Olympus inquiry clears its auditors of cover-up

An internal inquiry by camera maker Olympus has cleared its auditors, Ernst & Young (E&Y) and KPMG, of any wrongdoing, despite their utter failure to spot a $1.7bn (£1.1bn) fraud at the heart of the company.

The pair were cleared despite the fact that PWC took just days to uncover the fraud after whistleblower Michael Woodford (pictured), then chief executive, hired them to investigate last autumn.

The report, dismissed by some as a whitewash, was made by a panel of lawyers commissioned by the company. While the two big audit firms were given a clean bill of health, five current and former internal audit staff were found to be culpable.

KPMG's Azsa arm handed over the audit contract to E&Y's ShinNihon division in 2009. Perhaps surprisingly to western eyes, E&Y ShinNihon remains its auditor despite the scandal.

Although the panel's findings mean Olympus will not be suing the two firms, they are still being investigated by the Japanese Financial Services Authority, the Tokyo Police and Britain's Serious Fraud Office. They also face litigation from shareholders.

Mr Woodford was unimpressed by the report, telling The Independent: "This was an Olympus-appointed panel, not a judicial investigation."

Some reports suggested the auditors were conspired against by Olympus' banks, who gave the impression the company had more money in its accounts than it actually did.

Olympus has arranged a press conference later today where board member Masataka Suzuki may be named as president of the company.

He was on the board which unanimously voted to sack Woodford after he blew the whistle on the company.

As well as the other directors, Mr Suzuki failed to take action on any of the six letters the British chief executive sent him demanding questions about the irregularities before he went public.