EY's Japanese division starts investigation into $1.2bn Toshiba audit scandal

EY’s Japanese affiliate has begun an internal probe into its audit of Toshiba following the electronics-to-nuclear giant’s $1.2bn accounting scandal, a person with knowledge of the matter told Reuters.

Reuters reports that Ernst & Young ShinNihon LLC has amassed a 20-strong team to investigate the audit. The person spoke to Reuters on condition of anonymity. No one could be reached at the company’s offices in Tokyo on Saturday.

In July, 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 – which ranks as one of corporate Japan’s biggest alongside the 2011 accounting fraud at medical equipment and camera maker Olympus Corp, which was also a client of Ernst & Young ShinNihon – 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 Japan Institute of Certified Public Accountants, which regulates the accounting industry, has now confirmed that it has started investigating the Toshiba audit, while Japan’s financial regulator, the Financial Services Agency, is widely tipped to be on the cusp of launching its own investigation.