What is the truth behind Nidec’s ‘disclaimer of opinion’? The management’s responsibility and future developments revealed by this unusual situation, which is rare for a listed company

Introduction

For investors and stakeholders of companies, audit opinions on securities reports are extremely important indicators.No opinion expressedThose who have come across this phrase are probably wondering what it means and why such a situation occurs in a large corporation.

This article focuses on the unusual case in which Nidec received a "disclaimer of opinion" from its auditing firm regarding its securities report for the fiscal year ending March 2025. We will explain the underlying accounting irregularities, the management's responsibility, and key points to watch out for in the future, while providing easy-to-understand explanations of technical terms.

By reading this article, you will understand what constitutes the reliability of financial statements, how large corporations' risk management systems function, and the key factors investors consider when judging a company's soundness.

Main theme of the article

The issue of NIDEK's "disclaimer of opinion" is not merely a matter of audit procedure, but a serious situation that directly impacts the overall credibility of the company's management.

What is "disclaimer of opinion"?

Audit firms can issue four types of opinions. For most large companies, an "unqualified opinion" is issued, which means that there are no problems with the financial statements. However, a "disclaimer of opinion" is one of these types and is only issued in extremely exceptional circumstances.

Four types of audit opinions:

• Unqualified opinion: All important points are accurately represented (this is a common opinion).
• Limited opinion: Some parts are inappropriate, but the impact is limited (there are problems, but they are not serious).
• Adverse Opinion: There are inappropriate matters and the financial situation is not accurately represented (significant problems).
• Disclaimer of opinion: Failure to perform essential audit procedures and obtain sufficient evidence (credibility is undermined).

A "disclaimer of opinion" means that the auditor is unable to determine the appropriateness of the report because they have not obtained sufficient evidence. In other words, it means "we don't know = we can't trust it."

Why did NIDEK issue a disclaimer?

The reason for not expressing an opinion on NIDEK is clear: an investigation by a third-party committee is currently underway, and we were unable to obtain sufficient audit evidence.

Specifically, the following issues were intertwined:

• Unpaid tariffs at Italian subsidiary
• Suspected accounting irregularities at Chinese subsidiary
• Suspected management involvement in asset valuation write-downs
• Discrepancy between the investigation period of the third-party committee and the deadline for submitting the annual securities report.

The particular problem is that the third-party committee was established on September 3rd, while the deadline for submitting the securities report was September 26th. Since investigations typically take two to three months, it was impossible to complete the investigation by the submission deadline.

This situation demonstrates the responsibility of management.

This unusual situation, rare for a large corporation, despite receiving a "no opinion" from the company, is no mere coincidence. Why was the internal investigation and the establishment of a third-party committee only done just before the submission of the annual financial report? This raises serious questions about the company's internal decision-making process.

Interviews with experts indicate that "it is rare for a company to receive a disclaimer of opinion regarding inappropriate accounting practices because the investigation by a third-party committee has not yet been completed." This suggests that the company likely did not plan or prepare adequately before the investigation.

Specific details, reasons, procedures, etc.

Timeline of the Nidek case

• June 2025: Announcement of extension of deadline for filing annual financial reports. Unpaid customs duty issue comes to light.
• September 3, 2025: Decision made to establish a third-party committee to investigate suspected accounting irregularities.
• September 26, 2025: A "Disclaimer of Opinion" is added to the securities report and announced.

Comparison with similar past cases

Large corporations have issued "no opinion" statements in the past. Representative examples include the following:

In the Toshiba accounting scandal, a "no opinion" was issued, but this is an extremely rare occurrence for a large corporation. Based on past cases, it can be said that Nidec is in a similarly serious situation.

The meaning of evaluating audit firms

Certified public accountant Teruhisa Tamai points out the following:

"Any evaluation other than an unqualified opinion can cause significant damage to the company. Among these, a refusal to express an opinion is only permissible in extremely exceptional circumstances."

In other words, a "no-opinion" statement is not merely a negative evaluation, but a serious matter that calls into question the credibility of the entire company. It could even lead to a sharp drop in stock prices.

Scope of investigation by the third-party committee

Currently, the investigation by the third-party committee is proceeding from the following perspectives:

1. Whether or not there was improper accounting – financial processing issues
2. Investigating management involvement – who was involved and how?
3. Assessment of the impact on financial statements – What revisions are needed to the disclosure documents?

Depending on the findings, management may be required to correct their financial statements as part of their responsibility.

Key points for investors

From an investor's perspective, this incident has the following implications:

• Decreased financial reliability – No audit opinion = insufficient information
• Uncertainty about the future – problems may arise in the next report as well.
• Stock price instability – declines are expected if scandals continue.

Supplementary information and points to note

What is a securities report?
Securities reports are financial disclosure documents prepared by companies in accordance with the Financial Instruments and Exchange Act. They are extremely important documents for investors to understand the financial condition of a company and make appropriate investment decisions.

This document mainly covers the following topics:

• Business activities and performance
• Financial statements (balance sheet, income statement, etc.)
• President's message and management policy
• Disclosure of risk factors

The impact of "disclaimer of opinion" on stock prices

When an auditing firm issues a "disclaimer of opinion," the following changes in investor psychology can be observed:

1. Increased risk awareness – Companies' soundness is being questioned.
2. Increased selling pressure – uncertainty about the information raises concerns.
3. Withdrawal from long-term investors – they can't wait for confidence to be restored.

In fact, there have been several cases in the past where stock prices have plummeted after a company announced a no-opinion statement.

Lessons for companies to learn from this incident

Business executives and finance managers need to be aware of the following:

• The importance of early disclosure – proactively sharing information rather than hiding problems.
• Proper schedule management – coordinate the survey period and submission deadline in advance.
• Timing of establishing a third-party committee – Plan by working backward from the submission of the annual securities report.

Key points to watch out for in the future

The following points will be important to note until this incident is resolved:

1. Third-party committee's findings published – what impact will this have on financial statements?
2. Whether or not management was held accountable – who made what mistakes.
3. Correcting disclosure documents – Measures to restore investor confidence

Summary

Audit opinions on securities reports of large corporations are an important barometer for measuring a company's soundness. Through the Nidek case, we should understand that the term "disclaimer of opinion" is not merely technical jargon, but a critical signal directly related to the overall credibility of a company.

The most important lesson to be learned from this incident is not "disclose sooner rather than later" or "it's okay to delay the investigation." Rather, it's "prioritize planning and thorough risk management."

Even if management makes some mistakes, they should be discovered, not concealed, and fairly evaluated by an independent committee—that is the beauty of corporate governance. Transparent operations are essential for protecting long-term corporate value.

For investors, it's crucial to check "what kind of audit opinion" is attached to financial statements. If an evaluation other than an "unqualified opinion" is given, it's necessary to thoroughly understand the reasons and calmly assess the risks and returns.

To business leaders and finance professionals: This incident is not something to be taken lightly. It presents a good opportunity to review your company's governance system. You need to seriously consider strengthening internal controls, appropriate information disclosure, and effective collaboration with third-party committees.