April 27, 2024
Industrials
DSME auditor Deloitte Anjin struggles for recovery, runner-up rivals seek momentum
[THE INVESTOR] The accounting fraud cases that jolted the construction and shipbuilding industries last year have dealt a heavy blow to the auditors in charge, according to accounting industry officials.
The key game changer was Daewoo Shipbuilding & Marine Engineering’s account manipulation scandal which hit its auditor Deloitte Anjin hard and consequentially reversed the industry’s ranking.
Deloitte Anjin, the Korean unit of the New York-based Deloitte and the third-largest accounting firm in sales here, is currently undergoing administrative litigation against the Financial Services Commission, with its first pleading slated for Oct. 20.
“The goal of the claim is to seek for the revocation of the financial supervisor’s sanctions concerning the DSME accounting manipulation,” said an official of the company.
In April this year, the FSS imposed a one-year suspension of operation and a 1.6 billion won ($1.4 million) penalty on the auditor for overlooking the multitrillion won accounting fraud of the shipbuilder.
Considering that auditing contracts are operated on a three-year term, the business suspension is expected to cut down the company’s sales in auditing by about a third or more.
A number of local builders, who had previously worked with Deloitte Anjin, switched their auditors earlier this year, turning to Samil PwC, Samjong KPMG or Earnest Young Hanyoung, the Financial Supervisory Service’s data showed.
Responding to such consequences, Deloitte Anjin is also working on an unprecedented restructuring plan, which may reduce its partner-level staff by up to 30 percent, according to officials.
But while the company is pulling itself together to regain its former status, it is the runner-up rivals which have been seizing the opportunity to expand their businesses.
Samjong KPMG already outran Deloitte Anjin as of the end of last year, with 320 billion won in yearly sales over Deloitte Anjin’s 310 billion won, therefore seizing the No. 2 position for the first time in years.
More conspicuous was EY Hanyoung, which has been scoring double-digit growth for the past four years.
The company’s total sales -- including the consulting sector -- last year stood at 280 billion won, up 11 percent from the previous year, catching up closely with Samjong KPMG. The figure excluding consultation fees came to 216 billion won, up 16.12 percent from a year earlier.
Apparently determined to ride on the momentum, EY Hanyoung has been placing top priority in recruitment this year, appointing the largest number of partners in July and vowing to expand welfare for its employees.
“We are also planning to recruit 280 new accountants in September, which is about 30 more from the previous year,” said an official of the company.
Front-runner Samil PwC, on the other hand, has safeguarded its No. 1 position but has recently been tripping over failing to detect the account fraud by the nation’s sole aircraft manufacturer Korea Aerospace Industries.
The company recorded 504 billion in sales last year, outrunning by far its rivals and also surpassing the 500 billion won mark for the first time in the industry, FSS data showed.
But the ongoing prosecutorial probe on KAI and its top executives over cost manipulation and slush funds has brought the accounting firm under fire for auditing failure. The defense company is suspected of overstating an aircraft deal to Iraq in 2013, making it look as if the money was properly received though it was suspended due to regional tension at the time.
Samil, however, stated in its half-year report last week that “no violations of accounting regulations were detected in specific” in KAI’s account records, claiming that its role is only to evaluate the accounting factors, not to interfere in the client’s business details.
By Bae Hyun-jung/The Korea Herald (tellme@heraldcorp.com)
The key game changer was Daewoo Shipbuilding & Marine Engineering’s account manipulation scandal which hit its auditor Deloitte Anjin hard and consequentially reversed the industry’s ranking.
Deloitte Anjin, the Korean unit of the New York-based Deloitte and the third-largest accounting firm in sales here, is currently undergoing administrative litigation against the Financial Services Commission, with its first pleading slated for Oct. 20.
“The goal of the claim is to seek for the revocation of the financial supervisor’s sanctions concerning the DSME accounting manipulation,” said an official of the company.
In April this year, the FSS imposed a one-year suspension of operation and a 1.6 billion won ($1.4 million) penalty on the auditor for overlooking the multitrillion won accounting fraud of the shipbuilder.
Considering that auditing contracts are operated on a three-year term, the business suspension is expected to cut down the company’s sales in auditing by about a third or more.
A number of local builders, who had previously worked with Deloitte Anjin, switched their auditors earlier this year, turning to Samil PwC, Samjong KPMG or Earnest Young Hanyoung, the Financial Supervisory Service’s data showed.
Responding to such consequences, Deloitte Anjin is also working on an unprecedented restructuring plan, which may reduce its partner-level staff by up to 30 percent, according to officials.
But while the company is pulling itself together to regain its former status, it is the runner-up rivals which have been seizing the opportunity to expand their businesses.
Samjong KPMG already outran Deloitte Anjin as of the end of last year, with 320 billion won in yearly sales over Deloitte Anjin’s 310 billion won, therefore seizing the No. 2 position for the first time in years.
More conspicuous was EY Hanyoung, which has been scoring double-digit growth for the past four years.
The company’s total sales -- including the consulting sector -- last year stood at 280 billion won, up 11 percent from the previous year, catching up closely with Samjong KPMG. The figure excluding consultation fees came to 216 billion won, up 16.12 percent from a year earlier.
Apparently determined to ride on the momentum, EY Hanyoung has been placing top priority in recruitment this year, appointing the largest number of partners in July and vowing to expand welfare for its employees.
“We are also planning to recruit 280 new accountants in September, which is about 30 more from the previous year,” said an official of the company.
Front-runner Samil PwC, on the other hand, has safeguarded its No. 1 position but has recently been tripping over failing to detect the account fraud by the nation’s sole aircraft manufacturer Korea Aerospace Industries.
The company recorded 504 billion in sales last year, outrunning by far its rivals and also surpassing the 500 billion won mark for the first time in the industry, FSS data showed.
But the ongoing prosecutorial probe on KAI and its top executives over cost manipulation and slush funds has brought the accounting firm under fire for auditing failure. The defense company is suspected of overstating an aircraft deal to Iraq in 2013, making it look as if the money was properly received though it was suspended due to regional tension at the time.
Samil, however, stated in its half-year report last week that “no violations of accounting regulations were detected in specific” in KAI’s account records, claiming that its role is only to evaluate the accounting factors, not to interfere in the client’s business details.
By Bae Hyun-jung/The Korea Herald (tellme@heraldcorp.com)
