Daewoo E&C fined W2 bil. for accounting fraud

The securities regulator said Thursday that it fined Daewoo E&C 2 billion for allegedly committing accounting fraud by not reflecting expected losses worth more than 1 trillion won in its financial statements.

The Securities & Futures Commission (SFC) said it also imposed a 1.06 billion won fine on Samil PricewaterhouseCoopers for failing to supervise the builder so that it would follow accounting regulations. Samil’s two accountants were prohibited from supervising listed companies for one year. The orders are subject to approval of the Financial Services Commission by the Capital Market Act.

“With the punishments, we expect construction companies to improve their accounting management by reflecting expected losses and debts more strictly,” said the SFC in a statement. “We are studying to make their accounting reports more transparent in cooperation with the Financial Supervisory Service (FSS).”

The announcement came amid Daewoo Shipbuilding & Marine Engineering (DSME) being under probe over its alleged accounting fraud. The shipbuilder is suspected of hiding its losses worth 3 trillion won. Both Daewoo E&C and DSME are under the wing of the Korea Development Bank.

Deloitte Anjin, an accounting firm which supervised DSME’s financial statements for the last few years, is also criticized for failing to supervise the shipbuilder’s accounting management properly.

However, the securities regulator said it has no plan to widen its investigation into other construction companies, worrying it would undermine their business. Shares of Daewoo E&C slipped 30 won, or 0.47 percent, to 6,400 won because the bad factor was already reflected in its stock price before.

The regulator said that Daewoo E&C failed to reflect its expected losses worth 1.3 trillion won in 2012 and 2013. The company is also accused of omitting its debts worth 550 billion won to financial statements for two years. The builder filed its regulatory filings with false information, confusing investors and the authorities.

Market watchers said that the fines are too small compared to its irregularities. They said the regulator needs to raise the amount of fines of companies violating accounting regulations in order to prevent such irregularities from happening again.
Source: Korea Times