Toshiba, a Janpanese international company which mainly sells electronic products, lost its CEO in July, 2015 because of inflating its profit over the past several years.

Here I want to apply EVERETT E. COLBY ‘s theory about factors of financial statement fraud to analyze the reasons why Toshiba would do such things. Toshiba Corp wanted to maintain its leading position in Japan’s electric industry and live up to its investor’s expectation. Once the company started to exaggerate their profits and hit a sweet spot, it is likely that they will get addicted to it. Additionally, customer’s trust in the company create a smoke screen for the company that it can get away with cheating the public.

From my prospective, publc corporations have intrinsic responsibility of providing the public with real financial statements. However, accounting scandal seems to be a common phenomenon in recent years.The consequences brought by fraudulent financial statements are unfavorable. These companies go against business ethics and would lose market’s trust eventually. Moreover, the whole economy of the country would be affected to some extent. Since the market failed to deal with accounting scandals, the government should intervene through making strict regulation and using the power of external investigation.

Article from:

<http://www.wsj.com/articles/toshiba-ceo-felled-by-accounting-scandal-1437468537>

<https://www.cga-pdnet.org/Non_VerifiableProducts/ArticlePublication/FinStatFraud/FinStatFraud_p1.pdf>

Image from:

<http://cdn03.androidauthority.net/wp-content/uploads/2015/07/toshiba.jpg>