Deloitte Anjin, Korea's leading accounting firm, was given a harsh punishment for doctoring the books of Daewoo Shipbuilding & Marine Engineering by being ordered not to undertake audits on all publicly traded corporations and financial service firms for one full year.
This is the first time for a Korean accounting firm to be punished for wrongdoings since 2001 when KPMG San Tong was suspended for manipulating the books of Daewoo Group and eventually went bankrupt. Given most auditing contracts last three years, the latest measure may mean a loss of several tens of billions of won, with a possibility that some of its large customers may defect permanently.
The Securities and Futures Commission under the Financial Services Commission held an emergency meeting on March 24 and made the final decision on the punishment level on Deloitte Anjin. The commission's members said the accounting firm knowingly turned a blind eye to the shipbuilder's irregularities, which merits heavy penalties. Under the current laws, suspension is one of the harshest administrative sanctions including registration revocation.
The list of companies with which Deloitte Anjin is prohibited from doing business includes all publicly listed companies, all firms subject to mandatory auditing, and all financial service firms including unlisted ones. As of the end of last year, the number of firms with which Deloitte Anjin signs audit contracts is 1,068 including 223 public firms and 845 privately held ones.