of a Japanese unit of the PricewaterhouseCoopers Group were arrested last month on suspicion of falsifying accounting reports of Kanebo Ltd., a maker of sundries, food products and pharmaceuticals. If these CPAs are found guilty of violating the Securities and Exchange Law, the credibility of the nation's auditing services will be undermined, and the Japanese economy could suffer as a result.
The four CPAs -- three of whom were indicted on charges Monday -- worked for ChuoAoyama PricewaterhouseCoopers. They were arrested by the special investigation department of the Tokyo District Public Prosecutor's Office on charges of collaborating with former Kanebo executives to falsify the company's financial records. Mr. Takashi Hoashi, a former Kanebo president, and Mr. Takashi Miyahara, a former vice president, have already been indicted.
Public prosecutors suspect that the accountants not only were aware that the financial statements they approved had been falsified but actively offered suggestions on how to cook the company's books. Whereas liabilities exceeded Kanebo's assets by 81.9 billion yen and 80.6 billion yen in fiscal 2001 and 2002, respectively, the consolidated financial statements, submitted to the Kanto Local Finance Bureau of the Finance Ministry, reported that the company's assets exceeded liabilities.
Set up in 1968, ChuoAoyama is one of the nation's four largest audit corporations. It employs about 1,800 CPAs, has more than 20 offices in Japan and nearly 30 offices abroad, and serves more than 5,000 clients. The present management of Ashikaga Bank -- which is now temporarily under state ownership after going bankrupt -- has sued ChuoAoyama for its alleged lax auditing work, which it blames for its financial woes.