The Securities and Futures Commission under the Financial Services Commission announced on October 15 that it had decided to impose measures such as the designation of auditors on two companies, including Model Solution, for preparing and disclosing financial statements in violation of accounting standards.
Model Solution omitted accounting for raw material purchases in 2022. After discovering this, the company should have made a retrospective correction in 2023, but instead reflected it in the 2023 profit and loss, resulting in overstatement and understatement of equity and net income for 2022 and 2023, respectively.
In addition, the company recognized revenue on a gross basis instead of a net basis for paid consignment transactions, overstating sales and cost of sales by 2.572 billion won in 2022 and 2.075 billion won in 2023.
The Securities and Futures Commission imposed a fine of 190 million won on Model Solution and designated an auditor for three years.
The fines for three company officials will be determined by the Financial Services Commission at a later date.
SDM overstated and understated construction revenue, construction costs, and inventory assets from 2019 to 2022, resulting in a three-year auditor designation, a recommendation for auditor dismissal, and a six-month suspension from duties. The fine will be determined by the Financial Services Commission at a later date.
Measures such as restrictions on audit work were also decided for the accounting firms and certified public accountants involved.
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