The Securities and Futures Commission Approves Prosecutor Notification for Gijeon Industry's 'Accounting Standards Violation'

by Lee Jungyun

Published 20 Apr.2022 17:48(KST)

The Securities and Futures Commission Approves Prosecutor Notification for Gijeon Industry's 'Accounting Standards Violation'

[Asia Economy Reporter Lee Jung-yoon] The Securities and Futures Commission (SFC) under the Financial Services Commission held its 8th regular meeting and announced on the 20th that it resolved to take measures such as notifying the prosecution and designating an auditor against Gijeon Industry for preparing and disclosing financial statements in violation of accounting standards.

According to the SFC, Gijeon Industry, an unlisted company, overstated its assets by falsely recording non-existent inventory assets during 2016-2017. Although it should have evaluated investee companies with significant influence using the equity method, it mistakenly accounted for them at acquisition cost, resulting in an understatement of equity-method applied investment stocks.

Furthermore, from 2016 to 2018, despite lacking the legal right to offset bonds and debts, it offset assets such as short-term borrowings, advance payments, and deposits, and failed to set an allowance for doubtful accounts on these financial assets based on reasonable and objective criteria, leading to understatement. It also failed to set allowances for doubtful accounts on uncertain financial assets such as advance payments and accounts receivable, resulting in understatement.

In 2018, although there was a difference between the book value and fair value of land subject to the revaluation model, it did not perform the revaluation and understated the value.

The SFC resolved to impose fines, designate an auditor for two years, recommend the dismissal of responsible executives, and notify the prosecution regarding the company, its CEO, and responsible executives. The imposition of fines on the company and related parties will be finally decided by the Financial Services Commission in the future.

Regarding the auditor who violated auditing standards while auditing Gijeon Industry’s financial statements, the Korean Institute of Certified Public Accountants previously resolved to impose restrictions on auditing duties and other measures.