83 Listed Companies Found Violating Accounting Rules Last Year... 15 Billion KRW in Fines Imposed

Plagiarism Rate Drops 11%p to 54.6%

[Asia Economy Reporter Ji Yeon-jin] #When Company A, listed on the KOSDAQ market, faced the risk of being designated as a management item, it inflated its business performance by purchasing goods from Mr. C, a special related party of Company B, on paper for 1 billion KRW and then reselling them to Company B for 1.5 billion KRW, falsely recording sales and cost of sales as 1.5 billion KRW and 1 billion KRW respectively. This was detected during the financial authorities' financial statement review and audit last year. The Securities and Futures Commission under the Financial Services Commission regarded this as intentional accounting fraud by Company A, imposing restrictions on securities issuance along with fines and penalties, and designated an auditor.

The Financial Supervisory Service announced on the 7th that, as a result of reviewing and auditing the financial statements of 152 listed companies last year, a total of 83 companies were found to have violated accounting standards, an increase of 5 companies compared to the previous year.

The financial statement review is a system where the Financial Supervisory Service examines whether there are violations of accounting standards in the company's disclosed financial statements, including sample reviews selected randomly or based on high violation probability, and suspicion reviews for companies that voluntarily correct accounting errors. Additionally, audits involve reviewing whether companies' submitted financial statements and auditors' audit reports comply with accounting standards and audit standards.

This time, the review and audit targets included 54 companies listed on the KOSPI market, 94 on the KOSDAQ market, and 4 on the KONEX market, consisting of 103 sample review audits and 49 suspicion review audits.

Violations among KOSPI-listed companies numbered 31, while those among KOSDAQ and KONEX-listed companies were 52. The violation rate was 54.6%, down 11.8 percentage points from 66.4% the previous year, due to an increase in sample review audit targets.

The violation rate related to sample review audits was 34.0%, while that related to suspicion reviews reached 98.0%.

The 83 listed companies violating accounting standards committed a total of 150 violations, averaging 1.8 violations per company.

Intentional violations accounted for 12 companies (14.5%), and gross negligence for 9 companies (10.8%), making the serious violation rate 25.3%. The serious violation rate has been decreasing annually, from 32.9% in 2019 to 28.2% in 2020.

However, the amount of fines imposed and the average fine per company have been increasing every year. The total fines increased from 4.98 billion KRW in 2019 to 15.97 billion KRW last year, and the average fine per company rose from 220 million KRW in 2019 to 1.14 billion KRW last year. The Financial Supervisory Service explained that this is due to strengthened fines under the revised External Audit Act.

Last year, there were 6 cases of prosecution referrals and other notifications to investigative agencies, and 16 recommendations for executive dismissals, totaling 22 cases, an increase of 9 from the previous year.

During this period, actions against auditors such as accounting firms totaled 30 cases, a decrease of 7 cases (18.9%) from the previous year, and 68 certified public accountants were sanctioned for violating audit standards.

The Financial Supervisory Service stated, "As strict measures such as increased fines under the External Audit Act are imposed on cases of intentional or gross negligence, companies need to strengthen internal controls and the preparation and verification of financial statements to prevent accounting fraud."

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