TOKYO, July 20

Toshiba ‘systematically’ inflated profits by $1.2 billion over the past six fiscal years with the involvement of top executives, an independent panel said on Monday, in a stinging indictment of one of Japan’s best-known firms.

Current President Hisao Tanaka and his predecessor are both expected to resign over the profit-padding scandal after investigators uncovered irregularities stretching back to 2008.

The panel, headed by a former Tokyo prosecutor, found that ‘inappropriate accounting was systematically carried out as a result of management decisions’, according to a summary of the report released by the firm.

“Toshiba had a corporate culture in which management decisions could not be challenged.”

The accounting scandal, one of the most damaging to hit Japan in recent years, began when securities regulators uncovered irregularities when probing Toshiba’s balance sheet earlier this year.

The findings released today mean that Toshiba will have to restate its profits by 151.8 billion yen between April 2008 and March 2014. It is unclear whether it will affect the fiscal year ending March 2015.

Best known for its televisions and electronics, including the world’s first laptop PC and DVD player, Toshiba has more than 200,000 employees globally and also operates in power transmission and medical equipment.

Among the divisions affected by the inflated profits are the infrastructure, audio-visual and semiconductor businesses, the summary said.

Tanaka is reportedly expected to resign on Tuesday over the scandal, while Norio Sasaki, who served as Toshiba president between June 2009 and June 2013 — covering most of the period during which the company inflated the profits — is also expected to step down.

“I express sincere apologies to our shareholders and all other stakeholders ... and assure you that we will make every effort to restore your trust,” Tanaka said in an earlier statement.

In May, Toshiba warned over the ballooning accounting ‘irregularities’ and yanked its earnings forecast — a 120 billion yen net profit on sales of 6.7 trillion yen — for the past fiscal year.

The embarrassing findings come less than two months after Japan adopted a long-awaited corporate governance code that backers hoped would usher in a new era of transparency for shareholders in Japanese firms.

Toshiba shares have lost more than 20 per cent since May as questions mounted over the extent of the problem and who was responsible.

The Securities and Exchange Surveillance Commission may ask the government to slap Toshiba with penalties over the scandal, the Yomiuri newspaper said.

The affair comes two years after a trio of former Olympus executives were handed suspended jail terms after being accused of engineering a $1.7 billion accounting fraud at the camera and medical equipment maker.