The Financial Supervisory Service examined the business reports of corporations and discovered that key items, including inventories, provisions for credit losses, reasons for changes in auditors, and internal accounting management systems, were often omitted.
The FSS reported on the 1st that the examination of the business reports from 260 companies that submitted new business reports and those with deficiencies found in the previous year's inspection led to these discoveries.
The inspection found deficiencies in most categories, with common issues identified across multiple companies.
In the inventories management sector, it was confirmed that companies failed to specify their inventories by business sector or only provided aggregate totals for the years. Some corporations did not report the full status of their inventories.
Additionally, in relation to provisions for credit losses, some companies omitted the criteria for recognizing accounts receivable, and some amounts in overdue receivables were missing. There were also cases where the status of provisions for credit losses was reported differently in business reports and audit reports, or where all relevant disclosures were omitted.
Cases of failing to provide reasons for changes in auditors and omitting relevant personnel and their experience regarding internal controls were also identified.
The FSS emphasized that while some information on inventories and provisions for credit losses is included in the notes of financial statements, the required items in business reports must be recorded separately, and that reasons for changes in auditors and audit opinions related to internal accounting management systems should also be thoroughly documented.
Among non-financial items, the FSS examined 111 listed companies with a self-owned stock ratio exceeding 15% of total issued shares. As a result, deficiencies in reports on self-owned stocks not approved by the board, status of self-owned stock holdings, and plans for the acquisition, disposal, or retirement of such stocks were identified. Furthermore, issues such as the lack of detailed documentation on minority shareholder rights exercising through shareholder proposals and discussions in general meetings were also detected.
The FSS stated that "It will improve the standards for the preparation of corporate disclosure formats to ensure that information necessary for investors' investment judgments is accurately recorded," adding that it will continue to review the disclosure system based on the results of this inspection.