Toshiba's Accounting Scandal

Toshiba's Accounting Scandal
Student's Name
Institutional Affiliation
Toshiba's Accounting Scandal
Toshiba has been operating for more than a century and it holds a high profile in business around the world. Small companies try to emulate Toshiba's culture to get a share in the corporate business. They are all motivated by Toshiba's success, thus Toshiba Corp. has been a role model for many small firms in the world. The 140-year-old electronics giant that had its operations in diverse activities such as installing power lines and supplying iPhone parts to Apple found itself in an accounting scandal that impacted it heavily since May of 2015 (Addady, 2015).
Its CEO Hisao Tanaka resigned after it was found out that Toshiba has been overstating its profits for the last seven years. This was revealed after an independent investigation that cited several accounting improprieties in the organization was conducted. Several accounting irregularities were sighted in various units of the organization. For many years the organization has been ranked among the top performers in Japan but little did the managers know that their firm is under the watch of Financial Service Agency. After suspecting the accounting improprieties in the organization a launch to the probe. After the investigation it was evident that the company had overstated $1.2 billion in profits for the past seven years (Soble, 2015).. The managers have been lying to the stakeholders of the company since the financial reports did not provide a fair view of the organization's financial position. They have been doctoring the books to please the investors.
After the scandal erupted in Toshiba, its CEO Hisao Tanaka and other top managers resigned to take responsibility of being involved in the scandal probe that saw the organization overstate its profits by $1.2 billion. According to the report provided by the investigative panel, Toshiba's accounting problems dates back to the global financial crisis in 2008. With a drop in the products of Toshiba, the top executives set difficult profit goals for unit managers. Due to this pressure, the managers “resorted to accounting gimmicks and shortcuts” that was to help them realize those profit goals.
Therefore, the fraud was as a result of a top-down directive where the employees had to inflate the organization's net income. The impossible profit targets that were set by the top executives pressured the employees to meet the goals by all means that included fraudulent inflation of the profits. The resignation of the top executives was a sign that they were responsible for the probe. On their resignation day, CEO Hisao Tanaka said that they were sorry to the stakeholders though they never told the employees to inflate the profits (Soble, 2015). When employees are given impossible goals to achieve and there is no room for consultation, they will employ all the means they seem possible to help them achieve them. So the top directors in Toshiba had not to tell the employees to doctor the financial reports directly. They figured it out on their own.
Toshiba had a good governance structure and culture that looked good on the paper but it was ineffectively monitored by the top executives. A stron...