Daewoo Shipbuilding & Marine Engineering Co. (DSME) whose fate hangs on a new multi-billion-dollar bailout based on massive haircut on private debt is unlikely to receive a clean report from an outside auditor on its fiscal 2016 financial statement as its new independent auditor questions reliability of the company that had been found guilty of accounting frauds in the previous years.

If its final figures for 2016 to be disclosed on Friday carry “qualified” opinion - which means the auditor had limitation in its work and disagreement with the management over its accounting policies to pass the financial statements - the suspension on the DSME shares won’t be lifted.

According to accounting sources, DSME’s independent auditor Samil PricewaterhouseCoopers is likely to issue a qualified opinion on the shipbuilder’s 2016 financial statement in the audit report to be released on Friday.

“From the current conditions, DSME should get an adverse opinion and qualified at best,” one source said.

DSME was found guilty of cooking up figures in 2013 and 2014 amounting to 5.5 trillion ($4.6 billion) to inflate assets to get new funding from creditors and investors. Deloitte Anjin, the shipbuilder’s auditor since 2010 until it came under fire for colluding in the accounting fraud, was replaced by Samil. DSME in 2015 received state-led rescue fund of 4.2 trillion won.

The company failed to get a clean opinion in first-half and third-quarter statements last year.

A qualified opinion for full-year report would immediately put DSME on the KRX’s list of administrative issues, according to the security exchange rules. It would make the company excluded from the Kospi 200 index in June and deal a heavy blow to funds invested in the stock.

Its shares have been suspended since July and are due to receive review in October by the stock authority on whether to lift the sanction. If the stock continues to be excluded from the market, investors as well as institutional shareholders who had to agree to swap their debt into the company’s equity as a part of the 2015 bailout would see additional losses. The outlook would also weigh on a new 6.7 trillion won rescue package state creditors are concocting out for the shipbuilder while demanding commercial banks and bondholders to swap from 50 percent to 80 percent of their debt into equity.

DSME last year incurred operating loss of 1.6 trillion won after a 2.94 trillion won in 2015.

By Bae Mi-jung and Chun Gyung-woon

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