'Kyobo Life Put Option' Sentenced... Anjin Accounting Firm Hit by Internal Turmoil

Accounting Firms, Damage to Professionalism and Ethics

[Asia Economy Reporters Oh Hyung-gil and Park Ji-hwan] The legal battle over the put option (stock purchase right) between Kyobo Life Insurance and financial investors (FIs), with a first trial verdict scheduled for next February, is spreading into internal turmoil at Deloitte Anjin Accounting Firm. With affiliated accountants facing prison sentences sought by prosecutors for violating the Certified Public Accountant Act, strong criticism is emerging amid concerns over the fairness of the election to select the firm's representative. Some quarters are even raising accountability issues toward the current management, intensifying the conflict.

The issue began on the 20th when prosecutors sought prison sentences of 1 year and 6 months and 1 year respectively for three accountants affiliated with Anjin Accounting Firm for violating the Certified Public Accountant Act, and 1 year each for two officials from the FI side’s Affinity Consortium.

Prosecutors presented emails exchanged between Affinity Consortium and Anjin Accounting Firm officials as evidence. They stated that investors such as Baring PE had exchanged emails containing pre-calculated content indicating that "to achieve the target internal rate of return of 7.3%, a price above 376,000 won must be reached."

In response, the FI side argued, "The time given at the time was tight, and given the high possibility of disputes and lawsuits with Chairman Shin Chang-jae, we provided opinions that could help ensure the report was submitted without issues, and asked questions about any concerns regarding numerical errors or logical validity." The court has scheduled the verdict for February 10 next year.

Following this, concerns arose within Anjin that if the accountants’ prison sentences are confirmed, it would damage not only the accounting firm’s expertise but also its ethics. Particularly, as the final verdict approaches, controversy is spreading over the fairness of the accounting firm’s representative election scheduled for next month.

Due to the partnership structure of Anjin, to avoid excessive competition and maintain unity, even if multiple candidates declare their intention to run, the Candidate Recommendation Committee (CRC), which functions as the election management committee, conducts a public opinion gathering process called sounding to narrow down the candidates to one or two.

This year, current representative Hong Jong-seong and former Audit Headquarters Director Jeon Yong-seok declared their candidacies, but criticism is being raised that the CRC is pushing for the sole candidacy of Representative Hong. An accountant affiliated with the firm said, "Partners attending the general meeting on the 22nd raised issues about the fairness and neutrality of the CRC," adding, "There are concerns that the CRC is forcing the sole candidacy of Representative Hong in the last week of this month’s schedule and is taking for granted a vote for or against the sole candidate in early January next year."

Some point out that Representative Hong, who was the head of the Financial Advisory Headquarters (FA) in 2018 when the Kyobo Life put option price was being calculated, was the actual manager of the accountants now facing prison sentences, and thus cannot be free from responsibility. Another insider said, "If the accountants receive prison sentences in court, the accounting firm could be disciplined by the Korean Institute of Certified Public Accountants," adding, "There is concern among partners that if the then head of the department becomes the representative and is reappointed, the entire accounting firm could be shaken."

An official from Anjin Accounting Firm stated, "So far, Representative Hong and the former Audit Headquarters Director have declared their candidacies," and added, "The final representative election is scheduled for mid-January next year, and we do not know of any other matters."

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