Accounting Inflation, False Contracts, and Audit Obstruction Uncovered
SOOP (formerly AfreecaTV) Fined 1.49 Billion Won
"Accounting Transparency Is the Foundation of the Capital Market... Strong Measures to Follow"
The Financial Services Commission has imposed heavy sanctions on companies that manipulated and disclosed financial statements in violation of accounting standards. By levying fines not only on the companies but also on their CEOs and executives individually, the commission has demonstrated its firm stance against obstruction of external audits.
On October 1, during its 17th meeting, the Financial Services Commission announced that it had decided to impose fines and appoint designated auditors for three companies: SOOP Co., Ltd. (formerly AfreecaTV), Sejin Co., Ltd., and Singi Tech Co., Ltd.
SOOP inflated its operating revenue and expenses by recognizing revenue on a gross basis instead of a net basis during the process of brokering game content advertising personal broadcasting services. The commission imposed a fine of 1.49 billion won on the company and designated an auditor for three years. The former CEO and the former responsible executive were each fined 27.1 million won.
Sejin failed to remove accounts receivable collected through an affiliate from its books and entered into false loan agreements, recognizing them as borrowings. Some borrowings were falsely presented as if they had been waived, thereby inflating net income. The commission also found evidence of organized audit obstruction, including sending false confirmations to overseas clients and falsifying and altering audit documents to deceive the external auditor. Sejin was fined 180 million won and assigned a designated auditor for two years. The CEO and former responsible executive were each fined 17.7 million won, and the audit manager was fined 6 million won.
Singi Tech overstated its equity capital by recording transactions as loans (assets) and advances received (liabilities), even though it only served as a simple financial conduit. The company was also found to have deceived its auditor by preparing false audit documents. The commission imposed a fine of 30 million won on the company and designated an auditor for two years, while the CEO was fined 3 million won.
A representative of the Financial Services Commission stated, "Accounting transparency is the foundation of the capital market," adding, "We will continue to impose strong sanctions against false disclosures and acts that obstruct audits."
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