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Sanyo Electric, the loss-making electronics conglomerate understood to be under regulatory investigation for possible mis-statement of its accounts, admitted on Tuesday night that it might restate three years’ worth of historical earnings.

Investors said that any restatement of accounts, whether undertaken voluntarily or forced upon it by the authorities, could undermine Sanyo’s fragile corporate recovery efforts.

A Sanyo spokesman said that, while it did not believe there would be any need to restate the earnings declared after March 2004, it would “review the valuation of investments in subsidiaries and affiliates for the time between April 2000 and March 2003.”

Sanyo revealed last week that it was under investigation by the Securities and Exchange Surveillance Committee after local media reports suggested the group had exploited a grey area of Japanese accounting to conceal over $1bn of losses accrued in fiscal 2003.

A Sanyo source on Tuesday conceded that the company now risked losing the trust of investors. The stock lost 20 per cent last Friday as the market learned of the SESC’s investigation.

During the period now under scrutiny, Sanyo’s accounts were audited by Chuo Aoyama – the accountancy firm punished in the wake of the Kanebo accountancy scandal.

Sanyo changed its auditor last summer to the KPMG affiliate Azusa, and said it would not use accountants from the former Chuo Aoyama in its review.

The company has also asked for its internal review to be scrutinised by a special auditor from the SESC. The special auditor will be consulted on the question of how the regulator interprets the accounting grey area at the centre of the problem.

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