[Woori Bank Embezzlement] 180,000 Hours of Accounting Audit, 6 Million Self-Inspections... Could Not Prevent Woori Bank Embezzlement Incident

Woori Bank Conducted 6.05 Million Audits Over 6 Years of Embezzlement
Anjin Accounting Firm Spent 180,000 Hours on Financial Audits
Financial Supervisory Service Conducted 11 Inspections but Failed to Detect Embezzlement
Systems to Prevent Financial Accidents Prove 'Useless'

[Image source=Yonhap News]

[Asia Economy Reporter Song Seung-seop] The spotlight on the embezzlement incident involving 60 billion KRW at Woori Bank is now turning not only to Woori Bank itself but also to the accounting firm in charge and the Financial Supervisory Service (FSS). Despite the bank’s own internal audits, hundreds of thousands of hours of accounting audits, and inspections by the FSS, the embezzlement went undetected for 10 years. This has raised criticism that the institutional mechanisms established to prevent financial accidents failed to function properly.

According to the inspection policy of Woori Bank’s internal audit department on the 2nd, a total of 6,051,890 internal inspections were conducted from 2012 to 2018, the period during which the embezzlement occurred. While A, a deputy manager-level employee in the Corporate Improvement Department of Woori Bank, embezzled 61.4 billion KRW in company funds in three separate instances, millions of inspections and audits were carried out but failed to detect the embezzlement.

Woori Bank’s audit system is broadly divided into routine audits, comprehensive inspections, sector inspections, and ongoing inspections. Routine audits, which review the work of department heads and above, totaled 27,084 cases. Comprehensive inspections, which examine overall operations including the Corporate Improvement Department where the embezzlement took place, were conducted 165 times at the headquarters alone. Sector inspections, which check not only individual matters but also the implementation status of internal controls, were conducted 227 times. Ongoing inspections related to IT and computer systems were originally conducted about 1.6 to 1.7 million times but were reduced to around 200,000 times starting in 2015. Considering branch inspections and non-performing loan examinations, the actual scale is even larger. The “Internal Control System Evaluation” was also operated at least once a year.

How Far Will the FSS’s Scrutiny Reach?

Deloitte Anjin Accounting Firm, which was responsible for the accounting audits during the same period, conducted a total of 181,079 hours of audits. The audit hours increased every year. The 2012 audit, when the embezzlement began, took 18,430 hours, while the 2018 audit, when the last offense occurred, took 38,656 hours?more than double. Intermediate audits focusing intensively on internal accounting systems totaled 29,783 hours, increasing from 2,984 hours in 2012 to 4,165 hours in 2018.

The FSS also conducted 11 inspections but only uncovered issues such as negligence in real estate development financing reviews and violations of the obligation to verify real-name financial transactions. The comprehensive on-site audit conducted from late last year to early this year also failed to detect the embezzlement.

All parties responsible for internal control?the Woori Bank, the external audit organization Anjin Accounting Firm, and the supervisory authority FSS?are in a position where it is difficult to avoid responsibility. The FSS is expected to investigate what loopholes existed in all three. The FSS has already started inspections of Woori Bank and reviews of Anjin Accounting Firm’s audits. Furthermore, FSS Governor Jeong Eun-bo stated, “We will also investigate why the embezzlement was not uncovered through the FSS’s supervision.”

However, the impact on the financial sector will vary depending on who is held accountable and to what extent. There is already debate within the industry over responsibility. If the FSS determines that the cause of this incident was a failure of internal control and disciplines the bank president at the time, there is a possibility of backlash from the financial sector and legal battles similar to the Lime scandal. There is also dissatisfaction among accountants. A representative from an accounting firm expressed frustration, saying, “Accountants are not detectives, and it is hard to understand the criticism that they failed to detect an embezzlement case where even documents were forged.”

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