As of the deadline for submitting audit reports for December settlement of account corporations on the 21st of this month, 61 companies failed to submit their audit reports. Not meeting the deadline does not immediately result in penalties. However, delays in submission may raise concerns about potential issues in their accounting records, which could negatively impact their stock prices. Recently, Kumyang, facing a risk of delisting, had also announced a delay in submitting its audit report last year.
According to the Korea Exchange, as of the 24th, there are a total of 61 KOSPI, KOSDAQ, and KONEX listed companies that have not submitted their audit reports. In the securities market, seven companies, including DH Auto Nex, THE WILLBES&CO, IL-YANG PHARM, SAMBU Construction, Sam Jung Pulp, STAR SM REIT, and ENPLUS, have failed to submit their audit reports. Among these, DH Auto Nex and Hanchang are designated as management items, while ENPLUS is classified as an investment caution item. SAMBU Construction is currently undergoing rehabilitation procedures.
As of this day, a total of 39 corporations listed on KOSDAQ have not submitted their audit reports. Among them, 23 corporations are designated as management items or investment caution items.
About half of the corporations that submitted their audit reports late have received adverse audit opinions. According to an analysis by ChosunBiz, as of March 25 of last year, there were 47 corporations in total that did not submit their audit reports, combining the KOSPI and KOSDAQ markets. Among them, 24 companies (51%) received adverse opinions.
Auditors are required to record one of four audit opinions in the audit report: 'unmodified,' 'modified,' 'adverse,' or 'disclaimer of opinion.' Generally, receiving a non-unmodified opinion can be interpreted as a signal that there may be issues with the corporation's financial status or accounting practices.
Three out of ten KOSPI-listed companies received adverse opinions, including SAMBU Construction, which filed for rehabilitation, and Well Biotec and Hanchang, both of which received another 'disclaimer of opinion' after last year, putting them at risk of delisting. In Kumyang's case, it received an 'unmodified' opinion last year but submitted its audit report late.
KOSDAQ corporations were more likely to receive adverse opinions. Of the 37 KOSDAQ-listed companies that submitted their audit reports late as of March 25 last year, 21 received adverse opinions, approaching 60%. An analysis of 175 companies that were delisted in the past five years by the Korea Exchange revealed that 42 corporations, which account for 24% of the total, were delisted due to reasons related to adverse audit opinions and non-submission of business reports.
While delays in submitting audit reports do not directly lead to adverse audit opinions, it is a situation that inevitably raises concerns for investors. Generally, if an audit report is not submitted on time, it indicates that the auditor has not completed the audit procedures in a timely manner, leading to worries about the possibility of deficiencies in accounting practices. If the audit opinion is adverse, it constitutes a formal reason for potential delisting.
Since audit reports are subject to public disclosure of significant matters, they can be categorized as delayed disclosures, potentially regarded as non-compliant disclosures. If non-compliance continues despite warnings under the Non-Compliant Disclosure Act, a designation as a non-compliant reporting company may result in a one-day trading suspension.
Especially starting this year, as the government speeds up the exit of 'zombie corporations' from the stock market, attention is bound to focus on audit opinions. Recently, the exchange revised its listing regulations for the securities market and KOSDAQ, specifying that if a corporation receives adverse audit opinions for two consecutive years, it will be deemed a formal reason for delisting with no possibility of appeal, effective in the second half of this year.
A source in the financial investment industry noted, "The reason some companies fail to submit their audit reports could be due to issues identified in their accounting, but they might also simply lack the time. Whether they receive unmodified opinions is about 50/50."