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By Nam Hyun-woo
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| Samjong KPMG CEO Kim Kyo-tae |
They said the high-profile "accounting fraud" case involving the biopharmaceutical unit of Samsung Group has tarnished the image of Samjong and Anjin, making it difficult for them to secure new corporate clients or maintain existing ones.
On Wednesday, the Securities and Futures Commission (SFC), affiliated with the Financial Supervisory Service (FSS), ruled that Samsung BioLogics violated accounting rules intentionally by inflating its net profits in 2015 before its initial public offering (IPO) in 2016.
Upon ruling so, the SFC said Samjong KPMG made a "serious error" in auditing Samsung BioLogics and ordered the accounting firm to pay a fine of 170 million won, as well as banning it from auditing BioLogics for five years. The SFC also decided to request its umbrella Financial Services Commission to suspend the license of four Samjong accountants.
For Deloitte Anjin, the securities committee found the firm made an "error" and banned it from auditing BioLogics for three years, without imposing a fine.
Over the decision, industry officials say firms are expected to suffer difficulties in managing their penalty points for receiving auditor designation.
The auditor designation system is the highlight of the amended Act on External Audit of Stock Companies.
Introduced after the 2015 accounting fraud involving Daewoo Shipbuilding & Marine Engineering, the system requires more companies to receive outside auditor designation from the SFC in a certain period of time.
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| Deloitte Anjin CEO Lee Jung-hee |
"When an accounting firm makes an error or commits an accounting fraud, the SFC will look into the case and determine the amount of penalty points," a Financial Supervisory Service official said. "Under the current rule, firms having more than 100 penalty points as of March 31 next year will lose a firm per 30 points."
"For companies, keeping its score low is very important in receiving designation," an accounting firm official said asking not to be named. "Also, damages to their credibility will likely affect the competition between accounting firms in winning other audit contracts."
"The ruling came as a confusion to the domestic accounting industry," another industry official said.
"The International Financial Reporting Standards prioritizes experts' judgment on a case. In this case, accounting firms have judged that changing the method used to calculate of BioLogics' affiliate Samsung Bioepis was not a violation of the accounting rules. But the SFC's decision overturned such a principle. We may see another case similar to this Samsung BioLogics fiasco in the near future," he said.
The SFC looked into allegations the biopharmaceutical company's sudden profit in 2015 following years of losses was because of fraudulent accounting.
Samsung BioLogics reported a net profit of 1.9 trillion won that year after changing the method used to calculate the value of its core affiliate Samsung Bioepis.
Both Samjong KPMG and Deloitte Anjin refused to comment on the issue.
