(Corrects the scale of the CEO's pay cut)
By Reiji Murai
TOKYO, May 15 (Reuters) - Toshiba Corp has set up a committee headed by a former prosecutor to broaden a probe of accounting irregularities that overstated operating profits by at least $420 million in recent years.
The industrial conglomerate spooked investors last week, saying it was extending an investigation into inappropriate reporting of some infrastructure project costs and construction work. It said this week the irregularities may mean it has to mark down three years of profit by about 7 percent.
To buttress an internal probe, Toshiba on Friday appointed a panel of four outsiders, headed by Koichi Ueda, a lawyer and former head of the Tokyo High Public Prosecutors Office, as well as another lawyer and two accountants.
"We will offer the third-party committee's investigation our complete cooperation and make utmost efforts to regain trust in the company," CEO Hisao Tanaka.
He apologised to shareholders for the problems, which have wiped 15 percent off the company's value in the past week, and said he would take a 50 percent cut in his compensation until the company is again able to pay a dividend.
Toshiba's second accounting investigation in less than two years had provided unwelcome echoes for some in the Tokyo market of previous probes that billowed into major corporate scandals. In the highest profile case in recent years, camera and medical equipment maker Olympus Corp in 2011 admitted to a 13-year cover-up that hid $1.7 billion in losses.
The company said the new panel -- which will look at the parent company and its 593 consolidated subsidiaries -- will broaden the business areas and accounting issues being investigated by the internal panel. But Toshiba said it does not yet know the scope or time frame for the third-party investigation.
Toshiba, which has twice delayed reporting its earnings for the year ended in March because of the irregularities, said it will release them as promptly as possible after the new probe is complete.
But it said it will "disclose any material information, if found" by either probe as soon as possible.
The company's 50 billion yen initial estimate of overstated operating profits for the three business years through March 2014 involved nine cases, Toshiba said on Friday. (Writing by William Mallard; Editing by Muralikumar Anantharaman and Keith Weir)