criminal liability against the former employee (the specific stage of any lawsuit, investigation or other proceedings is not disclosed)
The Company will implement the measures to prevent recurrence and continuously verify and improve their operation. It will also pursue civil and criminal liability against the former employee. The Company expects to announce its financial results for the fiscal year ending March 2026 as scheduled on 15 May 2026.
| Item | Details |
|---|---|
| Event name | Fraudulent conduct by a former employee |
| Date of occurrence | End of February 2026 (date of discovery; the embezzlement occurred over more than 10 years) |
| Date recognized / date notice received | End of February 2026 (the matter came to light following a report by the former employee’s supervisor) |
| Subject Entity | VALQUA,LTD. (filing company) |
| Target Locations / Products | The Company’s Finance and Accounting Department |
| Cause | The Company recognizes that the primary cause was inadequate visibility into certain financial and accounting functions, which had become concentrated in the same individual over an extended period. |
| Amount of Impact on Business Performance | Approximately ¥224 million (amount embezzled). The impact on prior-period consolidated financial statements is limited, and the Company does not plan to restate prior-period financial results. |
| Accounting period in which recognized | Prior-period consolidated financial statements (the specific accounting period is not disclosed) |
| Impact on Earnings Forecast | There will be no change to the earnings forecast for the fiscal year ending March 2026 that the Company announced on 4 February 2026. |
| Type of litigation or proceeding | Pursuit of civil and criminal liability against the former employee (the specific stage of any lawsuit, investigation or other proceedings is not disclosed) |
| Investigation structure | Immediately after the above facts came to light, the Company established an investigation team that included outside professionals such as attorneys, certified public accountants and certified fraud examiners. The team conducted an internal investigation, interviews with relevant parties, a digital forensic investigation, analysis of accounting data and various supporting documents, and an investigation into similar incidents at consolidated subsidiaries. |
| Measures to prevent recurrence | (1) Strengthening controls over financial and accounting operations through the use of digital infrastructure, among other measures: By further expanding the use of the digital infrastructure currently being developed for financial and accounting operations, the Company will further enhance the visualization and standardization of the overall closing and financial reporting processes. It will also strengthen controls over financial and accounting operations by eliminating the concentration of duties through clearer segregation of duties and authority relating to payments and accounting procedures, rotation of responsibilities and other measures. (2) Enhancing the effectiveness of internal audits: To further improve the effectiveness of audits conducted by the Internal Audit Department, the Company will designate the financial and accounting areas related to this fraudulent conduct as a priority audit area and conduct risk-based audits. The Company will also verify the design and operating status of controls over financial and accounting operations while receiving advice from outside professionals, and will continue to make improvements. (3) Strengthening the management framework across the Group: The Company will also inspect financial and accounting operations at its domestic and overseas group companies, further clarify common Group rules and management standards, and establish a framework for continuously confirming the status of control development and operation at group companies to prevent similar incidents from occurring. (4) Conducting training and strengthening human resources development: The Company will conduct group-work-based training and other programs for departments responsible for financial and accounting operations. Going forward, it will also promote the development of personnel capable of improving their sensitivity to fraud risks and responding to risks proactively and swiftly, thereby thoroughly preventing similar fraudulent conduct from recurring. |
| Outlook | The Company will implement the measures to prevent recurrence and continuously verify and improve their operation. It will also pursue civil and criminal liability against the former employee. The Company expects to announce its financial results for the fiscal year ending March 2026 as scheduled on 15 May 2026. |
| Planned follow-up disclosure | The Company expects to announce its financial results for the fiscal year ending March 2026 as scheduled on 15 May 2026. |
Items this document does not state (11)
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 Company recognizes that the primary cause was inadequate visibility into certain financial and accounting functions, which had become concentrated in the same individual over an extended period.