South Korea’s financial authority and the outsider auditor are expected to share the liability for poor internal oversight at Osstem Implant Co. under multiple scandals and delisting risk as its window-dressing five years ago went off the hook with a light disciplinary action.
The Financial Supervisory Service in 2017 found that Osstem Implant failed to recognize its reserves worth 16.7 billion won ($14 million) for returned goods as liabilities during its special inspection. The regulating body, however, imposed only light disciplinary action against the dental implant maker for it, according to a study published in Korean Accounting Journal in 2018.
The article said that Osstem Implant had to revise its 2012~2015 financial statements to reflect 16.7 billion won in its 2016 books. Following the revision, the company’s earned surplus during the period fell 13 billion won, and 5.2 billion won worth of sales was canceled. Operating and net incomes fell 3.6 billion won and 2.8 billion won, respectively.
The accounting error was found during FSS’s special inspection upon Osstem Implant’s petition against its two rivals, claiming that they overstated revenue. The FSS carried out special inspection into all three companies and discovered inappropriate accounting practices by all three. One of the three companies was imposed heavy sanction while Osstem Implant and the other company walked away with light disciplinary action, according to the report.
The financial authority during the inspection was also unable to filter internal monitoring system, raising questions about FSS’ liability in the scandal.
Minority shareholders of Osstem Implant that have decided to file a suit against the company to demand compensation are also seeking to hold FSS and the outside auditor, Nexia Samduk, accountable for the latest accounting fraud at the company.
According to recent disclosures, the arrested Osstem Implant employee who allegedly embezzled 188 billion won in company funds withdrew 23.5 billion won in the fourth quarter of 2020 and returned the funds. Still, Nexia Samduk, proposed clean audit opinion in report in March last year.
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]