Very recently, in Tokyo police has begun in investigation on Olympus' attempt to hide investment losses dating back to the early 1990s. The company tried to clean up its books with four different incidents within 2 years.
Aside from the police looking into this, Japan's Financial Service Agency, has launched an investigation with Olympus, this includes a hearing with auditors who signed off on Olympus' books and a government official familiar with this particular matter.
Olympus' auditor until recently in 2009 was KPMG. During the time in which KPMG was their auditor several of these transactions took place. Following the auditor of KPMG was Ernst and Young. A spokesperson for Ernst & Young stated that she is not allowed to comment on whether or not the firm is being questioned during this investigation.
Olympus needs to restate decades worth of earnings which could make it difficult for them post results for the quarter-ending. Olympus did however state to us that hid their investment losses in the early 1990s but then did try to clean it up between the years 2006 and 2008.
Since the CEO was ousted for raising questions about the four acquisitions , Olympus lost 3/4 of its market value, which could potential harm the 22,000 shareholders. If the shareholders are permanently damaged in this situation, they will turn away from investing in Japan again. Shares in Olympus has dropped dramatically to a total decline of 44%, however they are trying there best to avoid delisting.
Tokyo, Japan requires that if a company makes false statements that have a material impact, then that company is to be delisted. This is certainly a possibility for a Olympus since they covered up years of investment losses.
A senior portfolio manager at IT Investment Partners Corp. stated that markets are pricing in the fact the risk of delisting will be unavoidable, but however, political considerations could work to Olympus' advantage to help prevent the delisting.
If Olympus corrects the financial reports soon enough, much like Nikko Cordial Corp, the stock exchange could decide not to delisted the company. By doing this they could be saving themselves from covering up accounting fraud that was done purposely.
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