Maximum Fine of 1 Billion KRW Introduced for Accounting Fraud
Even When No Unjust Profit is Gained
In the future, a fine of up to 1 billion KRW can be imposed even if there is no unjust profit gained through accounting fraud.
According to the Financial Services Commission, on the 13th, the partial amendment to the "Act on External Audit of Stock Companies, etc." (External Audit Act) passed the plenary session of the National Assembly.
The External Audit Act stipulates that if the CEO, accounting officers, or employees falsify financial statements, or if auditors or affiliated certified public accountants falsify audit reports, they shall be punished by imprisonment for up to 10 years or a fine ranging from twice to five times the amount of the profit gained or loss avoided (unjust profit) from the violation.
However, since there was no provision for the maximum fine amount in cases where there is no unjust profit from accounting fraud or when it cannot be calculated, there was a problem that imprisonment sentences had to be imposed. In response, the Constitutional Court ruled in July last year that this violated the ‘principle of proportionality between responsibility and punishment’ and declared it unconstitutional.
The revised law newly establishes a proviso setting the maximum fine at 1 billion KRW in cases where there is no unjust profit or it cannot be calculated due to the violation. Specific sentencing within the 1 billion KRW limit is possible depending on the nature and severity of the accounting fraud.
The amendment will be enforced immediately after going through government transmission and promulgation procedures.
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