Yesco Holdings Receives 'Adverse Opinion' on Internal Accounting

[Asia Economy Reporter Ji-hwan Park] LS Group affiliate Yesco Holdings received an 'adverse opinion' on its internal accounting control review.

According to the Korea Exchange on the 24th, Yesco Holdings announced on the 23rd that it received an 'audit opinion corresponding to an adverse opinion on the review of the internal accounting control system' from Samil Accounting Corporation. The company had received a 'clean opinion' in the previous fiscal year.

According to Samil Accounting Corporation, significant weaknesses were found in the review results of the internal accounting control system operation evaluation report for Yesco Holdings. Significant errors related to financial assets measured at fair value through profit or loss were discovered, and it was explained that appropriate reflection in the financial statements and the design and operation of sufficient and suitable control procedures were not implemented. This indicates a significant weakness that financial assets measured at fair value through profit or loss may not be properly recorded in the financial statements. Additionally, Samil Accounting Corporation found significant adjustments after the submission of the pre-audit financial statements due to deficiencies in internal controls reviewing accounting treatments.

Currently, for companies listed on the KOSDAQ market, receiving an adverse opinion on internal accounting results in designation as an investment caution stock. As of this date, 29 KOSDAQ-listed companies with December fiscal year-ends have been designated as investment caution stocks. However, being designated as an investment caution stock does not impose restrictions on stock trading.

On the other hand, KOSPI-listed companies do not face separate market measures from the exchange even if they receive an adverse opinion on internal accounting control reviews. However, there may be negative impacts on stock prices and other aspects in terms of accounting stability.

The internal accounting control system, introduced in 2005, requires auditors to review a company's internal accounting control system and attach the opinion on the results to the audit report, according to the Act on External Audit of Stock Companies.

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