On May 13, the Financial Supervisory Service (FSS) announced strict measures, warning that fines will be increased and cases may be referred to the prosecution if there is obstruction of accounting supervision or refusal to submit required materials.
According to the FSS, deliberate obstruction such as refusal, delay, or submission of false materials during accounting supervision continues to be detected. Since last year, there have been six cases of obstruction of external audits and four cases of obstruction of supervision. This marks an increase compared to the annual averages of 2.6 cases and 0 cases, respectively, from 2019 to 2023.
In response, the FSS has provided recent examples of enforcement actions through the Korean Institute of Certified Public Accountants and the Korea Listed Companies Association to deter the submission of false materials and to serve as references for external audit practices.
According to the materials, Company A submitted false documents more than five times in an attempt to conceal accounting violations such as overstating inventory assets, thereby obstructing the FSS's supervision. As a result, an additional fine of 70 million won was imposed. Furthermore, the level of action was escalated from a notification to the prosecution to an official complaint to the prosecution.
Company B refused to submit materials related to revenue recognition accounting requested by the FSS more than three times without valid reason, resulting in an aggravated fine of 3.57 billion won. In addition, although the initial motive for the accounting violation was gross negligence, a notification to the prosecution was also imposed.
Company C also refused to submit materials more than five times without just cause and only submitted some materials after receiving the FSS's prior notice of action, ultimately resulting in strict measures. Company C received an aggravated fine of 220 million won, and although there was no direct accounting violation, an executive identified as an obstructionist of supervision was added as a subject for notification to the prosecution.
In addition, Company D, which colluded with a foreign corporation to forge supply contracts and obstructed external audits, and Company E, which concealed inventory assets related to false sales in the company’s rest area, were also reported to the prosecution.
The FSS emphasized, "Obstructing external audits or supervision is punishable by up to three years of imprisonment or a fine of up to 30 million won," adding, "We will continue efforts to prevent and block obstruction of supervision in advance by utilizing digital supervision techniques, while also maintaining efforts to detect such acts."
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