GS Engineering and Construction suspected of accounting fraud
June 17, 2013 Leave a comment
2013-06-16 16:40
GS E&C suspected of accounting fraud
By Kim Rahn
The Financial Supervisory Service (FSS) is considering launching a probe into GS Engineering and Construction over suspicions of it manipulating its accounts, officials said Sunday.
The Solidarity for Economic Reform, a civic group, asked the regulator to conduct a special inspection into the nation’s fourth-largest builder last month.
If the allegations are confirmed, the FSS may ban the company from issuing new bonds or stock certificates and recommend the dismissal of its chief. The company’s CEO Huh Myung-soo already resigned last Wednesday. He is the younger brother of Huh Chang-soo, GS Group chairman and largest shareholder of the construction arm.FSS officials said they are reviewing the case. “We will decide whether to investigate the firm after looking into more details about the case,” an official said.
They are currently examining the firm’s financial documents to ascertain the veracity of the allegations.
A special inspection is conducted when there are allegations of accounting fraud or improper audit, and is usually launched at the request of a civic group or state agencies such as police or the prosecution.
In April, the company said it recorded 535.4 billion won in operating losses in the first quarter of the year. Its total sales amounted to 1.8 trillion won, 13.4 percent down from the same period last year, and resulting in 386 billion won in net losses.
It also said the huge deficit resulted from the increased cost of overseas plant construction projects, accounting for its increased operational costs in the first quarter.
However, the civic group said the company was aware of the rise last year but did not calculate it at that time.
“It is suspected that the delayed inclusion of the loss was in violation of accounting regulations,” the group said in a press release.
“The market is still concerned the company may have cooked its accounts books and whether there is a chance the company will announce additional losses. In order to relieve such suspicions, the FSS will have to conduct an inspection into the firm immediately and the firm will have to cooperate,” it said.
If the allegation is found to be true, investors who invested in the company based on its financial statements and suffered losses as a result may file for compensation.
The company’s stock price was 49,400 won on April 10 when the first quarter performance was announced, but dropped to 32,650 won, down 34 percent, three days later. The stock price further declined to close at 30,700 won Friday.
About bambooinnovator
Bamboo Innovator 