Case Study: Examining the Toshiba Accounting Fraud and its Impact

This case study analyzes the accounting fraud committed by Toshiba, focusing on the overstatement of profits and its connection to the fraud triangle. It examines the pressures, opportunities, and rationalizations that led to the fraud, as well as the ethical and investor issues that arose. The study explores how Toshiba's actions violated accounting laws and pressured employees, impacting stockholders. It delves into the ethical failures within Toshiba's culture and leadership. The study provides recommendations for Toshiba to regain a reputable position and prevent future fraud, including increased transparency, compliance with accounting standards, and the implementation of ethical codes and better corporate governance. The conclusion emphasizes the importance of ethical behavior and adherence to laws for corporate success, offering valuable insights for financial professionals and students alike.

Toshiba fraud case study

EXECUTIVE SUMMARY
The prevailing study shows the Accounting fraud committed by Toshiba to overstate its profits,
the study link the same with the fraud triangle and continues by explaining investor and ethical
issues. The study shows that Toshiba non-complied with the accounting laws, and forced
employees to meet the profit margins, this also adversely impacted the stockholders as a whole.

TABLE OF CONTENTS
Question 1........................................................................................................................................3
Question 2........................................................................................................................................3
Question 3........................................................................................................................................4
Question 4........................................................................................................................................4
References........................................................................................................................................6

INTRODUCTION
The present study is based on the critical evaluation and analysis of the accounting fraud
committed by Toshiba. The study will cover the applicability of fraud triangle in the case of
Toshiba, also the study will consider the issues of investors and ethical issues arouse from the
accounting fraud. Following to this, the study will draw recommendations for Toshiba to retain a
reputable position and prevent such frauds in future.
QUESTION 1
By considering the accounting fraud in Toshibaand applying the same in the fraud framework,
the major motives that are held can be stated as below by relating it to three stages, pressure,
opportunities and rationalization. A fraud triangle is stated as a framework developed to depict
the rationale behind the decision of a worker to execute a workplace fraud. By applying this
framework to the Toshiba fraud case, it can be stated that the reason behind Toshiba conducted
this big fraud was to overstate profits, and it was not just a mere omission, but it was
intentionally manipulated(Murphy & Free, 2015).
Pressure: The higher pressure were placed on subordinates to meet strict profit margins,and they
remained impatient for the company culture to provide them with the outcomes according to
their needs and expectations.
Opportunities: The opportunity for the fraud committed was the improper use of accounting
practices in various Toshiba units, and it was held that there was earlier booking of future profits,
that pushed losses, leading to overstated profits(Schuchter & Levi, 2016).
Rationalization: The reason by which company committed this fraud was to satisfy its profits.
However, the company apologized to its entire shareholder caused by their accounting practices.
QUESTION 2
The issues held at Toshiba from the stakeholder and investor perspective were that there was
earlier reporting of future profits, by which losses were pushed back that led to overstated
profits. However, the techniques differed; it was held that there wasa determination of direct as

well as indirect effects for the explanation of improper practices that retained throughout the
conglomerate(Ivey Publishing, 2016). The impact of the reduced shares prices and the declared
dividend withdrawal because the accounting fraud has been challenging in the corporate
structure, which termed the Toshiba as the most renowned company. From the point of view of
investors, they were wondering how a company can have such a big accounting scandalif it has a
big and reputable image and experience. The issues for the investor were laid in the profit
increase, as the increment in profits were artificial. There was not an actual increase in
theprofitsof the company. In addition, fraud can have a considerable impact on the investor,and it
can decline the capital value as well(Kerr & Twal, 2016). Thus, this improper financial
information held by fraud is distributed to investors, which is an issue of investors in itself.
QUESTION 3
The ethical issues in Toshiba company culture and leadership forced and pressurized on
employees and subordinates with severe profit targets termed as challenges to the business units
of Toshiba, generally with the implications that failed aspects cannot be agreed. The unethical
issues were also held that the company culture of Toshiba demanded compliance to superior,
which was a significant element allowing the deceptive accounting practices(Endrikat, Hartmann
& Schreck, 2017).This was unethical that employees were pushed to meet up the target, and their
points of view were not placed, they were just given the order, without any employee
participation and employment.
If I was in the case of Toshiba employees, I would have planned employee engagement and
motivation strategies and created a united, flexible and dynamic workplace environment, with
effective decision making that stimulated the efforts of employees. Thereby, with these
initiatives employee can consider themselves as the valuable part of the organization, leading to
distributive justice.
QUESTION 4
The options available for the company to cope with the issues, resolve their accounting fraud and
move forward is that they are required to consider more transparency in the organization, which
can state there must be more involvement of trusted directors. The company must also strictly

comply and adhere to the accounting rules and standardsand is required to document code of
ethics based on integrity to promote disciplined behaviour. The company must set better
company values in regards to integrity and honesty to form an optimal and effective corporate
leadership. In addition, the company must conduct governance based on compliance to create an
acceptable culture and standards which are legal(Mehta & Bhavani, 2017). Thus, the Toshiba can
consider the replacement of top management, optimum cultural changes, development of an
independent and fair audit section in each department and establishing a CSR team. For Toshiba,
in order to prevent such fraud in future, the company can seek further financial support from
banks, adopt efficient corporate governance and create a company culture that involves
managerial and employee decision as well.
CONCLUSION
On the basis of above analysis it can be concluded that, the inappropriate accounting practices
and unethical behaviour conducted by Toshiba intentionally to raise profits, is completely wrong
and unacceptable. The corporate should comply with the laws, and hire best top management,
while consider the perspectives of employees to regain a sustainable success. Thus, to improve
its position and image, Toshiba must consider the provided recommendations and move forward
to avoid such fraud situations.

REFERENCES
Endrikat, J., Hartmann, F., & Schreck, P. (2017). Social and ethical issues in management
accounting and control: an editorial.Routledge.
Ivey Publishing, (2016). Toshiba: Accounting Fraud. Retrieved from
<file:///C:/Users/HP/Downloads/2808229_1213572986_Toshiba-AccountingFraud.pdf>.
Kerr, R., & Twal, E. C. (2016). The Toshiba Accounting Scandal: A Public Perception
Catastrophe. Sage.
Mehta, A., & Bhavani, G. (2017). Application of forensic tools to detect fraud: The case of
Toshiba. Journal of Forensic and Investigative Accounting, 9(1), 692-710.
Murphy, P. R., & Free, C. (2015). Broadening the fraud triangle: Instrumental climate and
fraud. Behavioral Research in Accounting, 28(1), 41-56.
Schuchter, A., & Levi, M. (2016). The fraud triangle revisited. Security Journal, 29(2), 107-121.