Auditors hit by Olympus probe verdict

KPMG AZSA’s reputation took a hit yesterday when the independent investigation into Olympus released a report naming substandard external auditing as one of the central factors in the scandal.

The report censured the Japanese auditing firm, of which Olympus was a long-standing client, for issuing unqualified clean opinions without in-depth evaluation and for neglecting to disclose key information in its March 2009 handover to Ernst & Young ShinNihon.

“We cannot say this was appropriate,” the report concluded.

The investigation, which was launched after former Olympus chief executive Michael Woodford blew the whistle on the company’s suspicious accounting history, found no evidence of involvement from organised crime groups but said that the “core of management was rotten” and should be replaced, corroborating the claims Michael Woodford has been making since he left Olympus.

The independent panel also placed former executive vice-president Hisashi Mori and ex-internal auditor Hideo Yamada at the heart of the problem for their part in the financial cover-up.

Headed by former supreme court judge Tatsuo Kainaka, the panel urged legal action against those involved in the concealment of over £1bn in losses.

Woodford commented: “The panel’s report has made one thing painfully clear: the massive scale of the malfeasance from which the present directors and statutory auditors averted their gaze.

“Today’s report must be the beginning, and not the end, of our efforts to discover what has happened at Olympus.”

Olympus shares jumped 11 per cent yesterday morning to ¥1,255 before levelling out to ¥1,190 at the close of Tokyo trading.