CaseStudy of Toshiba Accounting ScandalToshiba’s origin begins with one of its forerunners,Tanaka Engineering Works. This factory was built in Japan during1875 by Japan’sMinistry of Engineering. The Ministry of engineering is responsible for Japansmodernization and technological advancements. Their main focused at the timewas to advance in telegraphic equipment, these are tools used to communicate andtransmit messages from point A to B. For example: in the late 1890s the factorydeveloped a waterwheel-powered turbine generator as well as a radiotransmitter.
Their greatest invention being the double-coil electric bulbbecame one of the top six inventions in the history of bulb tech. This companywithheld a lot of sacrifice and disasters such as earthquakes and the WorldWar. Both of their interfered in both production and development because of itswasteful delay. Majority of supplies used for production needed to besurrendered to the armed forces fighting the war. After years of recovery, thecompany got back to its feet stronger than ever and was ready to boom alongsideJapan’s economy.
Eventually the company renameditself to Toshiba in 1984 and focused its production on gadgets and PCs as wellas home appliances such as televisions and audio (Toshiba). Toshiba’s 2010 financial statement overviews theirinvolvement and development due to the emerging of Japans economic recovery.The circumstances where getting much brighter but Toshiba was not too sureabout their economic outlook during the economic rise. Toshiba wanted toincrease production and gain some investment confidence, but an obstacle wasmet that created a lot of commotion with Toshiba’s productive reasoning. Thepublic was not confident enough to invest on not only Toshiba, but majority ofJapanese public industries. Without public recognition and involvement, Toshibawas very hesitant to pursue new projects, however, this didn’t stop them fromtrying. In 2010 Toshiba’s Net Sales were just about 6.
3 billion yen. Their costof sales where 4.9 billion leaving their operation income at about 1.3 billionyen. Toshiba includes many different sources of income investments. Their homeappliances sales decreased by 90.7 billion yen.
With the development oftechnology, home appliances are now being adopted into the “smart” category. Smarttechnology does more than its primary function. This technology is innovative,but it also serves a big role on the structural crumble of fundamental techcompanies such as Toshiba. Since 2010 until the financial scandal Toshiba saw alot of loss and decreasing in numbers, involving production and sales. Thiscircumstance can frustrate a business such as Toshiba. Toshiba couldn’t stopfalling from the prestigious position it once stood on involving bothinnovation and creativity.
Ending March 31, 2015, universal tax season, Toshiba’sremaining sales were greater than $63 billion. Meanwhile, they were employingabout 200,000 people worldwide (Carpenter, 2015). Following this major event,Toshiba came forth with experiencing accounting issues.
Because of this, theirshares began to plummet. Although, it wasn’t fully uncovered how so until thebeginning of September 2015 (Addady, 2015). Having such a great downfall in thecompany, CEO Hisao Tanaka decided to resign in July of that year. Consideringthis, Tanaka had resigned not only because of the financial structure ofToshiba, but the various confirmed accusations of him being the perpetrator ofa $1.2 billion overstatements of revenues.
The company, overall, has overstatedprofits for the past seven years, up to $2 billion (Carpenter, 2015). The first thing that Toshiba did was try and changemanagement. Starting from the common root of the problem, was the easy go to inthis sense.
Let us back track to when it began and under who. Atsutoshi Nishida, born December 29, 1943 in MiePrefecture. He was first hired by Toshiba in 1975 and named President of ToshibaAmerica Information Systems in April 1992 and of the company in 2005(Wikipedia, 2017). With theextraordinary route of success and proclaimed as a scary man, he managed tocommit a fraud that would be remembered for a while. But, Atsutoshi Nishida wasnot alone, he was accompanied by men named Norio Sasaki and Hisao Tanaka.
NorioSasaki, born May 24, 1958 in Yamagata Prefecture, Japan. He joined Toshiba in1972 and served as the Chief Executive Officer starting 2009 (Bloomberg, 2018).Hisao Tanaka, born December 20, 1950. Toshiba demanded that these men wereobeyed, as they were the superiors in this corporate culture. This trickleddown through the chain of management, to the team of accounting, who wouldeventually perform the improper accounting techniques (Carpenter, 2015).
Here comes the first scandal, under Atsutoshi Nishida,in 2008 (Carpenter, 2015). Atsutoshi Nishida, Norio Sasaki, and Hisao Tanakastepped down from their positions in 2015. Tanaka resigned after spending 6years as their President of Toshiba. Failure is considered unacceptable in theJapanese business culture; so, when the business unit presidents working withthe challenges that were handed down from corporate each quarter-end burden,were forced to use unbalanced accounting methods.
The investigation, alsouncovered Toshiba having a weak corporate supremacy and insufficient internalcontrols at each division; for example, finance, corporate auditing and riskmanagement (Carpenter, 2015). Red FlagsFinancial Explanations Extortion including benefitexaggeration at Toshiba was found in a report released by an investigativeboard in July 2015. Concurring to the examination report, although theextortion did not include the company CEOs instructing their subordinates tomodify their bookkeeping records, they put much weight on workers to meet hightargets, which they could barely finish without understating their costs andcosts. The autonomous review group found inappropriate activities (red flags)in the company’s accounting practices, which signaled potential extortion inthe accounting records. The red flags included pushing back benefits and charges,booking future profits prior and changing liabilities and incomes side by side.SolutionSuggestions to avoid this sort of fraud orreoccurrence are corporate culture reconstruction, disposed of challengeframework of profit targeting, and reestablish inner controls and uphold a moregrounded corporate administration, advance and progress a whistleblowerframework in which employees can utilize without fear of losing theiroccupations (Carpenter, 2015).
Personally, I would have guaranteed that I aminformed about AICPA accounting measures and familiar with the company’saccounting exercises. This will guarantee that I learn and altogether surveyany changes in accounting exercises as they rise. ReferencesAddady,M. (2015, September 08). Toshiba’s accounting scandal is much worse than wethought. Retrieve January 20, 2018, from Atsutoshi Nishida. (2018, January 07).
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