Toshiba, a 140-year-old pillar of Japan Inc, is caught up in the country’s biggest accounting scandal: Audit And Assurance Service Essay, UUM, Malaysia

University Universiti Utara Malaysia (UUM)
Subject Audit And Assurance Service Essay


Toshiba, a 140-year-old pillar of Japan Inc, is caught up in the country’s biggest accounting scandal. Toshiba Corp president Hisao Tanaka and his two predecessors quit after investigators found that the company inflated earnings by at least $1.2 billion. Toshiba is one of the early adopters of the corporate governance reforms initiated in Japan. The corporate governance structure met corporate governance standards. Time and again cases of corporate governance failures have provided evidence that good corporate governance structure does not necessarily lead to good corporate governance.

Organisation culture is a critical determinant of the quality of corporate governance. Some of the observations of the independent investigation committee of the company on internal audit demand discussion and debate. The investigation committee observes, “According to the division of duties rules of Toshiba, the corporate audit division is in charge of auditing the corporate divisions, the companies, branch companies, and affiliated companies. However, in reality the corporate audit division mainly provided consultation services for the ‘management’ being carried out at each of the companies, etc (as part of the business operations audit), and it rarely conducted any services from the perspective of an accounting audit into whether or not an accounting treatment was appropriate.”

Stuck in Completing this Assignment and feeling stressed ? Take our Private Writing Services.

The observations of the committee give the impression that the fault of the internal audit in Toshiba was that it focused on consultation service rather than assurance service. Should internal audit avoid providing consultation service? I do not think so. It was not the fault of the internal audit that it provided consultation service. The fault was that it did not pay attention to accounting audit. In Toshiba, the top management used to set targets that are unachievable. There was excessive pressure from the top management to achieve those targets. The variable pay is a significant portion of the total pay.

The compensation of executive officers comprises a base compensation based on title and a role compensation based on work content. Forty per cent to 55 per cent of the role compensation is based on performance of the overall company or business department. ‘Challenge’ to achieve unachievable targets and performance-based pay provide enough motivation to manage earnings. Therefore, accounting audit should have been a focus area for internal audit. Internal audit can function independently only if the audit committee is capable, independent and effective, and the internal auditor reports to the audit committee. In Toshiba, the audit committee was neither capable nor independent.

Get Solution of this Assessment. Hire Experts to solve this assignment for you Before Deadline.

The three external members of the audit committee had no knowledge of finance and accounting. An ex-Chief Financial Officer (CFO), who was the CFO during the timeframe when accounting irregularities occurred, was the only whole time member of the audit committee. Therefore, the internal audit was not independent of the management. Earnings management had the tacit approval of the top management. Therefore, it is not surprising that accounting audit was excluded from the scope of internal audit. It is incorrect to infer that the accounting audit did not receive the attention of the internal audit because its focus was on providing consultation service. Contemporary literature defines internal audit as ‘assurance and consulting service’. The issue is of balancing between consultation service and assurance service. Problem arises when the internal auditor forgets that the internal audit is primarily an assurance function.

The consultation service flows from the assurance service. Although, the primary objective of operation audit is to obtain assurance that the internal control that is installed to achieve operation objectives is adequate and operating effectively, the auditees look to the internal auditor for suggestions and consultancy. Such consultation service is a by-product of the assurance service. Auditees should not be denied the benefits of internal auditor’s understanding of the industry and the business, and the challenges before the auditees in achieving operation objectives. Exclusion of consultation service from the scope of internal audit would result in sub-optimal utilisation of internal audit resources. Organisation culture also determines the effectiveness of internal audit.

The investigation committee observes, “A corporate culture existed at Toshiba whereby employees could not act contrary to the intent of their superiors”. In such a culture an upright internal auditor cannot survive, particularly if he is not independent of the management. Perhaps, it is the reason that the internal audit in Toshiba had chosen the easy path of focusing on ‘consultation service’ only without reporting internal control weaknesses. Internal auditor is the ‘eyes and ears’ and ‘go-to man’ of the audit committee. Therefore, internal audit failure leads to corporate governance failure.

Required task: 1. The role of internal audit of Toshiba only giving consultation services rather than accounting audit. Are you against or supporting on this statement? Justified. Support your argument and justification with empirical evidence and (or) appropriate case studies.

Are You Searching Answer of this Question? Request Malaysian Writers to Write a plagiarism Free Copy for You.

Get Help By Expert

Looking for Assignment Helper Malaysia or an Essay Writing Service? Look no further! Malaysia students can now rely on our experts for assistance with their coursework. Whether you need help with an Audit And Assurance Service Essay for UUM or any other academic task, our team is here to support you. With years of experience and a commitment to excellence, we ensure top-quality work tailored to your needs.


Recent Solved Questions

Online Exam & Assignment Writing Services

70841+ Orders Delivered

5 Star Rating

Confidential & Secure Assignment Help For

Group Assignment Help

Online Exam -Test & Quiz

Cheapest Price Quote

Diploma & Certificate Levels

Semester & FYP Papers

Summative & Individual

GBA & Reflective

Last Minute Assistance

Sample Assignment Download

AAR501 Construction Technology II UITM Assignment Sample, Malaysia
AAR501 Construction Technology II at UITM in Malaysia is a study of the principles, components, and assembly methods for various types of timber construction in small to medium-sized buildings, up…
PHT531 Physiotherapy In Spinal Rehabilitation  UITM Assignment Answer Malaysia 
 PHT531 Physiotherapy in Spinal Rehabilitation is a course offered at UITM, Malaysia. The PHT531 course emphasizes the development of hypotheses related to symptoms using the hypothesis-reduction model. It also emphasizes…


Instant Paper Writing Services by Native Malaysia Writers

Plagiarism Free Solutions
100% Original Work
24*7 Online Assistance
Native PhD Experts
Hire a Writer Now