Kakao, SM Entertainment Management Audit... "Appropriateness of Investments Without Headquarters Approval"

Kakao's Audit Committee is conducting an audit of the management of its affiliate SM Entertainment (SM).

According to the IT industry on the 25th, Kakao is conducting a financial statement audit of SM through an external law firm. This is being carried out at the request of Kakao's Audit Committee under the Board of Directors.

This audit aims to assess the appropriateness of investment projects that SM proceeded with without prior consultation after Kakao became the largest shareholder. To this end, they requested the submission of materials and even checked the PCs of internal executives at SM for a thorough investigation. It was explained that data verification was conducted only on company-owned work PCs and only with the consent of the personnel and on the agreed matters.

Kakao can conduct investigations of affiliates under the Act on External Audit of Stock Companies (External Audit Act). According to Article 21 of the External Audit Act, auditors may request the submission of accounting materials or conduct investigations regarding related companies in which the company holds a certain percentage or more of shares.