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Lee Jae-sool
Deloitte Anjin CEO |
By Kim Tae-gyu
Staff Reporter
Deloitte Anjin, one of the major accounting companies in Korea, has been penalized due to a blunder in auditing a corporation listed on the tech-heavy Kosdaq, while the firm plans to appeal the decision.
At its latest meeting, the Securities & Futures Commission (SFC) penalized a total of eight companies including Leenos, the Seoul-based wireless technology equipment maker and info-tech services provider.
The SFC said that Leenos offered its shares in another firm worth 36.9 billion won ($31.3 million) as collateral while raising capital by issuing corporate bonds last year. But it failed to put the fact in the footnote of its 2008 annual financial reports.
Auditing the financial reports of Leenos early this year, Deloitte Anjin also failed to pinpoint the omission, according to the Financial Supervisory Service (FSS).
Leenos faces 17.8 million won in fines and the five-member SFC will designate an auditor for the outfit for this year. Next year, Leenos can employ an auditor on its own, excluding Deloitte Anjin.
Deloitte Anjin was ordered to return 20 percent of the 2008 auditing fees, which it got from Leenos, and will be banned from inspecting the high-tech company during the next two years through 2011.
``We do not think the omission was intentional or that Deloitte Anjin auditors overlooked it on purpose. But it is in violation of the accounting regulations and the amount was pretty big,'' an FSS official said.
``The oversight does not affect net profits or capital of the company, but it should be notified in the financial reports because it can affect the liquidity of its corporate assets. That is why the disciplinary measures were imposed,'' he said.
Deloitte Anjin, headed by Chief Executive Lee Jae-sool, plans to appeal the ruling in the near future while Leenos, which is headed by CEO Roh Hag-young, is likely to accept it.
``The SFC seems to have regarded the omission as gross negligence. But it does not have an effect on profits or assets in the balance sheet or income statement,'' a Deloitte Anjin spokesman said.
``It does not influence the readers of the financial reports and this is the first time for us to get a sanction related to the footnote. We will ask the SFC to rethink the case,'' he said.
Leenos said that the oversight was simply a mistake.
``While snapping up Initech midway through last year, we raised money while using the company's shares as collateral. Because the shares were offered as collateral for our own debts, it was not subject to public announcement or approval of the board of directors' meeting,'' a Leenos official said.
``We should have put the fact in the footnote for the 2008 financial reports, but we erroneously failed to do so. The company is likely to accept the punishment because we did not abide by the regulations although it was just a mistake.''
Leenos eventually sold off Initech to Vicis Capital Master Fund, the U.S.-based fund.
voc200@koreatimes.co.kr
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