Question

Write about Toshiba’s accounting scandal, discuss the key issues, Point out any relevant lessons learned or any financial regulations that may prevent a re-occurrence. 500 words

Answer 1

Profits were overstated by more than $1 billion : Toshiba’s accounting problems primarily stem from company employees understating costs on long-term projects. This allowed the company to overstate operating profits by at least 151.8 billion yen ($1.2 billion) between 2008 and 2014, the investigation found. It also cited issues with improperly valued inventory.

Two former CEOs get particular blame : Toshiba CEOs put intense pressure on subordinates to meet sales targets after the 2008 global recession. It said the pressure often came right before the end of a quarter or fiscal year, which may have pushed certain employees to postpone losses or push forward sales on accounting.

The inappropriate accounting techniques employed at Toshiba varied somewhat between the different business units. Investigators found evidence of booking future profits early, pushing back losses, pushing back charges and other similar techniques that resulted in overstated profits. Although the techniques varied, the investigative panel identified a single set of direct and indirect causes to explain how the inappropriate practices took hold across the conglomerate.

The recommendations to prevent the recurrence of unacceptable business practices across Toshiba's business units, include, reformation of the corporate culture, elimination of the Challenge system of profit targeting and reestablishment of internal controls and strong corporate governance. The report also recommends creation and promotion of a robust whistleblower system that employees can use without fear of retribution.