Accounting firms in South Korea remain jittery as financial authorities are set to discipline Deloitte Anjin LLC soon for its failure to detect massive accounting fraud in a troubled shipyard, sources said Friday.
Starting in late 2015, the Financial Supervisory Service conducted a near one-year investigation into Deloitte Anjin over its failure to uncover that Daewoo Shipbuilding & Marine Engineering Co. had cooked the books to make its snowballing losses in 2013 and 2014 look smaller.
|This undated file photo shows the lobby of Daewoo Shipbuilding & Marine Engineering Co. in Seoul. (Yonhap)|
The FSS also conducted an audit on DSME on suspicions that the shipbuilding giant deceived investors by window-dressing its financial statements. Deloitte Anjin's "mea culpa" confession followed, but it claimed that it had not violated any laws.
Wrapping up the probe into Deloitte Anjin late last year, the financial watchdog is now known to be considering what sanctions it will impose on the accounting firm.
Industry watchers said the local accounting sector will be thrown into chaos if the watchdog slaps a heavy punishment on it, such as a business suspension.
"Rival companies may benefit from severe disciplinary action against Deloitte Anjin, but it could also set a bad precedent for the entire sector," an industry source said.
Some members of the Korean Institute of Certified Public Accountants are pushing to file a petition with the FSS calling for leniency toward Deloitte Anjin.
"No decision has been made yet, but we will consider issuing a statement on the case or lodging a petition after collecting opinions from members," said Choi Joong-kyung, head of the institute.
In principle, heavy punishments should be imposed on accounting firms and accountants who commit wrongdoing, but it is advisable for the FSS to determine the level of discipline after a court ruling on the case, he added.
In late December, state prosecutors indicted Deloitte Anjin and some 10 employees on charges of aiding and abetting DSME's fraudulent accounting worth 5.7 trillion won ($4.98 billion).
The watchdog's disciplinary action should be subject to approval from its board of supervisors, the Securities and Futures Commission, and the Financial Services Commission, the FSS' decision-making body. (Yonhap)