Financial Services Commission imposes 3.6 billion won fine on Gyeongnam Bank for 'accounting violations'

The financial authorities imposed a fine of 3.61 billion KRW and a one-year auditor designation on BNK Gyeongnam Bank for preparing and disclosing financial statements in violation of accounting standards. Orient Bio and Arc Solutions were also found to have violated regulations and were fined 110 million KRW and 460 million KRW, respectively.

On the 19th, the Financial Services Commission announced at its 3rd meeting that it had decided to impose fines on these three companies, their company officials, and auditors in accordance with the Act on External Audit of Stock Companies, among other laws.

First, BNK Gyeongnam Bank failed to reflect the embezzlement of funds by an employee in 2021 in its financial statements, resulting in an overstatement of approximately 100 billion KRW in equity capital. It was also confirmed that the 2021 financial statements prepared in violation of accounting standards were used in the securities registration statement and other documents, constituting a violation of disclosure requirements.

Accordingly, the Financial Services Commission imposed a fine of 3.61 billion KRW, a one-year auditor designation, and corrective measures on the company. Additionally, four individuals, including the former CEO, were fined a total of 790 million KRW.

Furthermore, the Financial Services Commission imposed a fine of 110 million KRW, a three-year auditor designation, a recommendation for dismissal of the responsible executive, and a six-month suspension of duties on Orient Bio, which neglected to properly review revenue recognition standards and thus overstated or understated sales. Three individuals, including the CEO, were fined a total of 25.5 million KRW.

Regarding this matter, Daeyoung Accounting Corporation, the external auditor, was fined 82 million KRW for negligence in audit procedures, required to increase its joint damage compensation fund by 30%, and restricted from auditing Orient Bio for two years. Two certified public accountants affiliated with the firm were each restricted from auditing listed and designated companies for one year.

The Financial Services Commission also decided to impose a fine of 460 million KRW, a three-year auditor designation, and a recommendation for dismissal of the former responsible executive on Arc Solutions, a KOSDAQ-listed company. Additionally, three individuals, including the former CEO, were reported to the prosecution and fined a total of 14.4 million KRW. It was confirmed that Arc Solutions falsely recorded product sales and cost of sales in 2020 and obstructed the auditor’s normal external audit by temporarily borrowing inventory assets from suppliers to coincide with the inventory inspection schedule in an attempt to conceal the false entries.