South Korea’s financial regulator said Thursday that 69 domestic companies have sought audit relief due to shortcomings in their reports for 2019, as the novel coronavirus has undermined their key operations, especially in China.
Over two-thirds of companies that have applied for regulatory relief have a presence in China, and determined their filings cannot be completed by March 30, according to the Financial Services Commission. They include tobacco product maker KT&G, light bulb maker Kumho Electric and auto parts makers Seoyon, Austem and Hwajin.
Nearly 20 percent of the companies that have applied were running operations either in affected regions in Korea -- including Daegu and nearby Cheongdo, North Gyeongsang Province -- or in the United States, Europe and Southeast Asia. They include Daegu-headquartered firms like car parts maker SL and aluminum product maker Namsun Aluminum.
This reflects auditors’ restricted access to operations in the affected regions and the forced shutdown of the local office building of auditors or appraisers due to the novel coronavirus.
As per law, those who fail to submit completed financial reports on time are subject to heightened scrutiny by stock market operator Korea Exchange and face the risk of delisting. Trading of their shares could be suspended, and cannot be purchased on margin.
But as the coronavirus panic does not seem to be settling down, financial authorities have implemented measures to offer troubled companies a 45-day grace period in completing audits.
In light of this, authorities called on companies to hand in a formal relief request from Feb. 28 until Wednesday if they are unable to complete their 2019 annual financial statement by end-March.
According to the measures, listed companies and large privately held firms submitted the relief request to the watchdog Financial Supervisory Service, while the rest of the firms’ applications went to the Korean Institute of Certified Public Accountants, a member association representing professional accountants in Korea.
Of the total, seven were trading on the nation’s main bourse Kospi, 29 were listed on the development bourse Kosdaq and five were listed on Konex.
They are awaiting approval from the Securities and Futures Commission, an independent body under the the FSC. Upon approval, the deadline for submitting annual financial reports will be delayed to May 15.
Meanwhile, the FSC said it would closely monitor whether some of the firms are exploiting the regulatory relief initiative to skirt penalties. According to the regulator, seven firms were under scrutiny for delisting as their financial records were misrepresented.
By Son Ji-hyoung (email@example.com