[Edaily Reporter Kwon Oh-seok] The Securities and Futures Commission (SFC) of the Financial Services Commission announced on the 10th that it held its 11th meeting and resolved to take measures, including the appointment of auditors, against #Youngpoong, #Koryo Zinc, and #Hankyul LS for preparing and disclosing financial statements in violation of accounting standards. In addition, the Commission resolved to impose measures, including restrictions on audit work for the relevant companies, against LeeChon Accounting Firm, DaeJu Accounting Firm, and their affiliated certified public accountants, who neglected audit procedures as auditors for Youngpoong.

◇ Yeongpoong: Three-Year Designation of Auditor Approved… Auditors Also Face Severe Penalties
According to the FSC, first, regarding the order to remediate contaminated soil in the area surrounding its smelter, Youngpoong failed to recognize a provision for liabilities in 2021–2022 despite a clear legal obligation to remediate. Furthermore, in 2023–2024, it underestimated the provision for liabilities by calculating it using remediation methods not permitted under relevant laws and regulations.
Furthermore, regarding the order to remediate contaminated soil in forested areas surrounding the smelter, Youngpoong failed to recognize a provision liability for 2023–2024 despite a clear legal obligation to remediate. Additionally, although a present obligation existed to remediate contaminated soil beneath the buildings of Smelter Plants 1 and 2—thereby meeting the criteria for recognizing a provision liability—the company failed to do so.
Furthermore, in 2019, following a groundwater pollution prevention order, a legal obligation to remediate contaminated groundwater at the smelter existed. Although the company was required to recognize the best estimate of all future costs associated with the remediation process as a provision, it instead understated the provision by recognizing only the actual contract amount with the remediation contractor.
Furthermore, during the impairment assessment related to the smelter’s suspension of operations from 2022 to 2024, Youngpoong understated the impairment loss by using historical profit and loss estimates from past suspensions rather than the best estimate for 2022. During the 2023 asset impairment assessment, the company understated the impairment loss by reflecting future cash flows that arbitrarily excluded the profit and loss effects of the operational shutdown.
Accordingly, the Financial Services Commission (FSC) resolved to impose a three-year audit designation, recommend the dismissal of the former CEO, and recommend the dismissal (removal) and a six-month suspension of duties for the responsible executive and the former responsible executive. However, the imposition of fines on the company and its related parties is scheduled to be finalized by the Financial Services Commission in the future.
In addition, the Commission decided to require Leechon Accounting Firm, Youngpoong’s auditor, to make an additional 30% contribution to the Joint Compensation Fund and imposed a two-year restriction on its audit services for Youngpoong. For two certified public accountants, the Commission resolved to impose a one-year restriction on audit services for Youngpoong, a one-year restriction on audit services for designated companies, and six hours of professional training.
For another auditor, Daeju Accounting Firm, the committee resolved to require a 70% additional contribution to the joint compensation fund and a three-year restriction on auditing Youngpoong. The imposition of administrative fines is scheduled to be finalized by the Financial Services Commission. In particular, one CPA received a severe punishment, including a one-year suspension of duties, a four-year restriction on auditing Youngpoong, a one-year restriction on auditing listed companies, designated companies, and large unlisted corporations, and 16 hours of professional training. The other two CPAs also received measures such as restrictions on auditing Youngpoong.
◇Koryo Zinc, which obstructed external audits, faces recommendations including the dismissal of responsible executives
In the case of Korea Zinc, the company understated related valuation losses (impairment losses) despite a decrease in the fair value and recoverable amount of financial instruments and investments in affiliated companies. It failed to disclose related-party transactions involving subsidiaries in the notes to the financial statements, and did not recognize impairment losses despite goodwill and subsidiary impairments arising from a decrease in the recoverable amount of overseas subsidiaries.
Furthermore, significant weaknesses in the internal accounting control system arose, such as the superficial execution of reviews regarding losses and impairments of investment assets, and the company obstructed the auditor’s normal external audit by failing to provide key information regarding convertible bonds issued by subsidiaries.
Consequently, the Securities and Futures Commission (SFC) resolved to designate an auditor for three years, recommend the dismissal (removal) of the responsible executive, and suspend their duties for six months. The imposition of fines on the company and its related parties will be finally decided by the Financial Services Commission (FSC) in the future.
Additionally, Hankyeol LS is accused of falsely recording inventory assets by arbitrarily reclassifying by-products as regular products to overstate volume and unit prices, and by manipulating inventory ledgers through methods such as inflating product weights. Furthermore, when valuing inventory assets using the lower-of-cost-or-market method, the company overstated the net realizable value and compared it to the book value of raw materials excluding processing costs, thereby understating inventory valuation losses.
Accordingly, the Securities and Futures Commission (SFC) resolved to designate an auditor for two years, recommend the dismissal of the former CFO, and notify the prosecution regarding the company, its former CEO, and the former CFO. The imposition of fines on the company and its related parties will be ultimately decided by the Financial Services Commission.