Case 1. Corporation A, a manufacturer and seller of chemical products, inflated its revenue figures by falsifying the quantities and high unit prices on commercial invoices (CIs) and product specifications (PLs) during the preparations for its initial public offering (IPO). Furthermore, while undergoing an external audit, it troubleshot the audit by preparing false accounts receivable reports for overseas sales and failing to provide the addresses of overseas clients.
Case 2. Manufacturer B created false sales without actually delivering products to avoid being designated as a management item due to four consecutive years of operating losses by exchanging only funds. Additionally, to conceal the false reporting of its inventories, B lent inventories on the date of inventory audit and stored them in a warehouse, returning them to the vendor after the audit.
The Financial Supervisory Service (FSS) revealed on the 27th that it conducted financial statement reviews and inspections of a total of 458 corporations over the past three years (2022-2024) and imposed sanctions on 214 of them. The FSS noted that it particularly focused its review and inspection capabilities on corporations (22) scheduled for IPOs with a high risk of accounting fraud, corporations (31) with financial risks, and corporations (12) causing social controversies.
Among the 22 corporations scheduled for IPOs, the FSS said that three, which received significant sanctions from the Securities and Futures Commission, were all delayed from listing. Moreover, among the 31 financial-risk corporations and 12 social-controversy corporations, inspections and reviews were completed for 36 corporations, with sanctions (a corrective action rate of 47.2%) imposed on 17 of them. Seven cases received significant sanctions (with a significant sanction rate of 41.2%).
The FSS imposed penalty surcharges totaling 772 billion won (an average of 257 billion won per year) on 52 corporations from 2022 to 2024. This exceeds the penalty surcharge amount of 356 billion won (an average of 119 billion won per year) imposed from 2019 to 2021 by more than double.
To prevent accounting violations in advance, the FSS has been publicly disclosing instances of reviews and inspections to corporations and auditors since 2011. The disclosure cycle was once a year but has been reduced to twice a year since last year. Including the 14 corporations for which instances are being disclosed for the second half of 2024, a total of 182 cases have been disclosed since 2011.
The FSS stated, "We will distribute major review and inspection issues to corporations and auditors through relevant organizations such as the Korea Listed Companies Association, the KOSDAQ Association, and the Korean Institute of Certified Public Accountants, which will help prevent similar cases from recurring and aid investors in their decision-making." It indicated that it would continue to regularly disclose major review and inspection issues every year.