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    Toshiba revealed it had raised earnings by $151.8 billion for several years through accounting fraud. Toshiba's internal audit function failed because its audit committee was neither independent nor competent, consisting of only ex-CFOs involved in the scandal. Lessons from Toshiba's case show that internal audit must function independently of management to properly ensure compliance, and corporate culture must value integrity over results to prevent such scandals.

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    Case Analysis

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    Toshiba revealed it had raised earnings by $151.8 billion for several years through accounting fraud. Toshiba's internal audit function failed because its audit committee was neither independent nor competent, consisting of only ex-CFOs involved in the scandal. Lessons from Toshiba's case show that internal audit must function independently of management to properly ensure compliance, and corporate culture must value integrity over results to prevent such scandals.

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    Toshiba revealed it had raised earnings by $151.8 billion for several years through accounting fraud. Toshiba's internal audit function failed because its audit committee was neither independent nor competent, consisting of only ex-CFOs involved in the scandal. Lessons from Toshiba's case show that internal audit must function independently of management to properly ensure compliance, and corporate culture must value integrity over results to prevent such scandals.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    359 views3 pages

    Case Analysis

    Uploaded by

    linkin soy
    Toshiba revealed it had raised earnings by $151.8 billion for several years through accounting fraud. Toshiba's internal audit function failed because its audit committee was neither independent nor competent, consisting of only ex-CFOs involved in the scandal. Lessons from Toshiba's case show that internal audit must function independently of management to properly ensure compliance, and corporate culture must value integrity over results to prevent such scandals.

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    © All Rights Reserved
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    of 3

    Toshiba's Internal Audit Failure

    Case Analysis

    CN 3050: ACCTG 57
    Submitted by: Kenneth S. Dagohoy
    TOSHIBA CASE
    Overview of the Toshiba case
    In 2015, Toshiba revealed it had raised earnings by $151.8 billion. for a period of
    several years. The actions of Toshiba's management and staff have left a profound
    impression on Japan. Toshiba was set on a journey to introduce systemic reforms that
    created a new corporate culture from top to bottom. The Toshiba case shows how a
    corporate governance system will operate if it is accompanied by a corporate culture of
    integrity and accountability, writes Shihoko Inouye. The study highlights how corporate
    culture problems can disrupt even the most stringent corporate governance policies,
    she says. The case study introduces useful issues that executives need to take to
    ensure that corporate governance structures run successfully, Inoue writes.  Inoue: By
    learning this case in Japan, executives can gain insights into the critical thinking skills
    they may use to make strategic business choices within their company.  
    Comment on the issue faced by the company
    Toshiba, the 140-year-old foundation of Japan Inc, has been trapped in the country's
    biggest accounting scandal since 2011. In July 2015, Toshiba Corp President Hisao
    Tanaka and his two successors resigned after the investigators learned that the
    company had increased its sales by at least $1.2 billion. Toshiba is one of the early
    adopters of corporate governance legislation implemented in Japan.
    Why did the internal audit function of Toshiba fail?

    Independent audit functions well as the internal auditor is conducting and reporting to
    the audit committee. Toshiba's audit committee was neither independent nor competent.
    Just the ex-CFO (who was the cfo at the time of the scandal) was a full-time audit
    member. This is the situation where the lack of internal audits has led to a failure of
    corporate governance.
    Do you think such a scandal in Japan would have taken place in the Philippines?
    If yes or no, why?
    yes, because it was related to the latest issue with the same amount of money but in
    Philippines money, PhilHealth was pocketed with the 15 billion pesos by senators, and
    Evidently, false allegations not backed by facts have been made to malicious officers
    who have denied his aspirations for higher positions for which he is not eligible.
    Lessons learned from Toshiba's case

    some many businesses neglect one of the primary roles of internal audit as an
    insurance company, but only focus on it as a consultant. There is a major void in
    itself that really needs to be looked at. It is crucial that processes are placed in
    place to ensure that all functions are carried out concurrently and when
    appropriate.

    Reference

     Asish K Bhattacharyya, (2015), Toshiba - a case of internal audit failure,


    https://www.business-standard.com/article/opinion/toshiba-a-case-of-
    internal-audit-failure-115080900760_1.html

     Richard Chambers,(2015), Lessons From Toshiba: When Corporate


    Scandals Implicate Internal Audit,
    https://iaonline.theiia.org/blogs/chambers/2015/lessons-from-toshiba-
    when-corporate-scandals-implicate-internal-audit#:~:text=
    %E2%80%8BLessons%20From%20Toshiba%3A%20When
    %20Corporate%20Scandals%20Implicate%20Internal%20Audit,-Richard
    %20Chambers%20July&text=That%20committee's%20report
    %20concluded%20that,the%20Japanese%20corporate%20governance
    %20culture

     Vasundhra Maheshwari,(2015),
    https://www.vskills.in/certification/blog/toshiba-one-of-the-biggest-
    accounting-scandal/

     Mitsuru Misawa, Hong Kong (2016),


    https://www.thecasecentre.org/main/products/view?id=139954

     J. WILLIAM CARPENTER, 2015,


    https://www.investopedia.com/articles/investing/081315/toshibas-
    accounting-scandal-how-it-happened.asp

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