2 years after receiving consecutive audit opinions of refusal, Kumyang has been subjected to a delisting decision by the Korea Exchange due to false sales reporting, overstated equity, and interference with external audits.
According to the Financial Services Commission on September 3, the Securities and Futures Commission held its 15th meeting the previous day and imposed a three-year audit designation and corrective measures on Kumyang for violating accounting standards in its financial statements. The commission recommended the dismissal of four individuals, including the CEO, and decided on a six-month suspension of their duties. Measures equivalent to dismissal were also approved for former sales executives. The company, its CEO, and former executives will be reported to the prosecution, with three former sales executives also facing prosecution notification. The final decision on fines for the company and its officials will be made by the Financial Services Commission in the future.
The investigation revealed that Kumyang falsely recorded sales and cost of goods sold by issuing and receiving false tax invoices without transferring actual inventory assets in 2022. The total amount of false accounting in separate and consolidated financial statements was found to be 10.3 billion won.
Issues were also identified regarding the accounting treatment of its Mongolian subsidiary. Despite jointly controlling the subsidiary through a shareholder agreement with its second-largest shareholder, Kumyang was found to have overstated its equity by performing consolidated accounting.
In 2023, the overstatement amounted to 77.65 billion won on a separate basis and 61.82 billion won on a consolidated basis. In the second quarter of 2024, the figures were 93.55 billion won on a separate basis and 75.25 billion won on a consolidated basis. It was also confirmed that Kumyang did not reflect impairment losses related to its investment in the Mongolian subsidiary. Despite signs of significant deterioration in the subsidiary's expected operating profit and loss, Kumyang failed to recognize impairment losses, leading to overstated equity. The unrecognized impairment loss as of 2023 was 76.33 billion won on a separate basis and 74.17 billion won on a consolidated basis.
Actions to deceive auditors and obstruct audits were also uncovered. During the external audit in 2022, Kumyang colluded with clients to present false transaction evidence and moved inventory to a warehouse to mislead auditors into believing it was company inventory, only to retrieve it afterward.
During the Financial Supervisory Service's inspection, Kumyang submitted falsely prepared receipts and falsely stated that inventory was delivered normally and that it did not obstruct the auditor's inventory inspection.
Kumyang has already received a delisting decision due to the refusal of audit opinions. The Korea Exchange decided to delist Kumyang's shares on May 20, following a meeting of the Securities Listing and Disclosure Committee, which reviewed the delisting grounds related to the refusal of audit opinions in the 2024-2025 fiscal year audit report.
* This article has been translated by AI.
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