Fidelix Falsely Booked KRW 15 Billion in Revenue and Other Items Over Five Years; SFC Files Complaint With Investigative Authorities

[Financial News] KOSDAQ-listed Fidelix was found to have colluded with business partners to falsely book about KRW 15 billion in revenue and other items over five years to facilitate the raising of external funds.
At its 19th meeting on the 28th, the Securities and Futures Commission (SFC), under the Financial Services Commission (FSC), voted to impose measures on Fidelix for preparing and disclosing financial statements in violation of accounting standards, including auditor designation for three years, a recommendation to dismiss the former CEO and others, and complaints and referrals to investigative authorities.
According to the SFC, Fidelix colluded with business partners to falsely book revenue and other items from 2018 to 2022 with the aim of making its operating performance appear better than it actually was. The amounts falsely booked each year were KRW 3.052 billion in 2018, KRW 3.161 billion in 2019, KRW 2.97 billion in 2020, and KRW 2.943 billion in each of 2021 and 2022. The total reached KRW 15.069 billion.
Fidelix was also found to have obstructed the auditors’ normal external audit, including by asking business partners to provide false responses to receivables confirmation requests.
The SFC imposed a three-year auditor designation on Fidelix and measures equivalent to a recommendation for dismissal for two people, including the former CEO. It filed complaints with investigative authorities against the company and the two people, and notified the authorities about a former executive in charge. The FSC will make a final decision on the administrative fines for the company and its officials at a later date.
Sanctions were also decided for Hyundai Accounting Corporation and With Accounting Corporation. Hyundai Accounting Corporation was found to have neglected audit procedures during the external audit of another company, Company A, which is unrelated to Fidelix.
From 2017 to 2020, Hyundai Accounting Corporation neglected audit procedures concerning Company A’s revenue and purchases, among other things, and failed to properly reflect the company’s accounting standards violations in its audit opinion. It was consequently ordered to make an additional contribution of 50% to the joint fund for compensation for damages and barred from auditing that company for three years. One of its certified public accountants was also barred from audit work and ordered to undergo professional training. The FSC will finalize the administrative fine at a later date.
With Accounting Corporation violated the rule prohibiting the same director from auditing a company for six consecutive fiscal years in its audits of three companies. The SFC ordered it to make an additional contribution of 20% to the joint fund for compensation for damages for each company and barred it from audit work for two years. It also barred two of the firm’s certified public accountants from audit work and ordered them to undergo professional training.

[email protected] Lee Jeong-hwa Reporter