SFC Fines Kumyang for Violating Accounting Standards and Refers It to Prosecutors

[Financial News] KOSPI-listed Kumyang was fined and ordered to have an auditor designated for three years for violating accounting standards.
According to the Securities and Futures Commission (SFC) on the 2nd, Kumyang falsely recorded 10.3 billion won in sales and cost of sales in 2022 by exchanging false tax invoices and other documents as if it had sold products without transferring the physical inventory.
Kumyang also misjudged its control over a Mongolian entity. Although it jointly controlled the entity through a shareholder agreement with the second-largest shareholder, Kumyang classified it as a subsidiary and included it in consolidated accounting. As a result, equity and other items in its separate financial statements were overstated by 77.65 billion won in 2023 and the first quarter of 2024, 93.55 billion won in the second quarter of 2024, and 17.22 billion won in the third quarter.
The SFC also confirmed that Kumyang failed to recognize impairment losses despite signs of impairment caused by a sharp deterioration in the Mongolian entity's operating profit and loss. The unrecognized impairment loss amounted to 76.33 billion won in the separate financial statements.
During the external audit, Kumyang allegedly colluded with business partners to present false transaction evidence. It moved inventory to a trading warehouse, had it inspected as if it were company-owned, and then retrieved it. The Financial Supervisory Service also found that Kumyang submitted false acceptance receipts and made false statements during its inspection.
The SFC decided to refer Kumyang, its CEO, and a former executive in charge to prosecutors. It also decided to notify prosecutors about three people, including a former executive in charge of sales. Four people, including the CEO, were subject to recommendations for dismissal and six-month suspensions from their duties.
Separately, the SFC imposed a fine and ordered Sunjin Accounting Firm to make an additional contribution equivalent to 20% of its joint liability fund for damages. It also restricted the firm from conducting audit work for the other company for two years after finding that it had inadequately performed audit procedures related to the company's sales and cost of sales.
[email protected] Lee Jung-hwa Reporter