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Result of Internal Investigation into Improper Accounting Practices at Consolidated Subsidiary Companies (Final Report)


Seiko Epson Corporation (“Epson”) today announced further measures aimed at preventing a reoccurrence of improper accounting practices at consolidated subsidiary companies, and the actions to be taken against the staff responsible for the incidents. This announcement follows the February 25 news release entitled “Result of Internal Investigation into Improper Accounting Practices at Consolidated Subsidiary Companies (Interim Report).”

Epson will use these events as an opportunity to prevent a reoccurrence by reviewing and improving its management of subsidiary companies, and to further strive towards the implementation of trust-based management.
1. Measures to prevent reoccurrence

At the time of the previous announcement, Epson had yet to announce definite measures to prevent a reoccurrence. After a series of internal reviews that sought to investigate and analyze the causes of the incidents, the Company has now determined the measures it will take to prevent a reoccurrence, and is now implementing these where possible.

(1) Strengthen corporate control to supplement regional management

While emphasizing regional management by the regional headquarters, Epson will ensure transparency of financial information and the IT environment of regional subsidiaries at a corporate level.

(2) Continuation and strengthening of J-SOX

Epson will improve its risk assessments and persevere in its efforts to enhance internal control systems over financial reporting. In particular, it will concentrate its efforts on subsidiary companies where it is required by law to conduct management assessments and that are subject to internal control audits, and subsidiary companies where financial reporting may present a risk to internal control systems.

(3) Strengthen audits conducted by the internal Audit Office

Epson will improve oversight of the American regional headquarters as the latter checks the audit situation at its Latin American subsidiaries, and will increase the frequency of audits at Latin American subsidiaries by Epson’s internal Audit Office. The Company will also take note of the issues raised in the accounting processes relating to these incidents, and amend the items to be subject to future audits.

(4) Strengthen finance and accounting global network

By registering finance and accounting organizational structures and personnel at a corporate level, Epson will gain a direct understanding of the current situation and will be able to increase opportunities for personnel exchanges among finance and accounting staff. Doing this will enable the Company to strengthen the global network among its finance and accounting function. Where necessary, Epson will also conduct a common education program as it seeks to improve and share among its finance and accounting staff an awareness of compliance issues and ethics, and related skills.

2. Actions towards related staff

Epson has dismissed those directly responsible for the improper accounting practices at its Brazilian and Mexican subsidiaries, and has implemented punitive measures against other related staff.

The Seiko Epson directors responsible for this incident have also decided on a voluntary refund of their monthly remuneration as detailed below. This has been done to establish management responsibility for the extraordinary loss resulting from the improper accounting practices and the consequent postponement of the submission of the quarterly report, and to express Epson’s determination to avoid a reoccurrence.

* Reduction of monthly remuneration: Two representative directors and the director responsible for finance and accounting
* Amount: 5%
* Period: March 2009 (one month)


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