The Yomiuri Shimbun Eyeing the release of its full-year earnings report for fiscal 2016, Toshiba Corp. is considering such specific steps as using a different auditor than PricewaterhouseCoopers (PwC) Aarata LLC.
Toshiba has been at odds with PwC Aarata over the timing when the company recognized a massive loss incurred by its U.S. nuclear subsidiary Westinghouse Electric Co. Toshiba submitted its quarterly earnings report for the April-December period to the Financial Services Agency on Tuesday without approval from the auditor.
Prospects of resolving the disagreements are uncertain, and Toshiba is discussing possible responses to the situation.
Toshiba was informed in January that Westinghouse senior managers pressured employees to reduce losses in the nuclear business. PwC Aarata called on Toshiba to conduct a probe, and Toshiba postponed releasing the quarterly earnings report twice. The initial deadline was Feb. 14, and it delayed again on March 14.
On March 10, the auditor sought an additional probe from Toshiba. According to sources, the auditor said Toshiba may have learned of the huge loss before the October-December period last year. As Toshiba believed about four weeks would be required for the probe, it postponed the March 14 deadline for the quarterly earnings report to April 11.
However, the two sides failed to resolve their differences of opinion.
After examining more than 600,000 emails and taking other steps, Toshiba concluded that it was unable to find evidence showing that it was aware of the loss before last December with a degree of certainty that would have enabled it to include the relevant figures in the financial statement, according to Toshiba Audit Committee Chairman Ryoji Sato, the company’s outside director.
PwC Aarata said in a review of Toshiba’s quarterly earnings report, which was presented to the company Tuesday, that the auditor was unable to approve of the conclusion reached by Toshiba’s audit committee regarding the time when Toshiba recognized the loss.
The auditor issued a “disclaimer of conclusion,” saying it was unable to obtain evidence to be used as a basis to announce a conclusion. PwC Aarata also found serious uncertainty over Toshiba’s ability to continue its operations.
Ahead of a press conference to announce the quarterly earnings on Tuesday, Toshiba President Satoshi Tsunakawa sent a message to all the company’s employees that said, “We were ultimately unable to narrow our differences of opinion and understanding with the auditor.” Tsunakawa indicated that submitting the quarterly earnings report was a difficult decision.
Toshiba apparently came to believe that the chances of obtaining approval from PwC Aarata were slim even though the release of the report was delayed further.
Toshiba is facing a deadline for submitting its annual securities report, which will carry full-year earnings, in late June. If the auditor again does not approve the securities report, Toshiba could lose trust not only in the market but also from banks, which are the lifeline for Toshiba’s financing.