• Toshiba Corporation regards its legacy in Japan, and is a multinational conglomerate, with headquarters in Tokyo, Japan and employees over 200000 employees all over the globe.
  • The Corporation gained its market share with innovative and pioneering catalog of projects in the late 1950’s and announced itself as the upcoming technological superpower of the world.
  • The conglomerate operates business over a diversified product range and reported net worldwide sales of more than $63 billion for the fiscal year ending March 31, 2015.
  • On July 21, 2015, Toshiba CEO Hisao Tanaka and seven other directors were forced to resign, when an investigation revealed that the firm had doctored the books and inflated, superseded its operating profits over the past seven years.
  • The Securities and Exchange Surveillance Commission under the financial watchdog were intuitive of financial and counting irregularities, and subsequently launched a probe into the corporation in February.
  • The gravity of the situation caught hold of the Toshiba Corporation and were required to set-up an in –house investigative committee in April, when the conglomerate publically announced its accounting troubles.
  • The anomalies seemingly deeper than the firm incapacitated and believed and thus handed the investigation over to an independent outside committee in May and postponed reporting its fiscal 2014 earnings.
  • The four member committee compiled a voluminous report showcasing Toshiba’s accounting practices from fiscal 2009 to 2014 and found a series of incongruous accounting entries that showed a staggering $1.2 billion net profit.
  • The accounting misconduct began under CEO Atsutoshi Nishida in 2008 amid a global financial crisis that cut deeply into Toshiba’s profitability. It continued unabated under the next CEO, Norio Saskai and eventually ended in scandal under Tanaka.
  • Investigators found evidence of booking future profits early, pushing back losses, pushing back charges and other similar techniques.
  • Investigator’s describe that Toshiba’s corporate leadership handed down strict profit targets to business units, with implication that failure wouldn’t be accepted, thus is numerous occasions the only way to achieve the said targets was through the use of irregular accounting techniques.
  • The investigative panel concluded that Toshiba’s corporate culture was the trigger movement for the emergence of the fraudulent practices within the organization and the subdued corporate governance was evidently clear and needed immediate rectifications.
  • The investigative report includes specific recommendations to prevent the recurrence of unacceptable business practices across the Toshiba Corporation. The report also indicated the vital need to a prominent whistleblower mechanism as well as a robust and communicative corporate governance policy.

FRAUD OPPORTUNITY TRIANGLE:                                    

American criminologist Donald Cressy developed a theory known as the Fraud Triangle, that explains the factors that lead to fraud and other unethical behaviours.
The three factors that make up the fraud triangle are :
Pressure contemplates the form of driving force that inhibits the individual to commit a criminal act. This driving force towards negativity need not make sense to outside observers, but it does need to be present. It comprises and ranges from a variety of emotions from financial crisis to greed and is often associated with injustice.
As per the evidence laid down by the investigation report, it is pertinent to the fact that the seeds to the incompetent accounting policies were laid down during the 2008 global financial crisis, which prodded the then CEO to take steps that could afloat the corporation during the tough times. Needless, to say the pressure culminated and forested itself and evidently went out of the realms of correct policies and procedures and gravitated towards the last resort, which was to achieve the said target in exchange of anything.
The subsequent CEO and directors were put into the shoes and designations which was not only gigantic to live upto, but also submerged into the nitty gritty of fraudulent activities, that continuing in the same direction seems easier than enabling some ground breaking changes, as always the folk lore of the corporation proved too much to live upto.
An evident chance to commit the act must be present. In case of a fraud, usually a temporary situation arises where there is a chance to commit the act without a high chance of being caught.
Thus, the opportunity presents itself in the best possible manner to carry out the desired actions, without too much of repercussions to face, for the time being.
The global financial crisis 2008 proved to be a perfect platform to indulge into malpractice, as the fear on unemployment and laying off loomed in the minds of the workers and employees, it was a step easier to enforce crude policies that demanded profits no matter what, with the knowledge that it will eventually lead to fraud policies adaptations and inflated results, and in that particular moment of time, this was the exact pedigree needed by the conglomerate to afford the global crisis.
Eventually, it embedded itself as a hardcore system, with little to no room for refinement and following perpetuators reaped the forbidden fruit.
The mindset of the person to commit an unethical act is one of rationalization. The individual manages to justify his course of action and is believed of the reason that, his way is the only way to overcome the current situation and prosper in the future.
The end goal of any organization is to flourish for centuries, and the difficult prick of the global crisis became too much of a hurdle for the conglomerate to handle without disposing off its significant market share, therefore in order to circumvent the same, the CEO found it in the best interest of the company to ultimately recoup it from the crisis, irrespective to the damage it may possess on its accounting policies, procedures and practices.


