Toshiba is facing a record 7.37bn yen (£39.6m) fine from a Japanese watchdog for a major accounting scandal which saw its profits being inflated over a seven year period.

Toshiba To Face £40m Fine

An independent probe blamed aggressive earnings goals and a corporate culture which discouraged staff from questioning bosses for the scandal, which emerged earlier this year.

Japan’s Securities and Exchange Surveillance Commission (SESC) recommended the penalty to the county’s Financial Services Agency.

SESC secretary general Kiyotaka Sasaki said: “This is a grave incident, whose impact is large.”

Toshiba was one of the first Japanese companies to import a US-style board structure which, with more outside directors, is intended to be more transparent. But Mr Sasaki said the board failed to function as intended.

The electronics to nuclear power conglomerate has since appointed more outside directors and set out to restructure its business, including selling off unprofitable divisions.

Toshiba’s fine would beat the previous record 1.6bn yen (£8.6m) penalty imposed on industrial group IHI Corp in 2008 for accounting violations. The scandal saw profits inflated by 155bn yen (£833m) over the seven-year period.

It comes four years after a scandal over accounting at another big Japanese manufacturer, Olympus.