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The Toshiba Accounting Scandal : Lack of Internal Controls & Profits Presented Red Flags

Toshiba Corporation is in hot trouble! The news has been buzzing with the recent discovery of Toshiba’s recent accounting scandal that has left investors in awe. Toshiba Corporation, a multinational Japanese corporation, has changed the tech industry by providing leading PC’s internationally. But things have seemed to take a major change for the worst. The organization has been performing in the red according to market analyst and the decline in PC sales, has caused the company to meet lack luster results with projections of 22m units sold last year. With the turn of recent events, the organization has been founded to have overstated their profits by 1.3 billion over 5 consecutive years. Ouch!! To say the least, investors and the stock market are not taking this lightly and in turn has furthered an open investigation of the accounting discrepancies within the organization.

With several top executives exiting to the left, its not looking pretty. According to USA Today, “The scandal surfaced less than two months after Japan adopted its first corporate governance code. Japan companies have long been criticized for weak internal financial controls and resistance to outside oversight.” If you are familiar with internal controls in a financial sense then you can see how this scandal was possible. Lack of internal controls in accounting can lead to major melt down of organizations integrity and moral standards. Due to the lack of checks, and procedures implemented in Toshiba’s finance division, there were major pressures put on accountants to record transactions that were indeed fraudulent. Downfall of Enron sounds familiar anyone?

With the exit of CEO Hisao Tanaka and 7 other executives, who happen to also be senior managers and Board of Directors that raises a major red flag for the incentive to boast fraudulent profits. Still the biggest concern will be how Toshiba will bounce back from this scandal and if their sales will continue to decline. Tech and business is about constant innovation and adaption to change. In honest sense, the use of a new PC would only be needed if a replacement were needed. With smart phones and tablets being on trend, it’s hard to tell where the company will go in the future. The company could potentially adapt a new strategy and introduce products that can help launch them in a new light. However, change takes time, and we will have to wait for the outcome of Toshiba’s future.

Learn more about Toshiba’s recent events here.


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