The Financial Services Commission imposed a 54.2 million won penalty surcharge on Kukbo for violating accounting standards. It also levied a total 10.8 million won penalty surcharge on two related individuals, including the former CEO.
The Financial Services Commission (FSC) said on Apr. 1 that it approved the sanctions at its 6th regular meeting.
According to the FSC's investigation, Kukbo excessively recognized bad debt expenses related to loans to a subsidiary. The company treated promissory notes provided as collateral to the subsidiary as lending and accounts payable, and set an allowance for doubtful accounts without sufficient review of collectability.
In the process of issuing convertible bonds and bonds with warrants, it inflated equity by recognizing the difference between fair value and transaction price as prepaid expense.
It was also pointed out as a problem that the company used the 66th financial statements, which violated accounting standards, in small public offering disclosure documents.
Earlier, the Securities and Futures Commission under the Financial Services Commission (FSC) had taken measures related to the matter, including designating an auditor for two years for Kukbo, imposing 36 million won in fines, and issuing a corrective order.
Meanwhile, Shinwoo Accounting Corporation, which conducted Kukbo's external audit, was sanctioned with additional provisioning to the joint compensation fund (20%) for failing to carry out audit procedures properly.