Unmasking Fraud at Toshiba
Issues in Accounting Education, Forthcoming
32 Pages Posted: 21 May 2019
Date Written: May 3, 2019
Following its purchase of Westinghouse and subsequent macroeconomic events, Toshiba faced declining profits. In response, Toshiba engaged in earnings management through two accounting treatments. First, it delayed the recognition of losses under long-term contracts. Secondly, it inappropriately applied price masking to account for transfers of components between itself and contract manufactures. Students using this case will assess how business risks and corporate culture relate to audit risk, and how accounting for price masking transactions can lead to increased fraud risk. Students will also research aspects of auditing standards related to fraud and accounting estimates. The case is designed for auditing courses and capstone courses with an auditing component.
Keywords: price masking, audit risk and materiality, internal control, corporate governance, earnings management, fraud triangle
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