[Edaily Reporter PARK MIN ] The Securities and Futures Commission (SFC), under the Financial Services Commission, announced on the 2nd that it held its 15th regular meeting and resolved to take measures—including the appointment of an auditor—against Geumyang Co., Ltd. ( Kumyang(001570)), a secondary battery materials company that prepared and disclosed financial statements in violation of accounting standards.

According to the Securities and Futures Commission, Kumyang recognized 10.3 billion won in fictitious revenue in 2022 by receiving and issuing false tax invoices and other documents to make it appear as though it had sold physical inventory assets that had not actually been transferred.

It also distorted the scope of its consolidated financial statements. Although Kumyang jointly controlled a Mongolian subsidiary through an agreement between its second-largest shareholder and other shareholders, it applied consolidated accounting treatment, resulting in the overstatement of equity and other items.

It also failed to properly reflect impairment losses on its investment in a joint venture. Despite signs of impairment—such as a significant deterioration in the Mongolian subsidiary’s projected operating profit or loss—Kumyang did not recognize impairment losses, thereby overstating its equity and other items.

The company was also found to have obstructed the external audit. An investigation revealed that during the 2022 external audit, Kumyang colluded with a business partner to present false transaction documentation and transferred inventory to a warehouse operator with which it was doing business. The company then arranged for the auditor to conduct an on-site inspection as if the inventory were the company’s own assets, only to retrieve it afterward.

It was also revealed that during the financial authorities’ inspection, the company submitted falsified receipts and made false statements claiming that the inventory had been delivered normally and that it had not obstructed the auditor’s physical inventory count.

Consequently, the Financial Services Commission (FSC) imposed a three-year audit firm designation restriction on Kumyang and ordered corrective measures. It resolved to recommend the dismissal of the CEO and three other individuals, along with a six-month suspension from duty, and imposed measures equivalent to a dismissal recommendation on the former executive in charge of sales and one other individual.

Furthermore, the Commission filed criminal complaints with the prosecution against Kumyang, its CEO, and the former executive in charge, and decided to notify the prosecution regarding the former sales executive and two other individuals. The amount of the administrative fine will be finalized by the Financial Services Commission at a later date.

Sanctions were also imposed on SUNJIN Co., Ltd. on the same day. The Securities and Futures Commission determined that SUNJIN Co., Ltd. had conducted control tests and detailed tests related to revenue and cost of goods sold in a grossly inadequate manner while auditing the financial statements of a listed company.

Consequently, the Commission resolved to require SUNJIN Co., Ltd. to make an additional 20% contribution to the Joint Compensation Fund and to restrict its auditing activities for that company for two years. It also imposed measures, including restrictions on auditing activities and mandatory professional training, on two certified public accountants affiliated with the firm. The amount of the administrative fine imposed on SUNJIN Co., Ltd. will also be finalized by the Financial Services Commission at a later date.