The number of South Korean firms that have delayed the filing of their annual reports this year nearly doubled compared to last year, data released by the nation’s main bourse operator showed, in a phenomenon sparked by the reinforced external audit act.
According to the Korea Exchange, seven Kospi- and Kosdaq-listed firms recently requested to extend the deadline for the filing of annual reports by one week to April 8, citing their failure to receive auditors’ opinions on their financial reports.
The Korea Exchange’s main office in Yeouido, western Seoul
Last year, only three listed firms had requested a deadline extension.
Among the seven firms, Kosdaq-listed IT firm ANTN decided to hold its annual shareholders meeting for the second time after submitting its financial report. It received approval from shareholders during the meeting held on March 27.
Under the Financial Investment Services and Capital Markets Act, listed firms must file annual reports by the deadline or they will be designated as “administrative issues” by the KRX.
They risk being delisted from the stock market if they fail to submit the reports within 10 days after the deadline. However, they are exempted from the designation if they submit their annual reports within five business days after the deadline.
Analysts had predicted such delays would occur as a result of the new external audit act, which was pursued after Deloitte Anjin, one of three major accounting firms here, was accused of window dressing audit reports of debt-ridden Daewoo Shipbuilding & Marine Engineering in 2016.
The law, amended in November, hands more responsibility to accounting firms for lax auditing practices, and if companies are found guilty of fraud, external auditors will be subject to criminal punishment of up to 10 years, up from the previous five to seven years.
In April last year, two listed firms were designated as administrative issues for failing to file annual reports by the deadline.
“With the revised external audit act, more and more firms are delaying their annual report filing, which is fueling concerns of a mass delisting from the bourses,” said Ahn Ji-sun, an analyst at KTB Investment & Securities.
By Jung Min-kyung/ The Korea Herald (firstname.lastname@example.org)