The former managing director of Fuji Xerox in Australia and New Zealand was paid more than AU$1 million to leave the company after it was discovered that the "inappropriate" accounting practices that have rocked the vendor emerged during the top executive's tenure. Fuji Xerox (FX) parent company, Fujifilm Holdings, has released an English translation of an exhaustive report - derived from the investigation into the accounting scandal, which resulted in an estimated $450 million hit to net income over a six-year period.

According to the report, the bulk of the "inappropriate" accounting practices emerged and were widely used under the leadership of the managing director of Fuji Xerox in Australia and New Zealand at the time. The report refers to this individual only as "Mr. A". The report goes on to detail the primary causes behind the "inappropriate" accounting practices and how they emerged. It appears to make no qualms that the "sales at any cost" culture which sprung up at Fuji Xerox under the leadership of Mr. A contributed notably to the resulting accounting shortfall.

"According to interviews with multiple persons concerned, FXNZ's corporate culture was characterized by a 'sales at any cost' mindset," the report stated. Further, the report stated that Mr. A had an extremely high sales target achievement rate, which was particularly emphasised among the items used for calculating bonuses, and he therefore was paid significant amounts as incentives-based remuneration. The report makes much of the managed service agreements (MSAs) that were dished out by the company during Mr. A's tenure, until the end of 2015 when the use of MSAs was prohibited by the company. During the period from January 1, 2010 until January 2016, according to the report, FXNZ routinely utilised MSAs that included target volume clauses. In July 2015 the results of an internal audit by Fuji Xerox Asia Pacific found that the target volume was not achieved in about 70 per cent of contracts. Moreover, the report stated that the "double recording of advance sales, the recording of fictitious sales, the fictitious recording or deferral of cost of sales or expenses" and other accounting practices known as

'macro adjustments' were broadly and inconsistently implemented at FXNZ.

Extract from Spencer, L. Local Fuji Xerox MD paid $1M to leave amid accounting scandal, 29 June 2017. Australian Reseller News.

Required:

What theory(ies) and other content covered in ACC30008 this semester can be used to explain the pressures and incentives that may have been behind the 'sales at any cost' culture described in the Fuji Xerox case, and the likely consequences of that behaviour for stakeholders? (12 Marks)