2003 JAPAN LAW: ACCOUNTANTS’ LIABILITY
Keywords: Accountants, Corporate Law, Lawsuits, Litigation, Bankruptcy
Copyright 2004. All rights reserved Attorney Roderick H. Seeman
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A settlement has been reached between Chuo Aoyama Corporation and the bankruptcy administrator of the former Yamaichi Securities. The administrator had sought 6 billion yen in damages but a settlement was reached whereby 166 million yen, or about 5 years in auditing fees. Due to the widespread reporting that the collapse of Yamaichi Securities, which together with the collapse of the Hokkaido Tokushaku Bank touched off the crisis in the Japanese financial sector, was due to the behind the scenes  machinations of the Ministry of Finance to hide things due to “confidence that the market was coming back,” may explain why in this case the auditor may not have been liable. The Bank of Japan itself looks unlikely to recover 114 billion yen in loans it made to Yamaichi Securities, the first such case in over 50 years.

On the other hand, there are increasing reports of the likelihood of lawsuits against auditing firms due to the recent increase of bankruptcy filing by firms traded on stock markets. Since fiscal 2002 the companies have been required, through their financial statements prepared by the auditors, to disclose information that could bankrupt them. In most of the cases where bankruptcy was filed, no such disclosure had been made.