Panel clears audit firms of Olympus scandal blame

Tue Jan 17, 2012 5:15am EST
 
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By Yoko Kubota and Nobuhiro Kubo

TOKYO (Reuters) - An unofficial panel of experts cleared global accounting groups KPMG and Ernst & Young of any responsibility for a $1.7 billion accounting fraud at Japan's Olympus Corp, though the role of the firms remained under official review.

The scandal, one of corporate Japan's worst, had raised questions over the role of the two audit firms, which signed off on the accounts of the maker of medical equipment and cameras before the 13-year fraud finally surfaced in October.

But the panel of lawyers set up by Olympus to look at the role of auditors said in a report on Tuesday that five individual auditors were responsible for 8.4 billion yen ($109 million) in damages.

Olympus said later it was suing the five former and current individuals, seeking up to 1 billion yen in damages.

The panel effectively found the fraud, identified by a separate investigation as having being hatched by two former top executives in the 1990s to conceal losses, had been too well covered up for the external audit firms to have unraveled it.

"The masterminds of this case were hiding the illegal acts by artfully manipulating experts' opinions," the report said.

Neither KPMG's Japanese unit, KPMG AZSA LLC, which was the firm's external auditor until 2009, nor Olympus' current auditor, Ernst & Young ShinNihon LLC, was found to have violated its legal duties, the panel said.

Ernst & Young and KPMG, however, still face possible sanctions by the country's accounting industry body and financial regulator, which have launched probes into the matter.   Continued...