Although KPMG Azsa made Olympus write off nearly $1 billion worth of transactions, that fact was never mentioned in the audit report and the company still got an unqualified opinion. This should have never happened. That material of a write off should have been in the audit report and Olympus shouldn’t have gotten an unqualified opinion. I feel that the auditors should have also increased the level of risk for the audit and collected & tested more transaction samples.
Another thought of mine while I was reading this article was, what was KPMG Azsa doing from 1974-2009? The hiding of losses had been going on since the 1990’s. What took the auditors so long to find it? According to the article, KPMG Azsa first raised questions about the books in 1999. In 1999, the auditors discovered information that two members of top management were hiding securities losses off balance sheet. The auditors had the company unwind the transactions, but why would it take another 10 years for the same auditors to raise questions again? It doesn’t seem that after 1999, KPMG Azsa raised the risk level for Olympus audits. I feel that it would be a no-brainer to raise the risk level once you discover that management is hiding losses off balance sheet.
Overall, I think KPMG Azsa dropped the ball and could have and should have uncovered this scandal back in 1999-2000. It seems that they were negligent in taking the proper care to ensure that nothing else was going on off the books. In my eyes, KPMG Azsa is at some fault for this scandal. With their findings in 1999 and 2009, there is no way Olympus should have received an unqualified opinion and KPMG Azsa should have dug deeper into the transactions of the company to find out what was really going on.
What do you think? Here’s the article. http://online.wsj.com/article/SB10001424052970203501304577086351407137104.html