Deloitte asks DSME to rewrite financial statement

Deloitte Anjin has asked Daewoo Shipbuilding and Marine Engineering (DSME) to correct its financial statement.

This means the accounting firm failed to audit the shipbuilder properly and could face punishment from the financial authorities for malpractice.

The local unit of the global accounting and consulting firm Deloitte Touche Tohmatsu said it had asked DSME to rewrite its 2014 financial statement because Deloitte found errors while examining the shipbuilder’s 2015 financial statement.

Deloitte has audited DSME’s financial statements for the past few years.

“DSME accepted our request to rewrite the financial statement,” said Deloitte Anjin in a text message to The Korea Times. “We will announce our opinion of the statement after auditing it again.”

But the firm declined to elaborate, saying it was obliged to keep customers’ information confidential.

Thursday’s announcement follows the financial regulator’s investigation of DSME and Deloitte Anjin over allegations that the shipbuilder manipulated its accounts.

The Financial Supervisory Service (FSS) declined to comment on the case.

Market watchers said the FSS had internally concluded that the shipbuilder and the accounting firm had hidden 2.5 trillion won of losses in 2013 and 2014 by not reflecting long-term loans.

They also said the FSS collected evidence that DSME and Deloitte Anjin did not set apart reserves for losses from failed projects.

Industry sources said Deloitte Anjin was trying to avoid punishment from the regulator by asking DSME to rewrite the statement. This was because the FSS has strengthened its sanctions against accounting firms involved in accounting fraud.

The regulator announced in December that it would suspend the head of any accounting firm if the firm committed accounting fraud or failed to audit a company thoroughly.

The FSS said it would take away the accounting license of a firm’s chief executive and refer them to the prosecutors’ office if they violated regulations intentionally.

Korea’s accounting firms have drawn criticism for failing to play a check-and-balance role, paying no attention to wrongdoings of companies they audited. Market watchers said accounting firms were afraid that companies would withdraw their business if the accountants uncovered faults and reported them to the authorities.

Young accountants also faced indictment last year for investing in stocks using inside information collected by auditing companies. The accountants allegedly made hundreds of millions won, with which they bought luxury cars, according to the regulator.
Source: The Korea Times