Toshiba overstated its operating profit by 151.8 bn yen (£780m) over several years in accounting irregularities involving top management of the Japanese technology company, independent investigators said.
To put this in context, the estimate now reported is three times that fiorst suggested when problems began to come to light.
The Guardian notes:
The report said much of the improper accounting, stretching back to fiscal year 2008, was intentional and would have been difficult for auditors to detect.
For the record, the auditors are Ernst & Young's Japanese operation.
And also for the record, if this has been going on since 2008 I think that claim is an exercise in corporate whitewashing. If the auditors supposedly could not detect this three questions follow.
First, why have auditors in that case?
Second, why have accounts if they're so opaque and open to manipulation that even an insider cannot detect what is happening?
Third, how can you know whether the auditors would have difficulty, or not?
Corporate fraud is, I regret, normal, especially in the top down, Stalinist like, structures that demand results of the type Toshiba (and Tescos) adopted. But please don't tell me that risk cannot be appraised in such organisations. It can be, and is invariably at the top. The difficulty is having an auditor willing to name that risk and address it. That's the hard bit. And by default EY fell short: the accounts they signed off were wrong.
Now the question is will anything change? Don't hold your breath: the real reason for getting the excuses to the media, which the Guardian has faithfully reproduced, in early is to make sure that this will be claimed to be 'a rotten apple' and nothing needs to change as a result.
I beg to differ, and the agenda for change is simple.
First, split auditing from the supply of all other services.
Second, rotate auditors, compulsorily.
Third, remove some of the vast areas of subjectivity from current accounting standards that provide scope for abuse and impart little useful information.
Fourth, add granularity that puts the focus on real, local trading. Country-by-country reporting would do that.
Fifth, require that all the books of all companies in a group be covered by audit: this is rarely if ever the case at present leaving massive boltholes for misrepresentation.
Sixth, ensure that this happens worldwide.
Seventh, stop arguing: do it.
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What’s your position on auditors being a state function? Seems the most sensible solution given costs involved in rotation
Happy with it
What’s your position on a business deducting tax and NIC from employees’ wages, then simply not handing it over to HMRC and the auditors simply not noticing?
I am sure that is a leading question
And of course it is wrong
So is sweeping it under the carpet
And yes I realise who you are talking about
But the action does not justify the consequnces
Why don’t the government do it, surely it pays for itself?
Yes it was a leading question, because I’m afraid it didn’t look like it was going to appear on your blog. I would have thought you would take the opportunty even at this late stage to call for the tax to be paid over. Am I mistaken?
No I won’t be doing that
What I do think should have happened was a proper reconstruction of the organisation in question and a review of the actions of the trustees
Dozens of people have gone to jail for collecting VAT on gold sales and not passing that on to HMRC. Not sure what the difference is.
Criminal intent
It’s really not hard to work that one out, is it?
That’s interesting, you don’t think the tax should be paid over to HMRC. No doubt your opinion is based upon settimg the facts as you know them against a set of objective criteria. Can you think of any occasion, any occasion at all, when you can remember reaching the same conclusion for a continuing commercial enterprise? Or is a criterion you are using g being it is an NGO?
Week in, week out, thousands of companies are liquidated, and often revived, having not been able to pay their taxes
That is most of insolvency work
I think that is a price society has agreed worth paying
What point are you trying to make?
I have not for a moment made the one you are suggesting
I happen to know a bit about insolvency and have worked on anumber of occasions with HMRC to recover debts, including tax debts. Never ever have I heard anybody at HMRC decribe the simple forgiveness of a tax debt from a phoenix company as being “the price society has agreed worth paying”. In fact I have never heard anybody anywhere describe writing of the tax debts of phoenix businesses that way. I have seen directors being sent to prison for setting out to evade tax debts in this way.
But anyway, I asked referred to ongoing businesses; Not an apples and pears comparison with insolvency cases. I don’t think this charity is insolvent; is it?
So, can I ask again; what are the circumstances here on which you base your opinion that the tax debt should NOT be chased?
So now, as is usual, the truth begins to creep out
Firstly, you clearly do not have the knowledge of insolvency even if you have of debt recovery
Insolvency was created to allow second chances and precisely to avoid debtors prison unless there was clear fraud
No on has in the case you allude to suggested fraud that I know of
It should have been dealt with formally as insolvency and not informally as it was
But formal insolvency very, very rarely results in blame being apportioned let alone prison even though much is tax driven
Sop you are a) wrong b) making false claims c) likely to be misrepresenting facts
And so I make clear there are no cases where debt should not be chased – except for the billions of pounds HMRC decide not to chase for their own reasons to which you or I are not privy
All I ask in those cases has always been explanation as to why: it is not forthcoming
You have now had a full answer
Please do not waste my time again
“It should have been dealt with formally as insolvency . . ”
Is there any evidence that the charity in question was insolvent? You are suggesting that evidence of this exists.
If as has been suggested it could not pay its tax then that would be the case
If instead the tax was waived then that would be a grant and there is no issue to discuss
Which would you like it to be?
Making grants to charities is not part of HMRC’s remit. Waiving tax in order to make a grant to a charity would be very much ultra vires.
Waiving tax where doing so is appropriate *is* in HMRC’s remit, although sometimes questions can arise over whether it was a suitable exercise of discretion – Goldman Sachs, for example.
I have just agreed waiving debt is intra vires
I have suggested to that this may have been done by request
But I do not know and nor does anyone else
Which is why debate on this issue is closed
A few points on the Toshiba story. According to some of the press comments/leaks a week or so ago, the issue seems to relate to recognising losses on long term contracts and the auditors being provided with over-optimistic forecasts to “prove” no provision was needed. Not sure if this is what the official report says since it is only in Japanese at the moment. I heard that EY do not get criticised in the report. The earlier reports indicated that the issues arose in various companies/countries and I am not sure if EY audit the whole group (just for the record, I do not work for EY).
In a year such things can happen
Year after year? Pull the other one, I say
“If instead the tax was waived then that would be a grant and there is no issue to discuss”
Seriously? An organisation withholds tax from its employees’ salaries and then secretly lobbies the government to waive its legal obligation to pay it over to the treasury. It gets this secret waiver and you think “there is no issue to discuss”.
Again, seriously?
You do not know what was agreed
Nor do I
It’s clearly irregular
It’s something I would not condone
But for reasons you and I do not know it was decided upon
What is then wrong, quite emphatically, us to blame one party when it is clear error was on many sides
But what I do know is that your whole approach to this is plain straightforwardly nasty, unbecoming and abusive at every level because it appears to be wholly vindictive
From November 2002
http://www.standard.co.uk/promotions/evening-standard-christmas-appeal-7221493.html
Looking at the way its finances were run you have to wonder if this write-off happened once only, or more than once.
I’ve never heard of HMRC having grant-awarding procedures though. I think Richard is mistaken on that.
Of course HMRC has no such powers
It has the power to waive debt and does
I am suggesting it may have been asked to do so