Bloomberg News

Olympus Auditor Ernst & Young to Probe Accounting, Judgment

December 12, 2011

(Updates with closing share price in the fifth paragraph.)

Dec. 12 (Bloomberg) -- An Ernst & Young ShinNihon LLC committee will determine whether there were auditing problems or lapses in judgment in its probe on the coverup of a $1.7 billion fraud at Olympus Corp.

ShinNihon said Dec. 8 that it formed a committee to investigate its audit of Olympus and verify an internal probe that found nothing wrong. “We will look into whether there were problems in the accounting process for acquisitions and also judgments made in auditing,” Toshifumi Takada, a panel member and economics professor at Tohoku University in Miyagi, northern Japan, said in Tokyo today.

Olympus is investigating about 70 executives to answer queries over losses and transactions for acquisitions, including $687 million in payments to advisers in the purchase of Gyrus Group Plc in 2008 and stake writedowns in three other takeovers. The camera maker set up a special panel in November to conduct a probe after former Chief Executive Officer Michael Woodford revealed the coverup costing 135 billion yen ($1.7 billion).

The ShinNihon committee plans to ask KPMG Azsa LLC, Tokyo- based Olympus’s former auditors, to cooperate with its probe, said Nobuo Gohara, a lawyer and committee member. The committee intends to release an interim report by Dec. 31 and a full account by the end of February, he said.

Market Value

Olympus, also the world’s biggest endoscope maker, surged 7.8 percent to 1,300 yen, the highest level since Oct. 27, at the close in Tokyo trading after the company said it plans to hold a briefing about its first-half earnings on Dec. 15. As of the Dec. 9 close on the Tokyo Stock Exchange, Olympus had lost the equivalent of $4.5 billion, or about half its market value, following Woodford’s dismissal Oct. 14.

The company is required to restate earnings and issue second-quarter results by Dec. 14 to avoid delisting. Olympus said today it’s preparing to meet the deadline.

The payments were “questionable from the accounting point of view,” Olympus’s panel said in a report last week. “We cannot conclude this was appropriate.”

Japan’s Financial Services Agency is looking into any role ShinNihon may have played in the Olympus cover-up, Minister Shozaburo Jimi told reporters in Tokyo last week.

--Editors: Lena Lee, Suresh Seshadri

To contact the reporters on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net; Takashi Amano in Tokyo at tamano6@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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