Toshiba $1.2bn accounting scandal claims first scalps

TOSHIBA’S Yen 151.8bn (£784m) accounting scandal has claimed its first top-level scalp with the resignation of chief executive Hisao Tanaka.

A number of other senior staff – including vice-chairman Norio Sasaki – fell on their corporate swords following the publication of an independent report which revealed the electronics to nuclear giant had massively overstated its profits almost threefold, over a six-year period.

Investigators found that the firm had “systematically” ramped up its profits in numerous parts of the business which were financially stressed. Reports suggest that auditors Ernst & Young were given false explanations of the company’s position.

The accounting scandal began when securities regulators unearthed problems as they probed the state of the company’s balance sheet earlier this year.

The results of those findings now mean Toshiba will have to restate its profits for the six year period between April 2008 and March 2014.

The inquiry team reported that the misreporting of profits began in 2008 in the wake of the financial crash, after senior managers imposed unrealistic targets. The report found that there was an endemic “corporate culture in which one could not go against the wishes of superiors”. This then rippled throughout the company to the point where employees conducted “inappropriate accounting practices” in a bid to hit the “wishes of their superiors”.

Shares in Toshiba recovered slightly in Japan since the scale of the problem was finally unearthed but are still well down since the company first hinted at the existence of accounting irregularities in April.

The scandal is the latest to erupt in the Asian powerhouse following the $1.7bn (£1bn) accounting fraud uncovered at Japanese camera maker Olympus.