Securities and Futures Commission Designates Auditor for Raon Holdings for 2 Years over Accounting Violations

The Securities and Futures Commission, under the Financial Services Commission, announced on May 8 that it held its 9th meeting and resolved to take measures such as designating an auditor for Raon Holdings, after finding that the company had prepared and disclosed its financial statements in violation of accounting standards.

Raon Holdings, an unlisted real estate development company, was found to have overstated or understated sales revenue and cost of sales by including interest from construction-related borrowings and building demolition costs from 2021 to 2023 in the calculation of construction progress. In addition, the company failed to offset accounts receivable from sales (assets) and advance receipts from sales (liabilities) for each buyer in ongoing sales projects, resulting in assets and liabilities both being overstated. It was also discovered that borrowings were incorrectly classified as non-current liabilities instead of current liabilities.

Accordingly, the Securities and Futures Commission resolved to designate an auditor for Raon Holdings for two years, recommend the dismissal of the responsible executive, and suspend their duties for six months. The imposition of fines on the company and related parties will be finally decided by the Financial Services Commission at a later date.

The Securities and Futures Commission also imposed a two-year restriction on audit services for Raon Holdings on Shinbo Certified Public Accountant Audit Team, which neglected audit procedures as Raon Holdings' auditor. The imposition of fines on the auditor will also be finally decided by the Financial Services Commission at a later date. Additional measures, such as restrictions on audit services for Raon Holdings and listed or designated companies, as well as mandatory job training, were imposed on the certified public accountants belonging to the audit team.

In addition, the Securities and Futures Commission decided to impose restrictions on audit services and other measures on accounting firms Jipyung, Jeongan, and Roel, as well as their certified public accountants, for violating the Act on External Audit of Stock Companies by failing to comply with the restriction on consecutive audits by the same director.