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2015-12-03 17:54
By Kim Jae-won

The financial regulator is supposed to monitor whether accounting firms play a check-and-balance role in the financial reports of auditing companies.

However, the Financial Supervisory Service (FSS) seems to neglect its duties, having no plans to investigate Deloitte Anjin, which is suspected of turning a blind eye to alleged accounting fraud committed by Daewoo Shipbuilding & Marine Engineering (DSME).

DSME’s major shareholder the Korea Development Bank (KDB) has audited the shipbuilder to discover whether it had intentionally hidden accumulated losses worth more than 3 trillion won over the last few years. Their findings have not been announced yet.

Asked whether the FSS will investigate Deloitte Anjin, a local member of the global accounting and consulting firm, Deloitte Touche Tohmatsu, a director of the regulator gave an unexpected answer.

“I cannot understand why the media has so much interest in the matter,” said Jeong Yong-won, an FSS director in charge of supervising accounting firms. “You say that they are suspected of committing accounting fraud, but we do not know about it yet.”

Then, why does the FSS not investigate DSME and Deloitte Anjin over the suspicions? Jeong said he cannot comment on the issue.

Such an ambiguous stance by the authorities waters down their recent plans to punish the CEOs of accounting firms when they neglect their duties of supervising the financial reports of companies. Jeong also said that DSME and Deloitte Anjin will be exempted from the new regulations which will go into effect in February.

The FSS director seems to be too generous with the two companies which are suspected of some of the largest accounting frauds in the country’s history. He seemed to be defending them rather than playing his role as “the prosecutor of the financial industry.”

Market watchers said that Korea needs to learn from the U.S., where harsh sanctions are meted out to companies and accounting firms convicted of accounting fraud. Most of us know about the Houston energy company Enron, which collapsed in 2002 after the U.S. Securities and Exchange Commission launched an investigation of the company over its accounting practices.

Arthur Anderson, the accounting firm which audited Enron, was also hit hard for reviewing and approving transactions by Enron-related partnerships that contributed to the company’s collapse.

Transparent accounting reports are one of the foundations of successful business. That’s why the U.S., which leads the global economy, spares no efforts in imposing strong sanctions for accounting fraud.

Korea’s regulator should follow the steps of its U.S. counterpart so that the country’s accounting transparency improves even more.

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