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Japanese auditors struggle to restore confidence

Toshiba's then-President Hisao Tanaka, center, bows at a news conference in Tokyo in July 2015 as he announces his resignation following an accounting scandal.

TOKYO -- More than a year after Toshiba's accounting scandal broke, Japanese auditing firms that failed to detect companies' fraud, including Ernst & Young ShinNihon, are finding it increasingly difficult to cope with the fallout from recurring accounting shenanigans.

In late July, Glaucus Research Group, a U.S.-based activist short seller, rated Japanese trading house Itochu a "strong sell" in a report, saying: "Having a well-known auditor sign off on Itochu's financial statements is no guarantee that the company will not be engulfed in an accounting scandal."

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