Financial Services Commission Imposes 2.37 Billion KRW Fine on Etron for Accounting Violations

The financial authorities recently imposed a fine of 2.37 billion KRW on Etron, a KOSDAQ-listed company that was recently delisted.

On the 19th, at the 5th regular meeting, the Financial Services Commission resolved to take measures against Etron for preparing and disclosing financial statements in violation of accounting standards, including prosecution referral, imposition of fines, and designation of an auditor for three years.

Previously, Etron's management was found to have classified investment stocks related to investee companies, over which they had significant influence, not as equity-method investments but as financial assets measured at fair value through other comprehensive income (FV-OCI), thereby overstating net income. Additionally, the company failed to disclose in the notes that it provided financial assets as collateral to the subscribers of the bonds with warrants it issued.

Accordingly, the FSC imposed a fine of 2.37 billion KRW on Etron and 150 million KRW on four individuals including the former CEO. The external audit firms, Sejeong Accounting Corporation and Donghyun Accounting Corporation, which neglected their audit duties, were fined 100 million KRW and 150 million KRW respectively.

Along with this, the FSC imposed fines of 1 billion KRW on the company and 180 million KRW on two individuals including the CEO of Wave Electronics, a KOSDAQ-listed company. Wave Electronics was found to have recognized research expenses related to display equipment as assets despite not meeting the criteria for asset recognition, thereby overstating equity and net income.

Furthermore, the FSC took measures against Ecovibe, where omissions in accounting for borrowings and provisions and violations in small public offering disclosure documents were confirmed, including prosecution referral, fines (4.4 billion KRW for the company, 44.9 million KRW for the former CEO), designation of an auditor for three years, and recommendation for dismissal of the former CEO.