BLOG 8: OLYMPUS: 1.7 BILLION DOLLAR FRAUD

        The documentary amazed me with the fact that a company top management was able to hide the losses of $1.7 billion for nearly 20 years without any opinion from their Big4 auditors who are famous for their reputation in the “accounting profession”. There is no doubt that there was the failure in corporate governance in Olympus, which had originally been a sound company, with the involvement of the President who instructed the company Finance Directors to hide all the losses away from public reports. It was really ashamed for the Japanese when the whistleblower for the biggest fraud for their country is a Britain who was portrayed as the victim in the show. I would have no comment on how Woodford being badly treated and bullied at Olympus. However, the way he explains make me realizing some things bad in the Japanese culture which enables the man in the highest position to deliver ultimate decision which has to be always followed by the lower level.

        The fraudulent amount is undeniably material (accounting for 13% of total assets, 81% of net worth, 16% of total revenue, and 18 times net income). And again, auditors appeared to be unable to fulfil their role as the “watchdogs” for the public. It was really ridiculous when dozens of auditor teams from KPMG, E&Y and Arthur Andersen was doing nothing from receiving the audit fees and signing on the audit report that had no value to the public at all. This makes me question the competence and independence of qualified accountants who spent their whole life for the “Debit” and Credit” and by all-time consider the highest risk is the risk of unable to collect money from their clients. From my point of view, the tricks applied by Olympus are complex but not too sophisticated for the auditors with strong skepticism to find out. The Olympus scandal also renews long-standing questions about the structure of audit firms, which brand themselves as global networks but in fact are made up of legally separate firms to limit liability when one member gets in trouble.