FSC Imposes KRW 7.63 Billion Fine on Kunyang for Accounting Standard Violations

The Financial Services Commission (FSC) announced today (the 7th) that it has imposed a fine of KRW 7.633 billion on Kunyang for preparing and disclosing financial statements in violation of accounting standards.

During its 17th meeting held that day, the FSC resolved to impose fines of KRW 733.3 million on Kunyang's CEO, KRW 463.8 million on the former chief financial officer, KRW 39.2 million each on the former head of sales, head of disclosure, and former management audit executive, and KRW 177.2 million on the internal auditor.

Additionally, measures were taken including a 3-year designation of an external auditor, a recommendation to dismiss (or remove from office) the CEO and three others, and a 6-month suspension of duties.

The company, the CEO, and the former CFO were referred to the prosecution, while the former head of sales and two others were notified to the prosecution.

Kunyang falsely recorded revenues and cost of goods sold, and incorrectly calculated the scope for preparing consolidated financial statements.

It recognized false revenues by methods such as receiving and issuing false tax invoices as if sales had occurred without the actual transfer of physical inventory, and overestimated equity by performing consolidated accounting despite jointly controlling a Mongolian subsidiary through a shareholders' agreement with its second-largest shareholder.

It was also found to have overestimated equity by failing to recognize impairment losses despite discovering signs of worsening projected operating profits and losses in the Mongolian subsidiary.

During external audits, the company hindered audits by conspiring with clients to present false transaction evidence, submitted falsely prepared delivery receipts during the review process, and gave false statements claiming that it did not obstruct inventory audits.

The FSC also resolved to take measures against Ascendio, including a fine of KRW 733.7 million, a 3-year designation of an external auditor, and a recommendation for the dismissal (removal from office) of its former CFO.

The company was cited for neglecting impairment reviews on subsidiary investment stocks where impairment indicators existed, thereby failing to recognize related impairment losses.

Tae Yul Accounting Corporation, the auditor that neglected audit procedures for Ascendio, was penalized with an 80 million won fine and a 50 percent increase in the additional reserve for joint liability for damages.

In addition, Sunjin Accounting Corporation, which performed audit work in violation of major audit procedures, was penalized with a 22.5 million won fine and a 20 percent increase in the additional reserve for joint liability for damages.

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.