[Alpha Biz= Kim Jisun] Etron, a KOSDAQ-listed company recently slated for delisting, has been sanctioned by financial authorities for accounting violations, including a three-year auditor designation and a referral to prosecutors.
On Wednesday, the Securities and Futures Commission (SFC) under the Financial Services Commission (FSC) held its fourth meeting and deliberated on measures against Etron and two other companies for violating accounting standards in their financial statements. The commission imposed fines and designated auditors for the involved firms and their auditors.
Between 2019 and 2022, Etron failed to classify its investment shares in a company as equity investments despite having significant influence over the investee. The misclassified amounts were KRW 48.1 billion in 2019, KRW 29.8 billion in 2020, KRW 26.1 billion in 2021, and KRW 7.6 billion in 2022.
Additionally, the company did not disclose in its financial statements that it had pledged financial assets as collateral to the underwriters of its bond with warrants. In 2022, Etron also misrepresented the transfer of convertible bonds (CBs) by accounting for them as transferred despite not meeting the required conditions under accounting standards, thereby underreporting KRW 7.5 billion in CB-related valuation losses.
A further investigation revealed that Etron deliberately withheld a supplementary agreement detailing the substance of a CB transfer contract from its auditor, constituting an obstruction of an external audit. The company was also found to have inadequately designed or falsely operated its internal accounting control system.
As a result, the SFC imposed a three-year designated auditor measure on Etron and recommended the dismissal of one former CEO and two former executives. Additionally, the company, along with the former CEO and one former executive, has been referred to the prosecution.
Final decisions on fines against the company and its executives will be made by the FSC at a later date.
AlphaBIZ Kim Jisun(stockmk2020@alphabiz.co.kr)
