CEO Prosecution in Events of Document Forgery

In order to eradicate `window-dressing` accounting practices, legislation of law making CEOs of companies legally responsible and face prosecution in events of forged official document. Also corporate owners will receive civil liabilities for ordering of illegal activities. Especially, all certified companies have to officially record and receive approval from board of directors in events of cash loans and sureties to company owners, stock holders and board members.

On November 7th, the government has announced this `Accounting System Reform Plan` which was provided by `Accounting System Reform Act Planning Group` where Ministry of Finance and Economy, Finance Supervisory Commission, Association of Certified Public Accountants, Accounting Research Center are participants.

Director Yang Cheon-sik (Permanent committee member of Finance Supervisory Commission) of Accounting System Reform Act Planning Group says, "This reform emphasizes on proper role of six fundamental players in organization control structure namely the board of directors, auditing (committee), top management, internal accounting management organization, external auditor and supervising authority."

He announced in regard to the effective date, "Cases that need legal amendments will be presented in the next extraordinary session of the National Assembly. Those that only need regulation reforms will be put in to effect as soon as possible."

According to accounting reforms, the financial statements which were settled in the stock holder meetings are now settled in the board of directors. In case of companies whose fiscal accounting period ends in December, key management information such as annual dividends will be provided impartially to all stock holders.

Also consolidated financial sheets must be provided in every quarter period. Consolidated financial sheets will act key financial statement and most public notice policies will be based around on consolidated financial sheets.

In order to improve impartiality of external audit, Account consulting firms are restricted from providing consulting services to companies which are subjects of the audit.

Dong-Won Kim daviskim@donga.com