If a company keeps improper accounts and their accounts contain a material misrepresentation, they are often required to make corrections to their past accounting records (e.g., submit corrected Securities Reports) and confirm past financial statements in accordance with the Companies Act, after an internal investigation is conducted by an independent committee. Further, the Financial Services Agency may impose an administrative fine, or criminal fine where the violation is serious. In addition, a Stock Exchange may impose sanctions including delisting. Furthermore, civil actions could be brought against the company or related parties, including securities litigation filed by shareholders of the company seeking damages caused by a drop in the stock price, or against officers of the company for breaches of their duties.
As stated above, in the case of accounting fraud, a company could face various issues including an internal investigation by an independent committee, and be required to respond to relevant authorities such as the Financial Services Agency, the Securities and Exchange Surveillance Commission, or a Stock Exchange. They may also be subject to litigation and scrutiny by the media requiring the company to respond quickly and thoughtfully.
We have advised on numerous cases of window-dressing and are able to provide practical and expert advice based on our considerable experience.