Blurred Vision, Perilous Future: Management Fraud at Olympus

35 Pages Posted: 23 Apr 2014

See all articles by Saurav K. Dutta

Saurav K. Dutta

State University of New York (SUNY) at Albany

Dennis Caplan

State University of New York (SUNY) at Albany

David Marcinko

Skidmore College

Date Written: April 21, 2014

Abstract

In 2011, Japan was shocked by the revelation of a fraud at one of its most prominent companies, Olympus. What was more shocking was that the fraud was perpetrated by its Chairman of the Board and past president, Tsuyoshi Kikukawa, in collusion with several other Board members and officers. The whistleblower was Michael Woodford, a British citizen and the Company’s first non-Japanese president and CEO. Woodford had held the post of president for just six months before he was precipitously fired at a Board of Director’s meeting on October 14, 2011. This case demonstrates how poor governance structures allowed company executives and directors to circumvent accounting rules and hide investment losses for over two decades. The accounting topics include (1) methods of accounting for investments in financial instruments; (2) recognition and measurement of goodwill at the time of acquisition; and (3) consolidation accounting. The case requires students to link economic events to business decisions, and understand the financial reporting ramifications of those decisions. The case also requires students to critically analyze corporate governance mechanisms, and to consider the external auditor’s responsibility for detecting and communicating financial statement fraud.

Keywords: Olympus, fraud, corporate governance, financial accounting, auditing, consolidation, fair value accounting

Suggested Citation

Dutta, Saurav K. and Caplan, Dennis and Marcinko, David, Blurred Vision, Perilous Future: Management Fraud at Olympus (April 21, 2014). Issues in Accounting Education, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2427240

Saurav K. Dutta (Contact Author)

State University of New York (SUNY) at Albany ( email )

135 Western Ave
Building, Room 109
Albany, NY 12222
United States

Dennis Caplan

State University of New York (SUNY) at Albany ( email )

135 Western Ave
Building, Room 109
Albany, NY 12222
United States

David Marcinko

Skidmore College ( email )

815 North Broadway
Saratoga Springs, NY 12866-1632
United States

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