Big Six firms are moving to improve standards among their Japanese auditing partners after a Coopers & Lybrand subsidiary became the first auditor to be sued by clients’ shareholders for misconduct.
Chuo Audit Corporation, a Coopers subsidiary, and the management of Japanese broking firm Yamaichi are being sued by 40 shareholders, who are seeking compensation for losses incurred when Yamaichi’s share price plunged last November.
Chuo Audit Corporation, Yamaichi Securities’ auditor, has sued the company for misconduct. Yamaichi collapsed last year, and it was later revealed the company had Y260bn (#113m) of hidden losses. The losses were deliberately passed between accounts to conceal them.
Professional accountancy bodies in Japan hailed the action as a wake-up call for the sector, and hoped it would push firms to raise standards. Big Six accountants, who have already urged their Japanese partners to bring practices up to scratch, said the problem showed how serious the situation had become, and they planned to step up their efforts.
A Coopers spokesman said: ‘Chuo is a separate legal entity from us; it is not appropriate for us to comment on standards in Japan.’ Any liability will be ring-fenced from the rest of the group, and will not affect Coopers’ merger negotiations with Price Waterhouse.
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