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Investigators for Olympus aren’t pointing fingers at KPMG and E&Y

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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:

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.

The New York Times article above says of this new report:

But a separate panel of lawyers hired by Olympus to investigate the roles of the two auditors found that the firms had not violated their fiduciary duties, Olympus said in a statement. The report, released Tuesday, said that Olympus’s executives had so cleverly buried the losses that external auditors could not have uncovered them.

The Wall Street Journal article above summarizes the panel’s reasoning:

The panel said KPMG Azsa, which was Olympus’s auditing firm until 2009, didn’t violate its duties when it signed off on the company’s accounts, since the firm had Olympus write off questionable transactions after KPMG Azsa became aware of irregularities.

The report didn’t hold Ernst & Young ShinNihon responsible since the bulk of the transactions used by Olympus executives to hide losses were approved before the firm took over as outside auditor in 2009.

Olympus has sued the five internal auditors for the costs to investigate the cover up, according to all of the articles I’ve mentioned above.  This is in addition to the 19 executives sued last week.

The New York Times has a hint of there being more assistance from the three banks that has been mentioned earlier. From their article:

But a person with close knowledge of various investigations relating to Olympus said that not only was Olympus adept at hiding its losses, but also that the company may have received help from its banks to misstate its financial position. KPMG received confirmation statements from some of Olympus’s banks that, with hindsight, were clearly misleading, the person said on condition of anonymity, saying he was not authorized to speak to the news media. The banks told KPMG that there was far more money in Olympus’s accounts at those banks than was actually there, the person said.

That last sentence is the intriguing one, at least for me. Previously, it was mentioned in the first investigative report that the banks did not mention that the deposits were collateral.  I mentioned that here.  If true, that would be a big deal.

This article by the NYT suggests the confirms had wrong numbers on them as well.  If true, that would be a bigger deal.  This is an idea to keep an eye on in future reports.

Written by Jim Ulvog

January 17, 2012, 10:08 am at 10:08 am

Posted in Audits, Fraud

Tagged with ,

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