Some companies using soon-to-be-disbanded Misuzu Audit Corp. as their auditor are unable to sign up for new auditing firms, raising the possibility they could be delisted if the situation drags on, sources said Saturday.
Many of the companies are listed on stock markets for startups and some have either engaged in questionable accounting practices or remained in the red, the sources said.
As a result, auditing firms that have taken over operations from Misuzu have refused to serve as their auditors.
It is unclear whether the companies will be able to find new auditors by the time their general shareholders’ meetings come around. Companies that close their books in March often hold general meetings in late June.
If the companies are unable to secure auditors before closing their books for the April-September first half of the current fiscal year, they may be delisted due to stock exchange rules.
In the case of the Tokyo Stock Exchange, companies will be transferred to the supervision post for possible delisting if they fail to prepare auditors’ reports for the fiscal first half by December.
“I have no recollection of any company delisted for the absence of an auditor,” a TSE official said.
Misuzu, formerly ChuoAoyama PricewaterhouseCoopers, one of the top four auditing firms in Japan, came under fire because of its inability to discover financial misconduct by client Nikko Cordial Corp. The brokerage was found last December to have inflated its profits for the two years through March 2006.
The incident came to light on the heels of another scandal in which three of ChuoAoyama’s accountants were arrested in 2005 on suspicion of cooperating in the falsification of Kanebo Ltd.’s financial reports.
The revelations forced Misuzu earlier this year to decide to disband by the end of July.
Given Misuzu’s fate, auditing firms have become more selective about their clients. In late May, for example, a midsize auditing firm told three listed firms that it would not serve as their auditor.
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