Arthur Andersen!?
Top accounting firms involved in savings bank trouble
By Kim Jae-won
A slew of accounting firms have been penalized by financial authorities in the past few years for failure in their supervisory role over the country’s troubled secondary banks, a lawmaker revealed Wednesday.
According to a report by Chung Ok-im of the ruling Grand National Party (GNP), the 19 accounting firms that were hit by the Financial Services Commission (FSC) had been supervising the 25 savings banks since 2006.
The list of disgraced accounting firms included the top-four companies by revenue ― Samil-PricewaterhouseCoopers (SamilPwC), Samjong KPMG, Deloitte Anjin and Ernst & Young Han Young.
SamilPwC, the Korean partner of global accounting group PwC, was warned by the FSC in June 2009 for its inept evaluation of loans provided by Shilla Mutual Savings Bank during its examination in June 2009.
Samjong KPMG was cautioned by the financial regulator for neglecting its financial appraisal of Invest Mutual Savings Bank in June 2004. The lender declared bankruptcy in July 2006. The FSC warned Deloitte Anjin for miscalculating the bad assets at Ace Mutual Savings Bank in June 2010.
Ernst & Young Han Young was suspended from supervising Hwaseung Mutual Savings Bank for one year for overlooking its duties to examine the lender’s loans in June 2009.
Shinwoo, Namil, Daejoo and Shinhan were among the smaller accounting firms that were penalized for their inability to properly monitor savings banks.
Chung said that the government needs to toughen its regulations against the misdeeds by the accounting companies.
“The government needs to suspend the operations of an accounting company for the entire industry if it fails to supervise one savings bank properly,” the legislator said in the report.
She said that currently, if an accounting firm fails to supervise a savings bank its responsibility is suspended for only that bank. Instead, it takes on the supervisory role for another savings bank, simply repeating the fault.
Industry watchers say that the relationship between Korean accounting companies and savings banks is similar to that of Arthur Anderson and Enron.
Chicago-based Arthur Andersen, once one of the big five accounting firms in the U.S., surrendered its licenses to practice as certified public accountants in 2002 after being found guilty of criminal charges related to the auditing of Enron, a Texas-based energy company. Enron filed for bankruptcy in 2001 and later defaulted.