Toshiba huge accounting scandal

Inflated profits by $1.2 billion & fraud scheme.

Toshiba Corp, its chief executive and president Hisao Tanaka will step down after an independent investigation found he had been aware the company had been inflating its profits over a number of years.

In one of the biggest ever accounting scandals in Japanese corporate history, the investigators' report said the consumer electronics and engineering giant had overstated operating profits by a total of 151.8 billion yen ($1.22 billion) since 2008, claiming numbers that were up to three times the actual level.

“Toshiba had a corporate culture in which management decisions could not be challenged,” according to a summary of the investigator’s report. “Employees were pressured into inappropriate accounting by postponing loss reports or moving certain costs into later years.”

It's the second big scandal of its kind in less than four years. In late 2011, executives at camera maker Olympus were accused of orchestrating a $1.7 billion accounting fraud scheme.

In my opinion, although the report point to the systematic problem that reached the upper echelons of Toshiba and the top executives pushed subordinates to meet unachievable financial targets, it also cannot overstatement of the profits and delay in reporting losses in a corporate culture that ‘avoided going against superiors’ wished”. Besides that, because of this case had a blow to the country’s efforts to regain the confidence of global investors. In additional, they had took the responsibility, Tanaka will be replaced by Masashi Muromachi, the group's chairman, according to a company statement. His predecessors, vice-chairman Norio Sasaki and adviser Atsutoshi Nishida, will also step down after being implicated in the report. Toshiba will also appoint a slew of independent directors to its board to strengthen external oversight of its management, but if Japan fails to implement appropriation corporate governance, it could lose the market’s trust. Furthermore, fraud can result in huge financial loss, legal costs, and ruined reputations that can ultimately lead to the downfall of an organization, so it can set a new policy and increase the penalties and punishment to enforcing this type of case happening.

References link below:

http://www.reuters.com/article/us-toshiba-accounting-idUSKCN0PU0E920150720

https://www.nytimes.com/2015/07/21/business/international/internal-panel-says-toshiba-inflated-earnings-by-1-2-billion.html?_r=1