Model Solution, a KOSDAQ-listed company, was found to have prepared and disclosed its financial statements in violation of accounting standards and was imposed a penalty surcharge by the financial authorities.
The Financial Services Commission said at the 20th meeting on the 19th that it resolved sanctions against Model Solution, related parties, and the external auditor under the Act on External Audit of Stock Companies, etc. Accordingly, the company was imposed a penalty surcharge of 190 million won.
Model Solution omitted accounting for raw material purchases in 2022, and after discovering this in 2023, it did not retrospectively correct it but reflected it in that year's profit and loss. As a result, equity and net income for the two years were overstated and understated.
It was also confirmed that in paid consignment transactions, revenue and cost of sales were recognized on a gross, not net, basis, resulting in overstatement. The overstatement amount for the paid consignment items was 2.572 billion won in 2022 and 2.075 billion won in 2023.
The Securities and Futures Commission under the Financial Services Commission imposed a penalty surcharge of 6.3 million won each on the Model Solution CEO and a former executive, and 6 million won on one working-level employee.
DONGHYUN Accounting Corp., which neglected audit procedures during the external audit, was ordered to pay a penalty surcharge of 67.5 million won and to make an additional 10% contribution to the joint compensation fund. Two certified public accountants at the firm were given a one-year restriction on audit work for designated companies.
Meanwhile, other sanctions under the External Audit Act, such as auditor designation, were already resolved at the SFC on the 15th of last month, and only the imposition of a penalty surcharge was finally confirmed at this meeting.