TOSHIBA ACCOUNTING SCANDAL

The Case:-

It is 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. The inappropriate accounting techniques
employed at Toshiba varied somewhat between the different business units. Investigators
found evidence of booking future profits early, pushing back losses, pushing back charges
and other similar techniques that resulted in overstated profits. The investigative panel
concluded that Toshibas corporate culture, which demanded obedience to superiors, was an
important factor enabling the emergence of fraudulent accounting practices. The culture
operated on the level of business unit presidents and on every level of authority down the
chain to the accountants who ultimately employed the accounting techniques

Toshibas take on the Issue:-

This revelation led to the resignations of the current and preceding two chief executives,
creating the biggest crisis faced by Toshiba since its founding. Hisao Tanaka, the companys
president and chief executive, said he did not tell anyone to falsify accounts but that he
would take responsibility for the investigators findings. Soon after that Tanaka was
replaced by Toshibas chairman, Masashi Muromachi, Tanakas predecessors, Norio Sasaki,
who was vice-chairman, and Atsutoshi Nishida, who was an adviser to the company, also
resigned. Moreover, along with Tanaka and Sasaki, six other directors thought to have taken
part in improper accounting stepped down from Toshibas board of 16 directors.

Medias take on the issue:-

Media was quite active on this issue since that was the biggest accounting scandal in the
history of Japan. Media channels took a dig on this issue by cross checking the details of the
investigating committee and the companys annual reports.

Our Opinion On this case:-

We discussed the issue in our group where we found out that these business divisions were
given strict profit goals that may have led to the loss of employment in the case of failure. As
a result, Toshiba employees had to choose between lying or certain termination. It is not
wrong to be strict with employees or encourage success over failure. In this case, it is likely
Toshiba employees were forced to overstate profits in order to prolong their employment
and eliminate the risk of discipline or termination for under-performance.