Global Advanced Research Journal of Management and Business Studies (ISSN: 2315-5086) Vol. 5(4) pp. 088-101, April, 2016 Available online http://garj.org/garjmbs/index.htm Copyright © 2016 Global Advanced Research Journals Review Accounting Irregularities at Toshiba: An Inquiry into the Nature and Causes of the Problem and Its Impact on Corporate Governance in Japan Khondaker Mizanur Rahman 1 and Bremer Marc 2 1School of Business, Nanzan University, 18 Yamazato-cho, Showa-ku, Nagoya 466-8673 JAPAN; FAX +81-52-832 2104. Email:
[email protected]. The authors have no relevant or material interests that relate to the research described in this paper. 2Faculty of Business Administration, Nanzan University,
[email protected] Accepted 16 April 2016 This research describes the largest financial scandal in recent Japanese corporate history. It explains how the Toshiba scandal expanded from a relatively simple case of accounting fraud to a company-wide deceit that involved dozens of managers and three generations of top executives. There are five main causes: domineering top management, compliant middle-managers who embody the worst of the salaryman mentality, duplicitous auditors, percentage-of-completion method accounting abuse, and the secular decline in several of the company’s business lines. The research links the scandal to broader issues with corporate culture, governance, and accounting in Japan and suggests ways to improve the situation. Keywords : Accounting irregularities, earnings management, corporate culture, corporate governance, corporate restructuring, internal controls, percentage-of-completion accounting method, Toshiba INTRODUCTION The world has experienced many serious accounting and the very embodiment of Japan Incorporated; it is the apex governance scandals; these include BCCI (1991), HIH of all that is good and big in Japan’s business culture; Insurance (2001), WorldCom (2001), Enron (2001), and, its scandal has deeply shaken all participants in Kmart (2002), Arthur Andersen (2002), AIG (2008) and Japan’s economy.