The entire board of Japan's Olympus Corp signaled its plans to quit, maybe as early as February, over a $1.7 billion accounting fraud, and set up an outside committee to advise whether to sue those responsible for the scandal.

One director resigned, and the company's president, Shuichi Takayama, said the entire board would step down once they had submitted their second-quarter earnings -- due by December 14 -- and taken steps to put the disgraced company back on track.

Takayama said an extraordinary shareholders meeting could be held as soon as late-February, and that would be the earliest possibility for the current management to resign.

The news follows the release on Tuesday of the findings of a separate investigative panel, which concluded that several former executives spent 13 years on a complex scheme to hide losses off the company's balance sheet.

Announcing the new committee, the 92-year-old maker of cameras and medical equipment also revealed that senior executive director Makoto Nakatsuka had quit the board, the third to do so since the scandal erupted in October.

Nakatsuka was found on Tuesday to have helped the two main architects of the cover-up, former internal auditor Hideo Yamada and ex-executive vice president Hisashi Mori, to manage Olympus' financial assets in the late 1980s, when it embarked on a series of risky investments that led to the losses in question.

Our corporate governance was severely criticized. As the representative of the company, I apologize sincerely, Takayama told reporters in his first news conference since Tuesday's damning report.

Earlier, Kyodo news agency said Takayama would be among those whose actions would be examined by the new committee.

Olympus, which still risks being delisted from the Tokyo stock market and forced into a humiliating sale of core assets, also said it would set up a second outside panel to examine the responsibility of the firm's auditors.

The board, already battling to maintain credibility after one of Japan's biggest accounting scandals erupted on its watch two months ago, faces a delicate task in pursuing wrongdoers.

Made up almost entirely of directors who served during Olympus's 13-year cover-up of investment losses, the board was publicly trashed in Tuesday's report, but it remains in charge until shareholders can agree on a new team.

The report, prepared by outside legal and accounting experts, described Olympus management as rotten to the core, citing a desire to flatter financial performance and a culture of absolute corporate loyalty.

ORGANISED CRIME

Kyodo said the new panel would also consider the possibility of seeking damages from those responsible for the cover-up.

Takayama has already said Olympus will consider legal steps, including criminal complaints, against those found responsible. He has blamed Mori and Yamada for masterminding the cover-up, and the panel found that two former company presidents were also made aware of the cover-up.

One of the few glimmers of hope from the panel's report was its conclusion that there was no evidence of a much-rumored link between the scandal and organized crime.

If a link were to be found -- and police are still investigating this aspect in a separate inquiry -- Olympus would be likely to be delisted from the Tokyo stock market, a humiliation that could force it to sell its core businesses.

Olympus shares have lost about half their value since its sacked chief executive, Michael Woodford, blew the whistle on the accounting problems, and the stock sank further on Wednesday on fresh doubts over the firm's struggle to remain listed.

The stock fell as much as 9 percent, with investors now focused on whether Olympus can meet next Wednesday's deadline to report its results and reveal the size of the restatement required to iron out its accounts.

Even in the absence of any link to organized crime, Olympus would be delisted if it failed to meet that reporting deadline. And even if it met the deadline, it could still be dumped from the exchange if its accounting misstatements were large enough.

The third-party panel report was as expected. The real issue is now with the Tokyo Stock Exchange (TSE), said Hajime Nakajima, a wholesale trader at Cosmo Securities in Osaka.

To regain confidence, the TSE has to make a decision. Otherwise it will be seen as a problem for the entire market.

Adding to the uncertainty is the question of Olympus' leadership, with Woodford campaigning to unseat the board and get his old job back at the head of his own team.

(Reporting by Mari Saito; Writing by Mark Bendeich; Editing by Linda Sieg)

Japan