Deloitte Anjin accused of negligence in audit reports

Deloitte Anjin's headquarters located on Yeouido, Seoul / Courtesy of Kim Do-hyung

By Anna J. Park

Doubts and concerns are rising as to whether Deloitte Anjin, one of big four accounting firms in Korea, is failing at internal controls, as it not only turned out to have received the largest number of corrections from the financial regulator in audit reports during the past few years among the top four accounting firms, but also has been engaged in some of the most scandalous financial fraud cases.

According to the data compiled by the Financial Supervisory Service (FSS), the country's Securities and Futures Commission (SFC) detected a total of nine violations from November 2017 to May last year in Deloitte Anjin's audit reports on listed companies. The SFC inspects local accounting firms' audit reports on listed companies on a regular basis to determine whether the firms are faithfully implementing auditing roles.

During the same period, the three other major firms, Samil PwC, KPMG Samjong and EY Korea were corrected four, five and four times, respectively. During the last three business years alone, Deloitte received a total of six corrections, while Samil PwC and EY only had two and one violation each.

The firm's past track records of audit report violations are strengthening the market's doubtful perspective on the accounting company, following a recent Woori Bank embezzlement case, where an employee of the bank siphoned a total of 61.4 billion won ($47.5 million) from the bank over the period of six years from 2012 to 2018.

The majority of the money is an Iranian firm's payment for the botched takeover of Daewoo Electronics, which Woori Bank had kept as the failed acquisition deal's main manager. Due to the U.S. sanctions on Iran, the bank was prevented from returning the money back to the Iranian firm for years. It was during this time that the employee siphoned the money into his own accounts.

During the six years when the embezzlement took place, Deloitte Anjin, which served as the lender's auditor for the whole time, issued an unqualified opinion, meaning that the bank's financial statements are fairly and appropriately presented.

The FSS launched an inspection into the accounting firm at the end of last month, stressing that if the bank's auditor turns out to have been negligent, the firm could be held accountable, either by penalty or by a jail term for the officials responsible.

Regarding the case, Deloitte Anjin said the audit on the bank was conducted in a standard and professional manner.

"We have performed our audits in accordance with the professional standards and stand by our audit opinions. We are fully cooperating with any inquiry by the FSS and respect their role in protecting the capital markets. We will continue to serve our clients in this regard and in accordance with applicable professional standards," the company's official told The Korea Times.

Despite the firm's position, the accounting firm's past engagement in Daewoo Shipbuilding's accounting fraud case in 2017, along with nine other audit violations detected by the SFC from 2017 and 2021, add fuel to market watchers' skepticism as to whether Deloitte Anjin has been failing to properly manage its internal controls.

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