EY’s Japanese arm fined £11.6m by regulator over Toshiba failings 

Japan’s financial regulator has fined EY’s Japanese affiliate ¥2.1bn (£11.6m) over the firm’s failure to identify accounting irregularities at Toshiba which meant the electronics giant overstated profits by some £780m over at least six years –

The fine is the first ever imposed on auditors by Japan’s Finance Services Agency (FSA), which has also banned Ernst & Young ShinNihon from taking on any new business for three months from 1 January 2016.  The firm is also required to undertake improvements to its operations, and seven of its certified public accountants are to be suspended for periods of one, three or six months.

The FSA said the fine was equal to two years’ of auditing fees paid by Toshiba, and said the auditors had shown ‘negligence of due care’, in relation to Toshiba’s financial statements for FY2009, FY2011 and FY 2012. The watchdog said these contained ‘material misstatements’ and were ‘significantly inappropriate’.

Ernst & Young ShinNihon has audited the company for decades, but this week Toshiba said it would not renew the contract from the fiscal year starting in April 2016.

ShinNihon is the biggest accounting firm in Japan, with about 3,500 certified accountants and more than 4,000 clients, including 1,000 listed-company clients.

Koichi Hanabusa, chairman and CEO of ShinNihon said the firm will pursue ‘radical reforms and improvements.’  In a statement, he accepted responsibility for the events and said he will step down on 31 January, when the firm is expected to compile a business improvement plan demanded by the FSA.

Hanabusa said: ‘It is very regrettable that we have come to this situation.’

Source: Accountancy Live – EY’s Japanese arm fined £11.6m by regulator over Toshiba failings

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