Posts Tagged ‘Olympus’
Wow! My guest post on the Olympus fraud, How Do You Hide A Multibillion Dollar Loss? Accounting For The Olympus Fraud, (link below) is at the top of Francine McKenna’s list of favorite posts for 2012.
Her comment: Read the rest of this entry »
“Exposure: Inside the Olympus Scandal: How I Went from CEO to Whistleblower“, from the former Olympus CEO Michael Woodford is out this week.
The first review I’ve seen is at The Economist: Paying a price for doing what’s right.
Associated Press reports the ex-president pled guilty to securities law violations. Two other senior staff pled guilty as well.
The AP report can be found in the Wall Street Journal article, Ex-President of Japan’s Olympus Pleads Guilty.
The Reuters report can be found in the New York Times article, Guilty Pleas in Trial Over Olympus Scandal.
The three individuals pleading guilty:
Japanese regulators slightly criticize Olympus auditors then say the corrective action plan they require wouldn’t have found the fraud anyway
Reuters reports that the Japanese regulator, Financial Service Agency, criticized KPMG and Ernst & Young for their audits of Olympus. Then they partially retracted their criticism.
The Reuters article, Japan regulator raps KPMG, Ernst & Young for Olympus work, says the two firms
…lacked operational management systems to ensure proper auditing that would spot and flag dubious transactions.
The regulators didn’t find any “intentional acts of grave negligence” according to the article.
I guess that means they should have had the foresight to develop some unidentified management system that would have identified the fraud.
The two firms have to develop a business improvement plan and report on their progress every six months.
An official then essentially retracted the criticism. Check out this comment:
How do you overpay for an acquisition but keep the announced sales price? More journal entries to describe the Olympus fiasco.
Here are some more journal entries that describe how Olympus moved money in their accounting fiasco.
‘Michael’ asked a great question at re: The Auditors about my guest post on the Olympus accounting fraud.
The full article with my reply can be found at How Do You Hide A Multibillion Dollar Loss? Accounting For The Olympus Fraud.
Here is his question, with slight editing:
If they actually bought the tiny companies for way more than they were worth, this would not fix their problem, they would just have the original losses plus the new losses on the companies that they overpaid for.
The only way this works is if they claimed to pay $1,000,000 for the companies but in reality only paid $100,000. Is this the case?
For example if they paid $1,000,000 for the subsidiary you would.
- Dr. investment 100,000
- Dr. goodwill 900,000
- cr. cash $1,000,000
There would be no cash in the subsidiary, just goodwill. So how could the subsidiary purchase the financial assets that were seriously underwater? The subsidiary would have to actually pay the inflated fair value for this to work?
A very good question, Michael.
I’ll go into more detail on how the money was moved and my read on what summarized entries would be. I posted my reply at re: The Auditors. Francine McKenna has allowed me to reprint my response. Here is my explanation:
Range of U.S., Chinese, and Japanese regulators’ responses to fraud in today’s news – Olympus and Longtop
Sometimes you get fun results when you look at two news articles side by side. Let’s look at the responses of securities regulators in the US, China, and Japan. Hat tip to Going Concern for highlighting the articles.
Japan’s securities market regulator proposed a fine of $2.5M against Olympus for conducting a $1.7 billion financial fraud that was spread over 13 years – Japan market watchdog recommends $2.5 million fine for Olympus.
Let’s put that proposed fine into perspective. All amounts will be in US dollars.
The Wall Street Journal headline says Panel Clears Ernst & Young in Olympus Probe.
Cool update on the investigation, huh? An official panel looks at E&Y’s role and concludes their auditing was okay. They have no legal liability.
I was quite interested in the article. Then found out the details.
On Wednesday, prosecutors in Japan filed official charges against six individuals for their role in the accounting scandal at Olympus. They also filed charges against Olympus.
The six charged include the ex-chairman, former executive vice president, former corporate auditor and three outside bankers.
I previous mentioned the arrest of 7 former officials and advisors in the Olympus fiasco. Also mentioned that I did not know what the arrests mean in the context of the Japanese legal environment.
The Wall Street Journal article Arrests Go Beyond Olympus provides me some context. (Article behind paywall, so grab your copy of Friday’s WSJ before you toss it. Better yet, get an online subscription.)
It would seem that the prosecutors are seriously pursuing the case.
An investigative panel set up by Olympus released a report saying the external auditors couldn’t have found the fraud.
The panel also blamed five internal auditors for helping with the cover up. Olympus has sued the five.
An Internet search today indicates there are 270 articles discussing this. Here are a few you can browse:
- Wall Street Journal – Panel clears Olympus accounting firms
- New York Times – Auditors not involving cover up, Olympus says
- Blomberg BusinessWeek – Olympus clears KPMG in fraud, faults internal auditors
One panel of investigators appointed by Olympus pointed fingers at the external auditors. I discussed this report in my guest post at re: The Auditors.
In contrast, this new panel isn’t pointing fingers at the external auditors. They are blaming the internal auditors for the costs incurred to investigate the cover up.
Yesterday I mentioned that Olympus was going after its former chairman and two others.
Today we found out who was sued.
A WSJ report indicates Olympus has sued 19 executives, including the current president and four current directors who are also senior executives over the fiasco of hiding a $1.7M loss.
Olympus has sued its former chairman and two other individuals. According to the Wall Street Journal article, Olympus Sues Former Chairman (all articles behind a pay wall), when the company made announcement, they didn’t give details of the suit or even say exactly how people are being sued.
Most interesting tidbit in the article is the lawsuit was based upon an independent report from three lawyers regarding the role of the board in the scandal. That report will be released on January 10, according to the article.
Hint that there’s major, useful news on the horizon:
Francine McKenna asked me to combine my short comments on the Olympus fraud into a guest post on her blog.
I’m quite happy to announce my revised, expanded, and edited discussion is available. You can read the full thing at How Do You Hide A Multibillion Dollar Loss? Accounting For The Olympus Fraud
Many thanks to Francine for the wonderful opportunity to speak to a big audience.