Securities Delisting Restriction on Cornerstone Networks for Accounting Standard Violations by the Securities Delisting Committee

[Asia Economy Reporter Lee Jung-yoon] The Financial Services Commission's Securities and Futures Commission announced on the 10th that it has decided to impose measures such as restrictions on securities issuance and designation of auditors on Cornerstone Networks for preparing and disclosing financial statements in violation of accounting standards.

According to the Securities and Futures Commission, Cornerstone Networks overvalued goodwill by estimating the recoverable amount during the impairment assessment of goodwill (investment securities in subsidiaries) in 2016 by adding a control premium to the publicly disclosed price in an active market without reasonable grounds. Furthermore, despite the existence of transactions with related parties and fund transactions, and revenue exceeding 10% from a single customer, these were not disclosed in the notes. In addition, financial statements prepared in violation of these accounting standards were used in securities registration statements and small public offering disclosure documents.

The Securities and Futures Commission imposed a six-month restriction on securities issuance for Cornerstone Networks. It also imposed a fine of 10 million KRW on the former CEO, a penalty of 72 million KRW on the company, and designated auditors for two years.

Moreover, the Securities and Futures Commission decided on a fine of 64.5 million KRW and an additional 30% contribution to the joint damage compensation fund for Samhwa Accounting Corporation, which violated auditing standards while auditing the company's financial statements, and imposed a two-year restriction on audit work related to Cornerstone Networks.

Additionally, two certified public accountants affiliated with the firm were subjected to audit work restrictions for Cornerstone Networks (two years and one year respectively), a one-year audit work restriction for listed and designated companies, and job training (eight hours and six hours respectively).

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