Toshiba: Account Scandal


Added on  2019-09-26

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TOSHIBA: ACCOUNTING SCANDAL.MAIN FACTS ABOUT THE CASE:Toshiba Corporation regards its legacy in Japan, and is a multinational conglomerate, withheadquarters in Tokyo, Japan and employees over 200000 employees all over the globe.The Corporation gained its market share with innovative and pioneering catalog of projects in thelate 1950’s and announced itself as the upcoming technological superpower of the world.The conglomerate operates business over a diversified product range and reported net worldwidesales of more than $63 billion for the fiscal year ending March 31, 2015. On July 21, 2015, Toshiba CEO Hisao Tanaka and seven other directors were forced to resign,when an investigation revealed that the firm had doctored the books and inflated, superseded itsoperating profits over the past seven years.The Securities and Exchange Surveillance Commission under the financial watchdog wereintuitive of financial and counting irregularities, and subsequently launched a probe into thecorporation in February.The gravity of the situation caught hold of the Toshiba Corporation and were required to set-upan in –house investigative committee in April, when the conglomerate publically announced itsaccounting troubles.The anomalies seemingly deeper than the firm incapacitated and believed and thus handed theinvestigation over to an independent outside committee in May and postponed reporting its fiscal2014 earnings. The four member committee compiled a voluminous report showcasing Toshiba’s accountingpractices from fiscal 2009 to 2014 and found a series of incongruous accounting entries thatshowed a staggering $1.2 billion net profit.The accounting misconduct began under CEO Atsutoshi Nishida in 2008 amid a global financialcrisis that cut deeply into Toshiba’s profitability. It continued unabated under the next CEO,Norio Saskai and eventually ended in scandal under Tanaka.Investigators found evidence of booking future profits early, pushing back losses, pushing backcharges and other similar techniques.Investigator’s describe that Toshiba’s corporate leadership handed down strict profit targets tobusiness units, with implication that failure wouldn’t be accepted, thus is numerous occasions theonly way to achieve the said targets was through the use of irregular accounting techniques.The investigative panel concluded that Toshiba’s corporate culture was the trigger movement forthe emergence of the fraudulent practices within the organization and the subdued corporategovernance was evidently clear and needed immediate rectifications. The investigative report includes specific recommendations to prevent the recurrence ofunacceptable business practices across the Toshiba Corporation. The report also indicated thevital need to a prominent whistleblower mechanism as well as a robust and communicativecorporate governance policy.

FRAUD OPPORTUNITY TRAIANGLE:American criminologist Donald Cressy developed a theory known as the Fraud Trainagle, that explainsthe factors that lead to fraud and other unethical behaviour.The three factors that make up the fraud traiangle are :A.PRESSURE:Pressure contemplates the form of driving force that inhibits the individual to commit a criminalact. This driving force towards negativity need not make sense to outside observers, but it doesneed to be present. It comprises and ranges from a variety of emotions from financial crisis togreed and is often associated with injustice.IN RELATION WITH TOSHIBA’S ACCOUNTING SCANDALAs per the evidence laid down by the investigation report, it is pertinent to the fact that the seedsto the incompetent accounting policies were laid down during the 2008 global financial crisis,which prodded the then CEO to take steps that could afloat the corporation during the toughtimes. Needless, to say the pressure culminated and forested itself and evidently went out of therealms of correct policies and procedures and gravitated towards the last resort, which was toachieve the said target in exchange of anything.The subsequent CEO and directors were put into the shoes and designations which was not onlygigantic to live upto, but also submerged into the nitty gritty of fraudulent activities, thatcontinuing in the same direction seems easier than enabling some ground breaking changes, asalways the folk lore of the corporation proved too much to live upto.B.OPPORTUNITY:An evident chance to commit the act must be present. In case of a fraud, usually a temporarysituation arises where there is a chance to commit the act without a high chance of being caught.Thus, the opportunity presents itself in the best possible manner to carry out the desired actions,without too much of repercussions to face, for the time being.PRESSUREOPPORTUNITYFRAUDRATIONALIZATION

IN RELATION WITH TOSHIBA’S ACCOUNTING SCANDAL:The global financial crisis 2008 proved to be a perfect platform to indulge into malpractice, as thefear on unemployment and laying off loomed in the minds of the workers and employees, it was astep easier to enforce crude policies that demanded profits no matter what, with the knowledgethat it will eventually lead to fraud policies adaptations and inflated results, and in that particularmoment of time, this was the exact pedigree needed by the conglomerate to afford the globalcrisis.Eventually, it embedded itself as a hardcore system, with little to no room for refinement andfollowing perpetuators reaped the forbidden fruit.C.RATIONALIZATION:The mindset of the person to commit an unethical act is one of rationalization. The individualmanages to justify his course of action and is believed of the reason that, his way is the only wayto overcome the current situation and prosper in the future.IN RELATION WITH TOSHIBA’S ACCOUNTIGN SCANDAL:The end goal of any organization is to flourish for centuries, and the difficult prick of the globalcrisis became too much of a hurdle for the conglomerate to handle without disposing off itssignificant market share, therefore in order to circumvent the same, the CEO found it in the bestinterest of the company to ultimately recoup it from the crisis, irrespective to the damage it maypossess on its accounting policies, procedures and practices.PROBABLE REASONS BEHIND THE CONVICTED IN TOSHIBA’S ACCOUNTINGSCANDAL: The Toshiba accounting scandal saw the then CEO Hisao Tanaka and seven other directors take forcefulresignation when the scandal was publically brought to light, the report of the investigation committeeclearly points that the initial footprints were laid down during the time of CEO Atsutoshi Nishida at thecrunch of the financial crisis of 2008.Toshiba Corporations have a 140 year old legacy, and is considered as one of the primitive forces oftechnological advancement in Japan. Anyone, associated with this sort of grandeur is under pressure fromthe word go and the prestigious CEO designation, that runs the orchestra had to be on the alert at allpoints of time, as he cannot afford a indent in the reputation.Therefore, the global financial crisis of 2008 was the game changer that threw everyone out of theirgames, including Toshiba, but the legacy and enormous market share was at risk and at stake, thesituation demanded extra ordinary steps, and exactly that was undertaken by the CEO, who in thewhirlwind of all, forgot where the boundaries stood and in full awareness took steps and enforced policieswhich was clear, to be the stepping stones into the fraudulent practices that spread over the entireconglomerate. The subsequent leaders and directors were living the glorified hallucination that was pre- established, andonce they came to realizing the truth, the intense attraction of the window dressed financial state of the

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