Assignment on

“Toshiba Accounting Fraud”

Course Name: Advance Cost & Management Accounting
Course Code: ACT405
Section: 2

Submitted To

Afroza Akhter
Assistant Professor

Faculty of Business Administration

Submitted By

Name ID
Md. Shahidul Islam 131200074
Rafia Afrin 133200074
Md.Tareq 133200102

Date of Submission: 13 April, 2016

Eastern University

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 What’s inside the Report

Contents Pages
Abstract 03
Introduction 04
Objectives 05
Rationale of the Study 06
Scope and Limitations 06
Methodology 06
Findings and Analysis 07
Reference 08

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Abstract
Toshiba 140 years old a blue-chip respected corporation has messed themselves
in a scandal which is considered Japan’s biggest accounting fraud. They are
convicted for overstating profit by 152 billion yen (1.2 Billion) between 2008-
2014 and purposely hide their operating losses. This fraudulent occurs due to
pressure from top executive to accomplish unachievable target profits.
Securities and Exchange Surveillance Commission first suspect and started
investigation after realization the problem they set-up in house investigation and
announce publically. After the shady accounting came to light CEO and six
board of directors resigned from their post. Toshiba has been fined around 7.37
billion yen and investors file case against Toshiba and the former CEO of the
corporation.

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Introduction
Toshiba Corporation a giant electric manufacturer considered among the
biggest conglomerate multinational corporation of Japan. Its diversified
products and services include information technology and communications
equipment and systems, electronic components and materials, power systems,
industrial and social infrastructure systems, consumer electronics, household
appliances, medical equipment, office equipment, lighting and logistics.

Toshiba is organized into four business groupings: the Digital Products Group,
the Electronic Devices Group, the Home Appliances Group and the Social
Infrastructure Group. The headquarter of Toshiba Corporation is in Tokyo,
Japan. Hisashige Tanaka built a factory in Tokyo in 1875 to accommodate the
growing government orders. This was Tanaka Seizo-sho (Tanaka Engineering
Works), one of the forerunners of Toshiba.

Toshiba survives in the market more than 140 years, in spite of being reputed
blue-chip Corporation; it found itself at the center of one of the country's largest
accounting scandals. Toshiba Corporation has convicted for overstated its
profit around 152 billion yen(1.2 Billion) between 2008-2014, the revelation of
almost $1.9bn in concealed losses over these years. According to the report
firm’s top executives, including Toshiba President Hisao Tanaka and his
predecessors Atsutoshi Nishida and Norio Sasaki, were involved in the
manipulation.

Suspecting accounting irregularities at Toshiba, the Securities and Exchange

Surveillance Commission under the financial watchdog Financial Service
Agency launched a probe in February. Realizing the seriousness of the issue,
Toshiba decided to set up an in-house investigative committee in April, and
then the firm publicly announced its accounting troubles. After the accounting
scandal , CEO, Hasao Tanaka along with half of board of directors resigned.

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Objective
Toshiba employs 200,000 people worldwide and manufactures a variety of
goods, ranging from electronic components to outfitting nuclear power stations.
Toshiba accounting scandal "is one of the most serious wrongdoings in
Japanese corporate history" That such a respected blue-chip company with a
140-year history could stoop to such accounting tricks as overstating sales and
profits, understating losses and improperly valued inventory came as a shocking
revelation.

The main reason behind this accounting fraud was date back to the deep
economic slump set off by the global financial crisis in 2008. The corporation
was making loss of ¥18.4 billion they thought that hamper their goodwill so
they did not announce the real amount and overstated profit by 152 billion yen
(1.2 Billion) between 2008-2014. Top executives across Toshiba’s many
divisions then began taking accounting shortcuts to meet increasingly difficult
profit goals. They pressure his subordinates to secure unachievable profits for
each quarter, and thus they set high targets, demanding their subordinates
improve the company’s results. The business culture at Toshiba did not allow
lower-level managers “to go against the bosses.”

The infrastructure division purposely understated the costs of construction

projects even though it knew, according to new estimates, the real costs had
increased.

Another way Toshiba manipulate its accounting Toshiba out-sourced the

manufacturing of computers to a partner. Toshiba would sell computer parts to
the partner, who would then assemble the computers, which it would then buy
back.

The company’s computer division would sell more parts than necessary to the
partners, which increased that company’s inventory, allowing Toshiba to inflate
its profit figures.

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Rationale of the study
As a student of accounting we feel there is learning from the incident. As it is
an accounting fraud so we found some interest about to know what actually
happen and why it took place in that company. There are some limited scopes to
gather information about the incident, what actually happened there . So by
utilizing that scopes it’s a try to learn some effective things . It might help us in
further study of accounting. This case study will grow our thinking power and
help us to learn something new out of our text book.

Methodology
The fraudulent took place in Japan so gathering primary data could not be
possible for us; there were only secondary data available for the report. We
collected total information through different web reports and online news
portals. So there might some of modified news we have collected. But all of
them are related to the case of Toshiba. We also tried to gather some
information through articles written on it. As we have collect secondary data
some of the references are given at the end of the report.

Scope and limitation

Incident took place in Japan so collecting primary data could not be possible for
us and we have to depend fully on secondary data besides we find difficulty to
get authentic data from the internet. Time was a great factor for preparing the
report.

All the data we found in the internet are not reliable .We have a few knowledge
about the fraud so it creates so problems .Most of the information’s are
modified.

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Findings and Analysis
The four-member committee looked into Toshiba’s accounting practices from
fiscal 2009 to 2014 and found a series of “inappropriate” accounting entries that
showed a staggering ¥152 billion ($1.2 billion) net profit. After the fraud came
to light President Hisao Tanaka and Adviser Nishida were resigning, as were six
other directors. Japan regulators fined ¥7.37 billion to Toshiba Corporation.
Toshiba's internal control issues have led the Tokyo Stock Exchange to
designate it a security on alert

In addition to workforce cuts in the lifestyle business, the company will reduce
its corporate division by 1,000 people and chip operations by 2,800 workers.
Toshiba had about 198,700 employees as of March 31, the lowest since at least
2009.

The former executives being sued include three former presidents, Investor
from California, U.S.A also file a case for the misleading information of
Toshiba.

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Reference
This is the secondary sources from we collected data for the report.

#1 Japan Times, 2015’s report on Toshiba Corporation.

http://www.japantimes.co.jp/news/2015/09/18/business/corporate-
business/pressure-to-show-a-profit-led-to-toshibas-accounting-scandal/
#.VwosTnYp7Ud

#2 Journals of Wall Streets, 2015’s report on fine and penalties.

http://www.wsj.com/articles/toshiba-accounting-scandal-draws-record-
fine-from-regulators-1449472485

#3 Economist Repot, On hiding operating losses.

http://www.economist.com/news/business/21659758-corporate-japan-
reeling-after-big-accounting-scandal-toshiba-load-tosh

Besides this Al Jazeera, Reuters , Telegraph were the source data collection.

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