[Edaily Reporter kim mi-kyung ] Haitai Confectionery and Foods Co., Ltd.(101530)has been sanctioned by financial authorities for overstating its revenue and cost of goods sold by approximately 53 billion won over the past four years. As a result, trading in its stock has been suspended, and the company is now subject to a review to determine whether it will undergo a substantive eligibility review for continued listing. Haitai Confectionery stated that it has completed a re-audit and a voluntary corrective disclosure regarding the problematic financial statements and has since strengthened its internal control systems.

On the 17th, the Korea Exchange (KRX) announced that it had confirmed Haitai Confectionery and Foods Co., Ltd.’s violation of accounting standards and its notification to prosecutors, and that grounds for a substantive review of its listing eligibility had arisen. Consequently, trading in Haitai Confectionery and Foods Co., Ltd. shares has been suspended. The KRX plans to decide by October 14 whether the matter will be referred to the Corporate Review Committee for deliberation.

Previously, on the 16th, the Securities and Futures Commission (SFC), under the Financial Services Commission, held its 16th meeting and voted to impose sanctions—including the mandatory appointment of an auditor for three years—on Haitai Confectionery for preparing and disclosing financial statements in violation of accounting standards. According to the SFC, Haetai Confectionery overstated its revenue and cost of goods sold from 2016 to 2019 by issuing false tax invoices and failing to account for sales discounts and sales incentives.

The amounts overstated by year were: △13.678 billion won in 2016, △15.317 billion won in 2017, △11.256 billion won in 2018, and △12.777 billion won in 2019, totaling 53.028 billion won.

The investigation revealed that financial statements for the 16th through 18th fiscal years—which violated accounting standards—were also used in securities registration statements. The company was also found to have obstructed external audits by presenting false transaction documentation to auditors and requesting business partners to provide false responses to accounts receivable inquiries.

The Securities and Futures Commission imposed a three-year auditor designation on Haitai Confectionery, while recommending the dismissal of the head of the finance department and suspending him from duty for six months, and imposing measures equivalent to a recommendation for dismissal on the former auditor. The head of the finance department and the former auditor were reported to the prosecution. The final decision on administrative fines for the company and the individuals involved will be made by the Financial Services Commission.

Following this notification to the prosecution, the stock exchange will review whether Haitai Confectionery qualifies for deliberation by the Corporate Review Committee in accordance with the listing regulations of the Stock Market. If the company is deemed eligible for deliberation, trading will remain suspended while the Corporate Review Committee proceedings are underway. If the company is excluded from Daesang, the trading suspension may be lifted. Trading in Haitai Confectionery’s shares has been suspended since 6:09 p.m. the previous day, based on a regulatory filing regarding rumors of a notification from the prosecution concerning violations of accounting standards.

Haetai Confectionery maintains that this violation of accounting standards relates to the inflation of sales figures by certain sales representatives that occurred more than seven years ago. Regarding the financial statements for 2016–2019 in question, the company conducted a re-audit, restated the relevant financial statements in May 2024, and voluntarily disclosed the corrections. The company explains that it has since comprehensively improved the six core areas of its internal control system.

A representative from Haitai Confectionery stated, “The Korea Securities and Futures Commission’s decision regarding this violation of accounting standards pertains to events that occurred more than seven years ago,” adding, “We took immediate disciplinary action against the relevant executives and employees at the time.” The spokesperson continued, “Since 2020, we have strengthened our internal accounting management system and conducted periodic ethics training to enhance internal controls. We have significantly improved accounting transparency and established robust internal audit mechanisms,” adding, “We will continue to strengthen and refine our internal accounting management system to ensure that such a situation does not recur.”