On the 19th, the Financial Services Commission held its 5th meeting and decided to refer ETRON, a KOSDAQ-listed company, to the prosecution for violating accounting standards in preparing and disclosing its financial statements and to impose a penalty surcharge and designate an auditor for three years.
According to the Financial Services Commission, the management of ETRON has significant influence over the investee company, as they concurrently serve as executives of the investee company, yet categorized related investment stocks as other comprehensive income - fair value financial assets (FV-OCI) instead of investments in affiliates, thus overstating net income.
ETRON also provided financial assets as collateral to a third party without disclosing this fact in the notes and accounted for financial assets that did not meet the transfer conditions as transferred, thereby overstating its net income and equity.
The Financial Services Commission imposed penalty surcharges of 2.37 billion won on ETRON and 150 million won on the former CEO and three others. The auditors, Sejong Accounting Corporation and Donghyun Accounting Corporation, were also imposed penalty surcharges of 100 million won and 150 million won, respectively, for negligence in the auditing process regarding investments in affiliates. Aggravated restrictions on audit tasks for ETRON, listed companies, and designated companies were implemented for the responsible certified public accountants.
The Financial Services Commission also imposed a penalty surcharge of 1 billion won on Wave Electronics, a KOSDAQ-listed company that overstated development expenses. Two individuals, including the CEO, were subjected to a penalty surcharge of 180 billion won. The unlisted company Ecovibe was imposed a penalty surcharge of 440 million won for omitted accounting of borrowing funds, and a penalty surcharge of 44.9 million won was decided for the former CEO.