83 Listed Companies Violated Accounting Rules Last Year... 56.5% Violation Rate Reported

The Financial Supervisory Service (FSS) found violations of accounting standards in 83 listed companies during the review and audit of financial statements conducted last year. The violation rate of accounting standards was recorded at 56.5%.

The financial statement review refers to the system in which the FSS examines whether there are any violations of accounting standards in the publicly disclosed financial statements of companies. This includes sample reviews selected either from companies with a high likelihood of violations or randomly, as well as suspicion reviews for companies that voluntarily correct accounting errors. Additionally, audits involve examining whether companies comply with accounting standards and audit standards based on the financial statements submitted by the companies and audit reports submitted by auditors.

According to the FSS on the 12th, a total of 147 listed companies completed the financial statement review and audit last year. This includes 49 companies listed on the KOSPI market, 89 on the KOSDAQ market, and 9 on the KONEX market. Sample reviews and audits were completed for 98 companies, and suspicion reviews and audits for 49 companies.

As the financial statement review system, introduced in 2019, has been stably established, the number of companies undergoing review and audit decreased by 5 companies, or 3.4%, compared to the previous year. The FSS explained, "There was no significant difference compared to the previous year's performance, which indicates that the financial statement review system introduced in 2019 has been stably established."

Last year, the number of listed companies found to have violated accounting standards in the review and audit results remained the same as the previous year at 83 companies. Violations among KOSPI-listed companies were found in 26 companies, and among KOSDAQ and KONEX-listed companies in 57 companies. The violation rate of accounting standards increased by 1.9 percentage points to 56.5% compared to the previous year.

The violation rate related to sample reviews and audits was 35.7% (35 companies), while the violation rate related to suspicion reviews and audits was 98.0% (48 companies). The violation rate for sample reviews and audits has remained relatively low since the implementation of the new External Audit Act in 2020, but the violation rate for suspicion reviews and audits remains high.

The number of companies with intentional motives for illegal acts was 9 (10.8%), and those with gross negligence were also 9 (10.8%). The proportion of violations due to intentional or gross negligence has decreased annually from 28.2% in 2020 to 25.3% in 2021, and 21.6% last year. The proportion of violations due to negligence increased annually during the same period, from 71.8% to 74.7%, and then to 78.4%.

The number of companies fined for violations with intentional or gross negligence motives has decreased over the past three years, but the total amount of fines has increased. The average fine per company has also continuously risen. The total amount of fines imposed was KRW 9.46 billion in 2020, KRW 15.97 billion in 2021, and KRW 22.35 billion last year. The average fine per company during the same period was KRW 560 million, KRW 1.14 billion, and KRW 1.6 billion, respectively. The FSS evaluated that this is due to the operation of a strengthened fine imposition system under the External Audit Act.

There were 6 cases of notifying investigative agencies such as prosecution referrals following the review and audit results, and 11 cases of recommending dismissal of executives. This is 5 fewer cases compared to 22 cases in the previous year.

Last year, there were 21 auditor disciplinary actions related to violations of audit standards in 14 listed companies, which is 9 fewer than the previous year. A total of 69 certified public accountants were subject to disciplinary actions due to violations of audit standards.

An FSS official stated, "Strict measures are being taken in accordance with the strengthened External Audit Act, including the annual increase in fines for companies with serious violations. Companies need to make efforts to strengthen internal controls to prevent violations of accounting standards."

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