After looking into the role of the auditors in the recent accounting scandals at camera-maker Olympus Corp., Japan's Financial Services Agency ordered KPMG Azsa LLC and Ernst & Young ShinNihon LLC to improve their systems -- though it noted that it had not found "any intentional acts or grave negligence," according to published reports.
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In one of Japan's worst accounting scandals, Olympus disguised close to $2 billion in investment losses over the course of more than a decade (see "Olympus Sues Executives Over Accounting").
The FSA's two main criticisms of the auditors centered on a lack of "proper operational management controls" for spotting fraud and irregularities, and a lack of communication between the two firms.
KPMG Azsa was Olympus' auditor until 2009, when it handed the engagement off to E&Y ShinNihon.
The FSA's "business improvement order" requires the firms to submit reports by August 6 on what corrective measures they will take. Both firms indicated that they would comply with the order.