Fake Company Establishment and Family Employment... 10 Small Accounting Firms Caught in Unfair Transactions

55 Accountants Involved... Unfair Practices Amounting to 5 Billion Won

Financial Supervisory Service, Yeouido, Seoul. Photo by Younghan Heo younghan@

#. A accounting firm director signed a service contract to purchase financial market information necessary for evaluating the value of financial products from a special-related company (paper company) owned by himself for 170 million KRW. This information, which could be purchased for 3 million KRW through a market research firm, was obtained by paying an enormous service fee.

#. An accountant affiliated with B accounting firm concurrently served as the CEO of a lending company, violating the accountant's exclusive duty. The lending company owned by the accountant handled credit card sales receivables secured loans for small business owners and collected additional fees averaging 4.3% per year as management consulting fees from borrowers, in addition to the agreed interest.

As a result of inspecting 12 small and medium-sized accounting firms, the Financial Supervisory Service found that 10 firms were suspected of unfair transactions.

On the 13th, the Financial Supervisory Service announced that it confirmed allegations of unfair transactions related to embezzlement and misuse of funds by small and medium-sized accounting firms subject to auditor supervision in 2023. A total of 55 accountants were involved, and the amount of unfair acts reached 5.04 billion KRW.

The most common cases involved hiring family members such as parents and siblings as accounting firm employees and paying salaries without providing labor, or paying other business income without providing services. There were also cases where accountants or their family members requested valuation or other services from paper companies where they or their families were executives or shareholders, and costs were unfairly paid under the name of service fees without actual service provision. Cases of accountants affiliated with accounting firms engaging in lending business were also detected. There were also cases where referral fees were paid to retired accountants in violation of the Certified Public Accountant ethical regulations prohibiting the receipt of referral fees.

The Financial Supervisory Service plans to provide information on embezzlement and breach of trust allegations to investigative agencies in accordance with relevant laws and regulations. Violations of the Lending Business Act and the Certified Public Accountant Act will be reported to the competent authorities.

The Financial Supervisory Service stated, "We will continue to conduct inspections of similar cases to prevent accountants who abuse accounting firms as means of private gain without complying with the auditor registration requirements for listed companies from engaging in audit work for listed companies," and added, "We will strive to ensure that the integrated management system is established promptly."