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2 accounting firms cleared, 5 in-house auditors blamed in Olympus cover-up

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© 2012 AFP

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Careful use of words here I think; "should not be held liable", OK maybe not liable but still displaying a lack of professional responsibility. I would love to know just how many of the individual auditors at these two firms are still in their jobs.

4 ( +4 / -0 )

well within expectation of foreign community in Japan :(

-5 ( +0 / -5 )

There are huge conflicts of interest with these big four accounting firms; tasked with both audit and minimizing costs and taxes, even acting as external consultants. It is very hard to believe that they knew nothing. It seems as if one of these big four is always involved when some company has been found to have been fiddling the books, avoiding taxes, corrupt and combinations of these...

8 ( +8 / -0 )

This is Japan. How did they do that audit in one month?

4 ( +5 / -1 )

Woodford has criticized the in-house auditing system as a mere facade, saying the non-employee posts are often given to retiring senior businessmen with close links to executive board members.

And that is just ONE of the MANY things wrong and open to foul play (ahem corruption)...

Yes, the whole system of big business is rotten to the core. it is also similar to how the government operates. Shady, dodgy and selfish whilst always failing miserably to portray themselves as working for the Japanese people...

A massive shake up is required in both Japanese business practices and the management of government.. A good place to start would be enforcing transparency and full disclosure at all levels...

4 ( +4 / -0 )

Wow... an 'independent panel' clears the companies of wrong doing but finds a few scapegoats... go figure!

3 ( +4 / -1 )

"Current CEO and president Shuichi Takayama, who is being asked to pay 500 million yen, has not been sacked, with the company saying he will resign after the next extraordinary general meeting, scheduled for March or April."

And let me guess... he'll receive a nice severance package totaling quite a bit more than 500 million yen for not being sacked. Japanese corporate governance at its best!

2 ( +3 / -1 )

I guess the accounting firms who were hired during the cover-up didn't notice anything unusual about the books?

I guess they were just doing as they were told, to balance the books, right?

The perpetrators are even better than I thought ... they know how to balance the books beforehand so the accountants wouldn't find anything unusual ... unless, of course, the accountants were actually in it from the start, and made it look like the books are indeed balanced.

3 ( +3 / -0 )

Enrst & Young figure prominently on the wiki list of accounting scandals.

http://en.wikipedia.org/wiki/Accounting_scandals

3 ( +3 / -0 )

Olympus is considering suing the five auditors criticized Tuesday, who include two current officeholders, a spokeswoman for the firm said.

I bet you a Cayman island this doesn't happen.

3 ( +3 / -0 )

That's how it is always" everybody cook the books till they get cought..

3 ( +3 / -0 )

"Wow... an 'independent panel' clears the companies of wrong doing but finds a few scapegoats... go figure!"

yep thats the kind of attitude that has helped create the recession impacting the globe.

0 ( +1 / -1 )

Wow... an 'independent panel' clears the companies of wrong doing but finds a few scapegoats... go figure!

Er....there seems to be some confusion here. If the panel was not independent, as you seem to imply, it would have been more likely to pin the blame on the accounting firms (Olympus outsiders) rather than blaming Olympus` own auditors (Olympus insiders).

-1 ( +0 / -1 )

Not even two of the Big 4 auditors could uncover the deception?

Proves that in-house accountants are better

1 ( +1 / -0 )

They should face no domestic charges.

-3 ( +0 / -3 )

It's very very hard for me to believe that a good auditor couldn't detect a $1.7 billion coverup. I'm an engineer not an accountant but I know some very good safety auditors. The good ones have enough experience to back up, look at the big picture, intuitively sense that something's wrong, and probe till they find it. Surely a good accounting auditor can do the same.

1 ( +1 / -0 )

senseiman: "Er....there seems to be some confusion here. If the panel was not independent, as you seem to imply, it would have been more likely to pin the blame on the accounting firms (Olympus outsiders) rather than blaming Olympus` own auditors (Olympus insiders)."

