Case be surrendered to the armed forces

 
 

Case
Study of Toshiba Accounting Scandal

Toshiba’s origin begins with one of its forerunners,
Tanaka Engineering Works. This factory was built in Japan during1875 by Japan’s
Ministry of Engineering. The Ministry of engineering is responsible for Japans
modernization and technological advancements. Their main focused at the time
was to advance in telegraphic equipment, these are tools used to communicate and
transmit messages from point A to B. For example: in the late 1890s the factory
developed a waterwheel-powered turbine generator as well as a radio
transmitter. Their greatest invention being the double-coil electric bulb
became one of the top six inventions in the history of bulb tech. This company
withheld a lot of sacrifice and disasters such as earthquakes and the World
War. Both of their interfered in both production and development because of its
wasteful delay. Majority of supplies used for production needed to be
surrendered to the armed forces fighting the war. After years of recovery, the
company got back to its feet stronger than ever and was ready to boom alongside
Japan’s economy.  Eventually the company renamed
itself to Toshiba in 1984 and focused its production on gadgets and PCs as well
as home appliances such as televisions and audio (Toshiba).

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Toshiba’s 2010 financial statement overviews their
involvement and development due to the emerging of Japans economic recovery.
The circumstances where getting much brighter but Toshiba was not too sure
about their economic outlook during the economic rise. Toshiba wanted to
increase production and gain some investment confidence, but an obstacle was
met that created a lot of commotion with Toshiba’s productive reasoning. The
public was not confident enough to invest on not only Toshiba, but majority of
Japanese public industries. Without public recognition and involvement, Toshiba
was very hesitant to pursue new projects, however, this didn’t stop them from
trying. In 2010 Toshiba’s Net Sales were just about 6.3 billion yen. Their cost
of sales where 4.9 billion leaving their operation income at about 1.3 billion
yen. Toshiba includes many different sources of income investments. Their home
appliances sales decreased by 90.7 billion yen. With the development of
technology, home appliances are now being adopted into the “smart” category. Smart
technology does more than its primary function. This technology is innovative,
but it also serves a big role on the structural crumble of fundamental tech
companies such as Toshiba. Since 2010 until the financial scandal Toshiba saw a
lot of loss and decreasing in numbers, involving production and sales. This
circumstance can frustrate a business such as Toshiba. Toshiba couldn’t stop
falling from the prestigious position it once stood on involving both
innovation and creativity.

Ending March 31, 2015, universal tax season, Toshiba’s
remaining sales were greater than $63 billion. Meanwhile, they were employing
about 200,000 people worldwide (Carpenter, 2015). Following this major event,
Toshiba came forth with experiencing accounting issues. Because of this, their
shares began to plummet. Although, it wasn’t fully uncovered how so until the
beginning of September 2015 (Addady, 2015). Having such a great downfall in the
company, CEO Hisao Tanaka decided to resign in July of that year. Considering
this, Tanaka had resigned not only because of the financial structure of
Toshiba, but the various confirmed accusations of him being the perpetrator of
a $1.2 billion overstatements of revenues. The company, overall, has overstated
profits for the past seven years, up to $2 billion (Carpenter, 2015).

The first thing that Toshiba did was try and change
management. Starting from the common root of the problem, was the easy go to in
this sense. Let us back track to when it began and under who.

Atsutoshi Nishida, born December 29, 1943 in Mie
Prefecture. He was first hired by Toshiba in 1975 and named President of Toshiba
America Information Systems in April 1992 and of the company in 2005
(Wikipedia, 2017).  With the
extraordinary route of success and proclaimed as a scary man, he managed to
commit a fraud that would be remembered for a while. But, Atsutoshi Nishida was
not alone, he was accompanied by men named Norio Sasaki and Hisao Tanaka. Norio
Sasaki, born May 24, 1958 in Yamagata Prefecture, Japan. He joined Toshiba in
1972 and served as the Chief Executive Officer starting 2009 (Bloomberg, 2018).
Hisao Tanaka, born December 20, 1950. Toshiba demanded that these men were
obeyed, as they were the superiors in this corporate culture. This trickled
down through the chain of management, to the team of accounting, who would
eventually 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 Tanaka
stepped down from their positions in 2015. Tanaka resigned after spending 6
years as their President of Toshiba. Failure is considered unacceptable in the
Japanese business culture; so, when the business unit presidents working with
the challenges that were handed down from corporate each quarter-end burden,
were forced to use unbalanced accounting methods. The investigation, also
uncovered Toshiba having a weak corporate supremacy and insufficient internal
controls at each division; for example, finance, corporate auditing and risk
management (Carpenter, 2015).

Red Flags

Financial Explanations Extortion including benefit
exaggeration at Toshiba was found in a report released by an investigative
board in July 2015. Concurring to the examination report, although the
extortion did not include the company CEOs instructing their subordinates to
modify their bookkeeping records, they put much weight on workers to meet high
targets, which they could barely finish without understating their costs and
costs. The autonomous review group found inappropriate activities (red flags)
in the company’s accounting practices, which signaled potential extortion in
the accounting records. The red flags included pushing back benefits and charges,
booking future profits prior and changing liabilities and incomes side by side.

Solution

Suggestions to avoid this sort of fraud or
reoccurrence are corporate culture reconstruction, disposed of challenge
framework of profit targeting, and reestablish inner controls and uphold a more
grounded corporate administration, advance and progress a whistleblower
framework in which employees can utilize without fear of losing their
occupations (Carpenter, 2015). Personally, I would have guaranteed that I am
informed about AICPA accounting measures and familiar with the company’s
accounting exercises. This will guarantee that I learn and altogether survey
any changes in accounting exercises as they rise.

 

           

References

Addady,
M. (2015, September 08). Toshiba’s accounting scandal is much worse than we
thought. Retrieve January 20, 2018, from

Atsutoshi Nishida. (2018, January 07). Retrieved
January 20, 2018, from https://en.wikipedia.org/wiki/Atsutoshi_Nishida

Carpenter, J. W. (2015,
August 13). Toshiba’s accounting scandal: How it happened (OTCBB:TOSBF).
Retrieved January 20, 2018, from
http://www.investopedia.com/articles/investing/081315/toshibas-accounting-scandal-how-it-happened.asp

Ernst,
A. C. (2012). Toshiba 2010 Annual Report . Retrieved January 21, 2018, from
https://www.toshiba.co.jp/about/ir/en/finance/ar/ar2010/tar2010e_fr.pdf

History.
(n.d.). Retrieved January 21, 2018, from https://www.toshiba.co.jp/worldwide/about/history.html

http://fortune.com/2015/09/08/toshiba-accounting-scandal/

http://www.rieb.kobe-u.ac.jp/tjar/conference/7th/CD1_MasumiNAKASHIMA.pdf

https://www.wsj.com/articles/former-toshiba-president-atsutoshi-nishida-dies-at-73-1512836649

Mochizuki, T. (2017, December 09). Former Toshiba
President Atsutoshi Nishida Dies at 73. Retrieved January 20, 2018, from

Nakashimi, M. Is the Structure of the Board of Directors
Associated with Accounting Fraud? Evidence from Japan. Retrieved January 20,
2018, from

Stocks.
(n.d.). Retrieved January 20, 2018, from https://www.bloomberg.com/research/stocks/people/person.asp?personId=24839944&privcapId=873792

Suzuki, D. & Yamada, J. (2016). Accounting Fraud and
Accounting Standards: The Case of Toshiba’s Fraudulent Accounting. Retrieved
January 20, 2018.