Week 7 –Toshiba Fraud Case

The accounting fraud at Toshiba was the overpriced profit in the period of 2008 to 2015 of
JPY 152 billion, that included the previous 3 CEOs. It can be explained by using the fraud
triangle as below.

Motive/Pressure
 The financial crisis in 2008 cut Toshiba’s revenue drastically and forced top
management in taking proactive action
 The fear of Toshiba’s investors and creditors might get concerned about the stock
prices after seeing the financial crisis
 Top managers set insufficient expectations for benefit and insist that the projects
follow
 Projects groups focused on current period of targets and profits rather than long-term
expenses and profits
 Top management refused to recognize or accept the losses that the company is facing

The opportunities
 Choices of accounting method- The revenues and expenses are centered on the
achievement improvement in the accounting period by using ratio of the achievement
model, which ensures that revenue and expense are calculated. This calculation can
easily be manipulated by project leaders and cannot be developed in the short term, as
most of these projects are long-term projects.
 Insufficient internal control: workers in Toshiba did not even disobey superior orders.
Therefore, there will be little hints or leaks about frauds that happen inside.  And
auditors did not receive sufficient information to detect frauds in the organization.

Rationalizations
 As leaders they felt that what they're doing is in the best interests to help Toshiba to
fight various capital market rivals and to satisfy the stakeholders.
 Project groups believed that achieving the goals set by top management was a model
of commitment and ability and may also assume that perhaps the best interest of the
entire organization is to do certain manipulations.
 Toshiba did nothing on papers in practice of deferring costs identification, by
assuming that it was supplier’s responsibility on the financial fraud. so, they just
followed the normal documentation procedure.

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