Well then, do tell who formed the independent panel? How many foreign experts were on it, by the way? And why is it more likely they would blame the accounting firms instead of singling out a few former Olympus (and one current) employees?

-1 ( +0 / -1 )

tokyokawasaki -- great post. Agree 100%. The un-holy alliance of big business, politicians and bureaucrats that form the core of Japan Inc., and therefore run Japan, is killing the country. Until some massive changes are made, along the lines of what you mention, Japanese people are simply spinning their wheels -- working hard but for no real gain.

And, j4p4nFTW, your comment that:

They should face no domestic charges.

is simply absurd. The auditors are criminals just like someone who robs a bank. Or can't you comprehend that they stole money, on the company's behalf, from millions of share-holders, just to protect their own jobs? There is nothing noble in that, no matter how you rationalize it.

-1 ( +1 / -2 )

Enrst & Young figure prominently on the wiki list of accounting scandals.

KPMG have their scandals too. Well, Olympus is not Enron, it won't think them. Too bad.

0 ( +0 / -0 )

not "think", but "sink" like a boat.

Not even two of the Big 4 auditors could uncover the deception?

Don't you mean : "not even hiring 2 of them could cover the deception efficiently. " ?

0 ( +0 / -0 )

Such gross misconduct and deception to the point of criminal act should not to be treated lightly. If Olympus is allowed to simply go on with their business as normal. It signals a very bad example. It might be a very painful one, but for the good of the wider Japanese Corporate goverance and fairness to investors through investigation must be done to unearth the truth.

-1 ( +0 / -1 )

Wow... an 'independent panel' clears the companies of wrong doing but finds a few scapegoats... go figure!

Agree with senseiman.

What are you implying there smith???

The independent panel is called "監査役等責任調査委員会" which consists of lawyers and certifiied accountants who are not tied with Olympus. As their "title" suggests, their "mission" is not to determine whether or not wrong doings, negligence, or irresponsibility took place within the company. Their job is it identify whom fits those categories.

http://www.nikkei.com/markets/ir/irftp/data/tdnr2/tdnetg3/20120117/79y007/140120120117066087.pdf

0 ( +1 / -1 )

wanderlustJan. 17, 2012 - 02:33PM JST There are huge conflicts of interest with these big four accounting firms; tasked with both audit and minimizing costs and taxes, even acting as external consultants. It is very hard to believe that they knew nothing. It seems as if one of these big four is always involved when some company has been found to have been fiddling the books, avoiding taxes, corrupt and combinations of these...

An accounting firm who has trust or special relationship with Olympus may be held liable for a third-party’s embezzlement if the accountant refers the client to the third-party and fails to disclose material facts or makes representations on which the client relies. One does not have a duty to protect another from a crime unless a special relationship exists. Most business relationships are not fiduciary relationships, an accountant may be held to be a fiduciary in circumstances where a client justifiably relies upon the accountant as a trusted advisor, as when an accountant renders personal financial, investment or tax advice to a client.

-1 ( +0 / -1 )

Smithinjapan - my point is that the panel was formed at the request of Olympus. Yet it implicated Olympus` own auditors rather than the outside accounting firms.

The point of appointing a biased panel (ie not independent as you suggest this one was) would be to protect insiders at Olympus and deflect the blame onto other companies like those accounting firms. Yet the panel did the exact opposite.

That, and the fact that as nigelboy pointed out everyone on the panel were independent lawyers and accountants with no ties to Olympus, makes me wonder why you are accusing it of not being independent solely based on the fact that they found the Olympus auditors at fault.

Also it should be pointed out that this isn`t the only panel investigating the fraud, nor are the auditors the only ones being held liable. Virtually every member of the Board of Directors has been dismissed (or will be dismissed pending the next general shareholders meeting) along with all the senior executives involved in the fraud and cover up. They are also all being sued for billions of yen. So not only is it inaccurate to say that the panel is not independent, it is also inaccurate to say they are only using these auditors as scapegoats.

0 ( +0 / -0 )

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