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Toshiba has filed its third-quarter earnings accounts without a proper sign-off from its auditor as the scandal-hit industrial group warned of “material uncertainty” about its ability to continue as a going concern.
The repeated failure to produce auditor-approved results for the October to December quarter comes amid lingering questions about the accounts of its US unit Westinghouse, which filed for Chapter 11 bankruptcy protection late last month.
Analysts say the latest development will add further pressure on the Tokyo Stock Exchange, which is examining whether Toshiba has improved its internal controls after the company was placed on “stock on alert” status in the wake of its $1.3bn accounting scandal in 2015. If the bourse deems its internal controls as inadequate, Toshiba’s shares will be delisted.
Toshiba has previously blamed its delayed results on a legal investigation into Westinghouse’s 2015 deal to buy Stone & Webster, a US nuclear construction company involved in two large US projects that are behind the cost overruns.
Based on the investigation, the company said last month that its audit committee had found evidence that some senior Westinghouse managers exerted “undue pressure” over the deal’s accounting.
Some analysts had hoped the offloading of the Westinghouse risk through a Chapter 11 filing would end the impasse between Toshiba and PwC Aarata, its auditor, which has caused the company to twice miss its accounting deadline.
But Toshiba’s latest standoff with its auditor has included questions over whether there was a need for the Japanese group to recognise its $6.3bn writedown on its US nuclear business at an earlier timing.
In a statement on Tuesday, Toshiba said the lawyers’ investigation had not found any evidence that the company’s recognition of the writedown risk was not done properly. The group also said it did not believe the “undue pressure” had any impact on its financial figures, and stressed that its internal controls are effective. But the auditor was not able to reach such a conclusive decision and failed to sign off on Toshiba’s accounts, the company said.
For the April to September period, Toshiba booked a net loss of ¥532.5bn compared to an year-earlier loss of ¥479.4bn. The company has already warned that its net loss could expand to ¥1tn for the full fiscal year that ended in March, which would be the largest loss for a Japanese manufacturer.
The loss stems from Toshiba’s guarantees on Westinghouse’s contingent liabilities, which stood at ¥650bn at the end of February and relate to potential further cost overruns on two nuclear projects in the US.