Accounting Violation Fines Total 16.8 Billion Won by August... "1.8 Times Last Year's Annual Amount"

[Asia Economy Reporter Ji-hwan Park] As of August this year, fines imposed for violations of accounting standards amounted to 16.8 billion KRW, which is 1.8 times higher than the total fines imposed last year. This is attributed to the expanded scope of targets and increased fine amounts following the revised External Audit Act implemented in 2018.

According to the "Status and Implications of Fines Imposed Based on Accounting Audit Results over the Past Three Years" announced by the Financial Supervisory Service (FSS) on the 13th, a total of 173 listed companies were subject to measures for violations of accounting standards over the past three years (January 2019 to August 2021). Among them, 56 companies were fined a total of 31.33 billion KRW.

The financial authorities impose fines on companies under the External Audit Act and the Capital Markets Act when listed companies prepare financial statements in violation of accounting standards and disclose such financial statements in business reports or other disclosure documents as monetary sanctions.

In particular, the scale of fines imposed has been increasing significantly every year. The amount of fines for violations of accounting standards was about 5.16 billion KRW in 2019, surged to 9.36 billion KRW last year, and reached 16.81 billion KRW as of August this year, already surpassing last year's total. An FSS official explained, "Since November 2018, under the revised External Audit Act, the scope of targets for fines has expanded from listed companies to all companies subject to external audits, and the fine amounts have also increased, resulting in additional fines under the External Audit Act."

Fines imposed on companies accounted for the majority at 27.65 billion KRW (88.3%). This was followed by executives and employees at 2.3 billion KRW (7.3%) and auditors at 1.38 billion KRW (4.4%). Legally, fines under the Capital Markets Act accounted for 27.51 billion KRW (87.8%), while fines under the External Audit Act accounted for 3.82 billion KRW (12.2%). Under the Capital Markets Act, fines are imposed when important matters are falsely stated (intentionally or with gross negligence) in disclosure documents such as securities registration statements and periodic reports.

Under the External Audit Act, auditors who prepare financial statements in violation of accounting standards or audit reports in violation of audit standards due to intentional or gross negligence are subject to fines. Notably, the amount and cases of fines under the External Audit Act have been gradually increasing. There were no cases in 2019, but last year, three cases totaling 1.97 billion KRW were fined. As of August this year, five cases totaling 1.85 billion KRW have been fined.

An FSS official stated, "As the scope of targets for fines has expanded to all companies subject to external audits and fine amounts have increased, the imposition of fines on company-related parties such as auditors has become more active," adding, "Companies and auditors need to make greater efforts to enhance the reliability of financial statements."

This content was produced with the assistance of AI translation services.