The Toshiba accounting scandal saw the then CEO Hisao Tanaka and seven other directors take forceful resignation when the scandal was publically brought to light, the report of the investigation committee clearly points that the initial footprints were laid down during the time of CEO Atsutoshi Nishida at the crunch of the financial crisis of 2008.
Toshiba Corporations have a 140 year old legacy, and is considered as one of the primitive forces of technological advancement in Japan. Anyone, associated with this sort of grandeur is under pressure from the word go and the prestigious CEO designation, that runs the orchestra had to be on the alert at all points of time, as he cannot afford an indent in the reputation.
Therefore, the global financial crisis of 2008 was the game changer that threw everyone out of their games, including Toshiba, but the legacy and enormous market share was at risk and at stake, the situation demanded extra ordinary steps, and exactly that was undertaken by the CEO, who in the whirlwind of all, forgot where the boundaries stood and in full awareness took steps and enforced policies which was clear, to be the stepping stones into the fraudulent practices that spread over the entire conglomerate. 
The subsequent leaders and directors were living the glorified hallucination that was pre- established, and once they came to realizing the truth, the intense attraction of the window dressed financial state of the organization was too difficult to interpret in any other way, and mere resting point depicting the incapability’s of the workers to raise their voices against the management, was motivation enough to steer the conglomerate in the direction it was heading in contemplate of the financial crisis of 2008.
It is difficult to believe that there were no early signs that did not indicate towards the building scandal or misappropriation that had the full potential to blow up in faces of the top management. The accumulating profit of Toshiba Corporation, while it colleagues ran in losses or a lateral decline should have raised some red flags. Moreover, the wide spread faulty accounting practices over the period of 2008 to 2015 makes it crystal clear that the next to throne indulged themselves further into the pit rather than bringing the matter onto light, way before, it actually came into spotlight.
Also, it shows either sheer negligence or purposeful negligence on the part of the security controller or the exchange of Japan, as they stood up way too late to point fingers at a situation which had already gone beyond the exaggerated proportions. 


  • Independent Internal Audit: Ensuring stringent internal control is a must for every organization as it not only helps in internal check, it also highlights the areas that need further improvement or assistance. But if the regulating committee comprises of individuals that have direct interest in the functions of the organization, it won’t reap the required result. Therefore, it is of extreme importance, that the internal check imposed in an organization is subjected to independent third party audit, which can sincerely put forward the result in front of the management, with the desired course of action which deems to be suitable for that point of time.
  • Marginal Costing: Marginal costing or management accounting is the buzzword in today’s accounting world, as evidently and time and again, Marginal costing had proved to be efficient and result oriented methods to achieve desired result, without compromising standard rules or accounting policies. Being a new concept, the marginal costing is viewed skeptically and many organization resorts to old techniques that have loopholes and can eventually attract fraudulent scenarios. Marginal costing is less tedious and more effective in approach and on ground and should be adopted by organizations.
  • Employee Reporting Systems: In today’s cut throat competition, it becomes very important to have full knowledge and access to employee’s information. Their reporting, working hours, capacity, result orientation and their level of interest in the organization should be known to the superiors and accounting managers, as it’s the change in perspective of one of the employees that develops the landslide for the fraud to grow and foster within the organization, thus, it is impotent to have a functional employee reporting system in build in the organization and have full monitoring over it.
  • Clear and Understandable Standards: The most important for any organization is to have clear, understandable and workable standards set for every department and function, putting up ambiguous , intangible standards with heavy penalties, will only result in utter confusion and adopting of ways that are crude to the organization and can develop into potential threats. The standards set should act as a motivator, and not as a threat, because the difference between the two, changes the mindset of the employees working to achieve the same. Therefore, it is important to have clear cut understandable standards.


The Financial Services Agency, Japan imposed a fine of Yen 7.37 billion on Toshiba Corporation for falsifying financial reports, the CEO’s and almost complete board of directors resigned in awake of the accounting scandal.
Though the fine imposed was the largest by the Financial Services and the corporation faced an white wash of its board of directors, it cannot be compelled to say that justice prevailed in the above scenario.
The Aftermath of the scandal gave the conglomerate a revamp of the management, job –cuts all over the world in the name of financial restructuring and an apology to Japan’s Prime Minister and to the stakeholders and investors’ for the company. But, does it set a hard example for other corporates all around the world, foregoing them to indulge in fraudulent activities, may be not. 
Monetary implications are often huge in the event of a scandal, and one can trace few convictions as well, but for the common investor, all is left is another disclaimer, as to how, one should invest wisely. There is none to nothing examples where the investors have been compensated for the management’s fault, nor the action taken by governing authorities are so stringent , that the future corporations think twice before letting the thought of inconsistencies lead to their minds.
Therefore, more powerful examples need to be established.

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Pitney, B. W. (n.d.). Investopedia - Sharper Insight. Smarter Investing. | Investopedia. Retrieved September 25, 2016, from
The Japan Times. (n.d.). Retrieved September 25, 2016, from

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