Erroneous accounting firms' CEOs to be ousted

By Nam Hyun-woo

CEOs of accounting firms may be held accountable for poor auditing, under a revised bill the Financial Services Commission (FSC) said Sunday that it will submit to the National Assembly.

According to the FSC, the revised bill will enable the top regulator to suspend accounting firms’ CEOs from operation if the CEOs are negligent in controlling their companies’ auditing quality.

The FSC said that the bill passed the National Assembly’s Regulatory Reform Committee on Friday and it will be tabled in September.

Should the bill pass the National Assembly, CEOs of accounting firms that repeatedly commit erroneous accounting either on purpose or by mistake will be stripped of their certification or be suspended from working.

Currently, the Act on External Audit of Stock Companies only holds accountants at the audited company responsible, but the FSC said it has a limit in addressing the fundamental problems regarding accounting errors.

“The bill seeks to improve accounting firms’ auditing quality by holding CEOs responsible for their companies’ auditing,” the FSC said in a statement.

According to the top regulator, the scheme could pass the committee after Daewoo Shipbuilding and Marine Engineering’s (DSME) alleged accounting fraud. In April, DSME corrected its financial statements for 2013 and 2014, during which the company posted huge losses but claimed to have hundreds of billions of won in operating profit.

Accounting firm Deloitte Anjin, which audited DSME’s book, confessed that “it failed to find the error,” but the prosecution is investigating both Deloitte Anjin and DSME on suspicion that the two were involved in the alleged accounting fraud.

In March, the regulatory reform committee advised the FSC to withdraw a previous version of the bill, calling it an “excessive regulation.” However, the Deloitte Anjin case stirred criticisms that accounting firms are evading their responsibilities, prompting the committee to pass the current version.

Compared to the previous version, the fresh bill stated the range of responsibility and the grounds for suspension. The FSC said it will prepare the standard for quality control and have accounting firms to abide by it.