Global Advanced Research Journal of Management and Business Studies (ISSN: 2315-5086) April 2016 Vol. 5(4), pp 088-101

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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 Rahman¹ and Bremer Marc²

¹School of Business, Nanzan University, 18 Yamazato-cho, Showa-ku, Nagoya 466-8673 JAPAN; FAX +81-52-832-2104. The authors have no relevant or material interests that relate to the research described in this paper).  Email: kmrahman@nanzan-u.ac.jp

²Faculty of Business Administration, Nanzan Universitybremerm@ic.nanzan-u.ac.jp

Accepted 16 April 2016

Abstract 

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