Disciplinary Measures on 13 Companies for Window-dressing

Financial Supervisory Commission (FSC) punished total 13 companies, 12 listed companies including affiliated companies of top 30 conglomerates like LG, SK, Hanwha, Dongbu, and Dongkuk Steel Co., and 1 Kosdaq company, for the suspicion of manipulating accounting books.

And FSC imposed sanctions on 7 accounting firms like Samil and Samjung and 26 certified public accountants, who undertook external audits on these companies.

It is for the first time that financial authority punished companies for accounting fraud even though they are normally carrying on businesses without the crisis of collapse or social troubles.

But some concerned companies and accounting firms are protesting that they will bring a lawsuit, and said, “financial authority interpreted the law arbitrarily according to ambiguously regulated standards of accounting. ” Hence, there is likely to be discussion on the standard of company account.

FSC called Securities and Futures Commission (SFC) on the 14th, and decided as follows.

FSC accused the executive and the former executive of Hungchang and the executive of Shinhwa Silup, and informed the executive of Daehan Pulp Co. and 2 former and present executive of Hungchang to the prosecutor’s office, and requested the prosecution to investigate the chief executive and 2 executives of Daehan Biolink.

FSC recommended 8 companies including Hanhwa to fire executives, and banned 8 companies like Dongbu Corporation from issuing securities for 3 to 12 months.

Standing member of SFC Yang Cheon-Sik said, “we decided to drastically apply sanctions against manipulating accounts, as the manipulation not only perverts the fact, but also applies the accounting standards improperly like a `creative accounts`.”

But the concerned companies are strongly protesting due to the facts △ the standard calculating appraisal profits and loss is ambiguous, △the standard reducing the business right on the enterprise sold out is not prepared yet and △ large accounting firms evaluated the issued accounting process as `reasonable`.

Byong-Ki Lee eye@donga.com