Securities and Futures Commission Sanctions SELVAS Healthcare, Daewoo Industrial Development for Accounting Violations
Overstated goodwill and understated bad-debt allowances
Daewoo Industrial Development also failed to reflect former chairman's embezzlement
Measures include auditor designation and fines
The Securities and Futures Commission under the Financial Services Commission said on Nov. 11 that it had approved measures, including the designation of an auditor, against SELVAS Healthcare and Daewoo Industrial Development for preparing and disclosing financial statements in violation of accounting standards.
SELVAS Healthcare was found to have overstated goodwill by unjustifiably inflating its projected future cash flows when assessing goodwill impairment. It also overstated development costs and investments in subsidiaries while setting aside insufficient valuation allowances for inventory. The commission imposed a fine and designated an auditor for two years.
Daewoo Industrial Development set aside insufficient allowances for bad debts by making it appear that it could recover construction receivables through adjustments to presale prices and the number of unsold units. It was also found to have overstated net income and equity by failing to properly reflect the embezzlement by its former chairman and former CEO in its financial statements.
The commission imposed a 12-month restriction on securities issuance, a fine and a three-year auditor designation on Daewoo Industrial Development. It also imposed measures equivalent to recommendations for dismissal (removal from office) against the former chairman, former CEO and responsible executive. The commission decided to restrict Daejoo Accounting Corporation and its certified public accountants from auditing the company, among other measures, for failing to conduct adequate audits.
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The Financial Services Commission will make the final decision on the fines.
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