TOSHIBA

ACCOUNTING
SCANDAL
Group VI
 COMPANY’S
BACKGROUND
Toshiba Corporation is a Japanese
multinational conglomerate
headquartered in Minato, Tokyo. Its
diversified products and services
include power, industrial and social
infrastructure systems, elevators and
escalators, electronic components,
semiconductors, hard disk drives,
printers, batteries, lighting, logistics,
as well as IT solutions such as
quantum cryptography
TIMELINE

Mercury is the closest planet to the Sun and the

smallest one in our Solar System—it’s only a bit
larger than our Moon. The planet’s name has nothing
to do with the liquid metal, since it was named after
the Roman messenger god
 COMPANY’S
BACKGROUND
Toshiba is responsible for a number
of Japanese’s firsts including the TAC
digital computer (1954), transistor
television, color CRTs and
microwave oven (1959), color video
phone (1971), Japanese word
processor (1978), MRI system
(1982), laptop personal computer
(1986), NAND EEPROM (1991),
DVD (1995), the Libretto sub-
notebook personal computer (1996)
and HD DVD (2005).

Toshiba is at its best until the accounting scandal was uncovered on July 2015
 THE ISSUE
PROFIT PARTNERS
Toshiba’s reported Responsible partners of
operating profit was the scandal in three
artificially inflated and groups: C-Suite (top
it was overstated by management), auditing
US$1.2 billion. parties, and auditing
system in Japanese
culture.
 THE ISSUE
 The scandal derived from a serious misconduct of the
accounting method named “Percent of Completion
(POC)” method.
PROFIT PARTNERS
Toshiba’s reported Responsible partners of
operating profit was What is POC?
the scandal in three
artificially inflated and Thegroups:
percent of (top
C-Suite completion (PoC) method which is a
it was overstated by non-cash flow accounting
management), auditing method of work-in-progress
US$1.2 billion. parties, and auditing
evaluation,system
withinthe aim of recording long-term contract, is
Japanese
mostly used in culture. managing long term projects and it
recognizes revenue and expenses as a percentage of the
project’s completion during the period.
 THE ISSUE
PROFIT PARTNERS
Toshiba’s reported Responsible partners of
operating profit was the scandal in three
artificially inflated and groups: C-Suite (top
it was overstated by management), auditing
US$1.2 billion. parties, and auditing
system in Japanese
culture.
 THE ISSUE
C – Suite
The manner of the C-Suite against middle
management andPROFIT
lower-level employees. PARTNERS
Toshiba’s reported
Auditing Parties Responsible partners of
Malpractice of operating profit was
audit parties, both external the scandal in three
artificially inflated and groups: C-Suite (top
and internal auditors.
it was overstated by management), auditing
US$1.2 billion. parties, and auditing
Auditing System in Japanese Culture system in Japanese
In Japan, 'the attitude is not to oppose the culture.
bosses’.
 NORIO

FRAUD
THREE ERAS OF
SASAKI
2009 - 2013

ATSUTOSHI HISAO
NISHIDA
2008 - 2009 TANAKA
2013 - 2015
 DISCOVERED?
HOW IT WAS
It all started with the January call from an official at
the SESC's disclosure statements inspection division.
"We have some questions about your accounting
practices concerning the infrastructure business,"
said the official. "Prepare the relevant materials.“

The watchdog's probe into Toshiba's books was

launched in response to whistleblowing.
CONSEQUENCES
• Chief executives resigned
• Lawsuits and Fines
• Removed from stock index of best
Japanese companies
• Stock price decrease
• Job cuts
• Japanese market distrust
 RESOLUTIONS
REPLACEME INDEPENDENT
NT OF TOP AUDIT
MANAGEME SECTION
NT

CORPORATE CHANGE IN
GOVERNANC COPORATE
E CULTURE
IMPROVEME
NT
 WRONG?
WHAT WENT
2008: Global Financial Crisis reduces profitability

Technique
• Unachievable goals
• Booking future profits early
• Pushing back losses and charges
• Improperly valued inventory

Profits were overstated by 151.8 billion yen ($1.2

billion)
 FRAUD TRIANGLE

• Poor internal controls • Company needs to maintain

• Corporate governance their profitability

• Corporate culture
• Leadership gave
challenges to employees
 For Independent
Provide Restructuring
Audit Firms, they
Mandatory Culture, System
should redesign
Ethical and and Top
their recruitment
Moral Training Management
policy

RECOMMENDATIONS

Creation and
Implementation Yearly Review
of an Effective and Checking of
Whistle-Blowing IC
System
THANKS
Group VI
Bonita, Bea Aiziel
Doria, Carl Joshua
Jao, Lizette Joy
Reyes, Mikka Rey
Villanueva, Rich Ann