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Toshiba to change audit firm after failing to gain approval of financial statements

Financially troubled Toshiba Corp. is poised to replace its audit company as there are no prospects that its financial statements will gain approval from the auditor following a conflict in views, company sources said.

The move comes after Toshiba was forced to announce its financial statements for the April-December 2016 period on a consolidated basis without approval from its auditor, PricewaterhouseCoopers (PwC) Arata LLC.

The electronics giant has already asked a second-tier audit firm to replace PwC as its auditor. Toshiba is aiming to gain approval of its accounts in the business year that ended in March 2017 from the new auditing corporation. The stock of a company that submits its financial statements without approval from its auditing firm could be delisted.

However, the announcement of Toshiba's financial statements could be deeply delayed because the audit of the accounts of such a huge company involves a massive amount of work. Moreover, Toshiba uses U.S. accounting criteria while the second-tier accounting firm Toshiba may hire uses Japan's criteria. If Toshiba is to change its accounting criteria, it could further delay the announcement of its financial statements by several months.

Toshiba and PwC got into a conflict over allegations that a former executive of Toshiba's U.S. nuclear unit Westinghouse Electric Co. pressured employees to underestimate its losses.

PwC demanded that Toshiba conduct another detailed probe into Westinghouse's practices. Toshiba replied that its probe found that the executive put inappropriate pressure on employees, but argued that the practice had no impact on its accounts.

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