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Deloitte Anjin under criminal charge in relation to Daewoo Shipbuilding accounting fraud

Collected: 2016.12.28

Distributed: 2016.12.29

Source: Go Direct

Prosecutors filed criminal charge on Deloitte Anjin, South Korea’s second-largest accounting firm, in the accounting fraud case against Daewoo Shipbuilding & Marine Engineering Co. (DSME), concluding that the shipbuilder was able to get away with accounting irregularities for years because of slack auditing. Three auditors and an executive also received separate criminal charges.

Prosecutors accused the auditing company of organizational scheming from top executive to the working level. Prosecutors said they created false audit documents and neglected their role to oversee the shipbuilder, allowing it to doctor the books to make huge losses look smaller or claim to have made profits over the past few years.

Upon the criminal charge, the Financial Supervisory Service (FSS) the Securities Futures Commission will likely take separate administrative actions that could lead up to business suspension upon agreeing to Anjin’s liability.

Investigation results showed that all accountants in Anjin’s audit team for the shipbuilder, including partners, managers and in-charge officials, were directly involved in the crime. They ignored internal advice that there could be risky fraudulent elements in DSME’s accounting books and instead actively assisted to the shipbuilder to inflate its operating income.

The total value of the fraud came to over 5.7 trillion won ($4.71 billion) between 2012 and 2014 when Anjin reviewed the shipyard`s financial statements. Anjin and DSME were already sued by minority shareholders and pension fund operators who seek compensation of more than 150 billion won.

By Bae Mi-jung and Lee Hyun-jung

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