Japanese Financial Services Authority (FSA) said KPMG Azsa and
Ernst & Young ShinNihon (E&Y) are lacking proper
operational management controls, which allowed Olympus to conceal
over $1.7bn in investment losses, according to


The FSA is said to have ordered the two firms
to submit a business improvement plan by 6 August and to report on
their progress every six months.

However, the regulator said it was not sure
the accounting fraud could have been spotted and prevented even if
the firms had proper operational management systems in place at the

So far an independent investigation
commissioned by Olympus and an internal investigation by E&Y
ShinNihon found no serious fault in the auditors work and pointed
at reckless behaviour by some of the camera makers senior

KPMG ASZA was Olympus’s auditor until March
2009 and E&Y ShinNihon is the company’s current auditor.

The Olympus scandal came to light after ousted
chief executive Michael Woodford questioned excessively large
adviser fees of acquisition deals after being fired by the firm in
October. It was later revealed the fees were a vehicle to hide
billions in losses.

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