OV E R V I E W O F T H E

CASE

Source: The Wall Street Journal , 21 July 2015

 The investigative panel pointed to weak corporate governance and a

poorly functioning system of internal controls at every level of the
Toshiba conglomerate. Internal controls in the finance division, the
corporate auditing division, the risk management division and in the
securities disclosure committee did not function properly to identify
and stop the inappropriate behaviors.

Toshiba's Accounting Scandal: How It Happened

By J. William Carpenter | August 13, 2015

The Role of the Board

in Fraud Risk
Management
by Andi Mcneal, October
2011

N a t u r e O f Fr a u d R i s k
Directors Role In

F i g h t i n g Fr a u d
Foundation Of Risk
Management
E ff e c t i v e F r a u d
Reporting
Raising Awareness

5
%

Organizations least focused on fraud are at greatest

risk. Organizations worldwide lose an estimated 5
percent of annual revenue to fraud.
Association of Certified Fraud Examiners, 2016

Managing fraud risk should be at the front of every directors mind when considering the
cost/benefit of fraud detection and prevention efforts:

DIRECTORS ROLE IN
FIGHTING FRAUD

DIRECTORS ROLE IN
FIGHTING FRAUD

THE FOUNDATION OF RISK

MANAGEMENT
The board should work closely with management.

Identifying and assessing the organizations fraud risks.

The board must evaluate management underlying strategy to manage fraud risks.
Revisited the process on a regular basis.
Properly communicate.
Tailored to the particular entity.

Ensuring that the established level of acceptable risk is aligned with the

entitys business strategy.

TOSHIBA need to understand the level of risk (significant/insignificant).

Without an adequate understanding, fraud risk management program

will be inaccurate.

Risk Management Division of TOSHIBA should understand so that they can avoid the
problem and able to identify fraud.

THE FOUNDATION OF RISK

MANAGEMENT
Must oversee the design and implementation of the fraud risk management

activities and controls.

TOSHIBA management can identify the problem in internal control activities.

Information must remain closely guarded to ensure their effectiveness.

TOSHIBA management should only give information only to authorized person. (have
specific list of individuals)

TONE AT THE TOP - Directors must place a strong emphasis on creating an

atmosphere of zero tolerance for fraud.

TOSHIBA director should motivate their employees to not do fraud.

Understand fraud risks. (Risk happen in TOSHIBA)

Monitor managements reports on fraud risks, policies, and control activities.

Oversee the internal controls (Weak internal control in TOSHIBA).

Ability to retain and pay outside experts (risk management consultants), when
needed.(TOSHIBA can outsourcing)

HOW TO SET UP TONE AT

TOP?

SUMMARY OF THE FOUNDATION

OF RISK MANAGEMENT

EFFECTIVE FRAUD
REPORTING

An effective in hotline should have :

What should Board management do ?

RAISING AWARENESS
To raise awareness by proactive antifraud education such

as;

the respective roles and responsibilities of those receiving the

training.
champions a team approach to fighting fraud, empowering and
encouraging everyone to do their part.

Directors must monitor investigations into alleged fraud

such as cycle of antifraud activities;

fraud risk assessment

fraud prevention
fraud detection
fraud response/investigation.