Securities and Futures Commission Imposes Two-Year Auditor Appointment and Other Sanctions on Ekim for Accounting Violations

Financial authorities have resolved to take measures such as the appointment of an auditor against Ekim for preparing and disclosing financial statements in violation of accounting standards.

The Securities and Futures Commission under the Financial Services Commission announced on January 7 that, at its regular meeting, it decided to designate an auditor for Ekim, an unlisted company, for two years, recommend dismissal of all former financial officers, and impose fines. The final decision on fines for the company and three related parties will be made later by the Financial Services Commission.

Between 2015 and 2018, Ekim was found to have issued false tax invoices to recognize fabricated sales and concealed transactions by offsetting fabricated receivables arising from these sales against fabricated payables. The scale of these false entries amounted to 1.85 billion won in 2015, 2.236 billion won in 2016, 1.743 billion won in 2017, and 1.643 billion won in 2018.

Additionally, Ekim was found to have overstated inventory assets by forging contracts with related parties to make it appear as if inventory was stored elsewhere. The scale of overstated inventory assets was identified as 1 billion won in 2015, 1.705 billion won in 2016, and 1.871 billion won in 2017.

The Securities and Futures Commission also resolved to impose restrictions on the audit work of Dasan Accounting Corporation, the external auditor of Kosdaq-listed company Sekonix, and its certified public accountants. Dasan Accounting Corporation was found to have understated the allowance for doubtful accounts related to sales receivables and accrued income of its subsidiary in 2019, and failed to appropriately reflect the company’s accounting standard violations in its audit opinion. Furthermore, the firm was found to have overstated investments in subsidiary shares in the same year and neglected audit procedures regarding the accounting treatment of capital conversions.

The Securities and Futures Commission imposed additional contributions of 20% to the joint compensation fund on Dasan Accounting Corporation and restricted its audit work for the company in question for two years. One certified public accountant was sanctioned with a one-year restriction on audit work for Sekonix, a one-year restriction on audit work for designated companies, and six hours of job training. Two other certified public accountants received warnings.