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Toshiba Accounting Scandal Analysis 2015

The document summarizes the 2015 Toshiba accounting scandal. It describes how Toshiba inflated profits by 30% from 2008-2014 through inappropriate accounting techniques. An investigation revealed fraud spanning three CEO eras. This led to stock price declines, fines, job cuts, and resignations. Toshiba has since implemented new internal controls and budgetary processes to improve governance and prevent future fraud.

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32 views12 pages

Toshiba Accounting Scandal Analysis 2015

The document summarizes the 2015 Toshiba accounting scandal. It describes how Toshiba inflated profits by 30% from 2008-2014 through inappropriate accounting techniques. An investigation revealed fraud spanning three CEO eras. This led to stock price declines, fines, job cuts, and resignations. Toshiba has since implemented new internal controls and budgetary processes to improve governance and prevent future fraud.

Uploaded by

Suvam
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

PROJECT ON AUDITING…

A STUDY OF THE TOSHIBA ACCOUNTING


SCANDAL, 2015
CONTENTS

 Company Background
 What Went Wrong?
 The Fraud
 The Revelation of Fraud
 Three Eras of Fraud
 Audit Failures
 Aftermath
 Conclusion
Company Background

 Japanese Company traced back to 1875

 Manufacture and sale electronics and energy products

 Number of Employees as of March 31, 2018 : 141,256

 Number of Shareholders as of March 31, 2018 : 300,871

 Net Sales: ¥3,947.6 billion (FY2017)


What Went Wrong?

 The Global financial crisis; 2008 reduced the profitability of Toshiba.

 Techniques

 Booking future profits early

 Pushing back losses.

 Pushing back charges.


The Fraud

 The accounting techniques adopted, were inappropriate and varied in


different units of the business
 Toshiba inflated its pre-tax income by approximately 30% from the
period of 2008 to 2014
 The infrastructure division also purposefully understated costs of
construction of projects
 Internal control system was not functional and the corporate
governance was weak
 By 2014, Toshiba had exaggerated profits of almost 1.2 billion dollars
The Revelation of Fraud

 On February 12, 2015, the Securities and Exchange Surveillance


Commission in Japan issued an order to Toshiba to report
 Toshiba set up an internal special investigation committee in April,
2015
 The investigation was followed by Independent Investigation
Committee in May, 2015
 The committee compiled a nearly 300-page report and submitted it to
Toshiba on July 20, 2015
Three Eras of Fraud

Atsutoshi Nishida Norio sasaki Hisao tanaka


CEO 2005-2009 CEO 2009-2013 CEO 2013-2015
Audit Failures

 Auditors were negligent towards their duties

 Independent investigating committee discovered that the internal audit

committee was not knowledgeable enough in finance or Accounting

 Did not had a whistle blower policy and the corporate culture kept the

employees quiet
Aftermath

 The stock prices decreased by 40%

 Toshiba’ shareholders sue the company 2.45 bn dollars

 The TSE also fined Toshiba ¥91.2 million

 Cut 7,800 jobs

 The former three CEOs along with other board members resigned
Aftermath (Cont.)

 Actions against the auditors


 suspension of taking new business contracts for three months
 the imposition of a fine in the amount of ¥2.1 billion or about US$17.4
million
 chief executive of Ernst & Young ShinNihon , Koichi Hanabusa
resigned
 Toshiba terminated its audit contract and entered into a new contract
with PricewaterhouseCoopers
Aftermath (Cont.)

 Company Resolutions
 Improvement in Internal controls
 Budgetary control implementation
 Employee Training
 New Internal Audit Division and Audit Committee
Conclusion

 Frauds can happen for a long time without getting caught

 Often many people are involved in large-scale fraud

 A company keeps better business by keeping integrity

 Shareholders take a lot of the damage

 Don’t be fraudulent!!

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