[Asia Economy Reporter Jang Hyowon] As the regular shareholders' meeting period for companies with December fiscal year-end approaches, a surge of listed companies receiving 'disclaimer of opinion' on their audit reports is occurring. Additionally, many listed companies have failed to meet the audit report submission deadline, raising concerns about the need for caution.
According to the Financial Supervisory Service's electronic disclosure on the 25th, as of that date, 29 listed companies disclosed that they received a 'disclaimer of opinion' in last year's audit. Among them, 12 listed companies received an unqualified opinion last year but received a disclaimer of opinion for the first time this year. For companies with a December 2020 fiscal year-end, 8 KOSPI companies and 41 KOSDAQ companies received audit opinions of disclaimer or qualified opinions.
Specifically, Izmedia, Syswork, Hansong Neotek, Yeon E B&T, Seondo Electric, PHC, Jinain Pharmaceutical, GTG Wellness, Hucentec, Vespa, Human N, and Intromedic received a disclaimer of opinion for the first time this year.
Listed companies undergo annual audits by accounting firms, and if a company does not conduct reasonable management activities or fails to provide appropriate audit evidence, the auditor refuses to express an opinion on the company.
In the case of KOSPI-listed Seondo Electric, the auditor refused to express an opinion, stating that the company did not provide sufficient audit evidence to prove the fairness of the financial statements and that the reliability was compromised due to the lack of appropriate internal control procedures.
GTG Wellness, which received an adverse opinion in the previous half-year, ultimately received a disclaimer of opinion. The reason was the inability to verify the validity of cash flows in art purchase transactions that were problematic. Additionally, the auditor stated that audit evidence could not be secured for transactions with related parties.
A disclaimer of opinion for a listed company is grounds for delisting, and trading is immediately suspended in the market. From the investors' perspective, since the audit opinion cannot be predicted, it means that stocks become untradeable overnight.
Moreover, many companies have not submitted their audit reports even after missing the submission deadline. Listed companies must submit and disclose audit reports at least one week before the regular shareholders' meeting. Since the last date for the regular shareholders' meeting of companies with December fiscal year-end is the 31st, audit reports must be submitted by the 23rd.
However, as of this date, 15 KOSPI and 40 KOSDAQ listed companies have not submitted their audit reports. The KOSPI companies include JW Holdings, JW Life Sciences, Hwasung Corporation, Namseong, Comtec Systems, Korea Electronics Holdings, Kyeyang Electric, BK Tops, Sungmoon Electronics, Sewoo Global, Central Insight, Cellmat Therapeutics, Able C&C, Wooshin Systems, and Hitec Systems.
Able C&C applied for exemption from sanctions to the Financial Supervisory Service, citing delays in audit report submission due to COVID-19, and the exemption was approved. Other companies approved for exemption from sanctions by the Securities and Futures Commission due to COVID-19 include BK Tops and Cellmat Therapeutics. They plan to submit their audit reports by May 16.
Other listed companies have disclosed that their audit report submissions were delayed for various reasons. JW Holdings reported and disclosed that the external audits of some subsidiaries and affiliates have not yet been completed, making it impossible to submit the audit report on time, and requested a five-business-day extension for the submission deadline. Hwasung Corporation stated that due to COVID-19, there was insufficient physical time to collect audit evidence such as financial statements of overseas subsidiaries.
An official from the financial investment industry said, "Some companies miss the submission deadline due to disruptions in the audit schedule caused by COVID-19, but in some cases, delays in audit reports are due to disagreements between the auditor and the company," adding, "If the auditor has unavoidable circumstances, they submit a statement of reasons and disclose a 'business report submission deadline extension notification,' but if not, it may be a situation where the company and auditor have not reached an agreement."
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