South Korea’s Financial Supervisory Service (FSS) has announced stringent measures against disruptions in corporate audits and inspections, reported ChosunBiz

The FSS highlighted a rise in cases involving false material submissions and refusals to submit necessary documents during external audits.  

It has reported that since 2024, there have been four instances of corporations obstructing inspections and six cases of external audit disruptions.  

This marks a significant increase compared with zero cases from 2019 to 2023 and an annual average of 2.6 cases of external audit obstruction. 

External audits and accounting inspections are aimed at providing investors with accurate corporate information.  

Obstructing these processes includes hindering auditors’ requests for viewing, copying, or submitting accounting-related materials without valid reasons or submitting false documents.  

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Inspection obstructions involve refusing, hindering, or evading the FSS’s accounting inspection tasks. 

One corporation was found to have submitted false materials in response to the FSS’s request for inventory-related documents, covering up accounting violations such as inventory overstatements.  

This led to an additional penalty surcharge of Won 70m and a report filed with the prosecution. 

Another corporation faced a penalty surcharge of Won 220m for refusing FSS requests for accounting materials and internal investigation reports, submitting some documents late.  

The executive responsible for the inspection obstruction has been reported to the prosecution. 

Corporations obstructing external audits were also identified.  

One company forged sales contracts and payment receipts when external auditors requested sales and asset-related materials.  

It repurchased products through special associates, disassembling them into new materials and supplies, which were then submitted to auditors, leading to prosecution. 

The FSS plans to announce cases of obstruction involving external audits and inspections through the Korean Institute of Certified Public Accountants, the Korea Listed Companies Association, and the Korea Securities Dealers Automated Quotations Association.  

The FSS, as reported by the Seoul-based publication, stated: “We will strengthen data collection and analysis using digital inspection techniques and prevent or block obstruction acts in advance.”