FSS launches huge CPA probe

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FSS launches huge CPA probe

The nation’s financial watchdog is investigating nearly 10,000 certified public accountants (CPAs) and the stocks they hold to determine if they made unfair yields through insider trading.

The Financial Supervisory Service (FSS) on Monday said it has launched an investigation since December into some 9,504 accountants at 155 local accounting firms and their stock transactions. It is the first time the financial regulator is inspecting CPAs. The inspection will review all stock transactions in the past two years.

The accountants subjected to investigation are nearly half of the total CPAs in Korea.

The FSS investigation will begin with each accountant submitting a document about his or her stock ownership status to the firm. Then, the firm’s internal auditor and each accountant sit down together and log in at the Korea Securities Depository’s website to see if the ownership the actual database matches the pre-submitted document. The investigation involves some 1,922 listed companies that are clients of the 155 accounting firms.

The Korea Institute of Certified Public Accountants will collect the stock ownership data of all 9,504 accountants and submit it to the FSS by the end of January.

If the accountants are found to have traded shares of their clients, their CPA certification could be cancelled and they may face criminal prosecution.

The 9,504 people subjected to inspection are mostly senior-level CPAs, who are technically banned from investing in client companies their firm is working with, according to the local Certified Accountant Act. Junior-level accountants can invest in companies their firm works with, as long as they are not on that particular account.

The investigation came after some 32 accountants were caught while the Financial Services Commission (FSC) was inspecting stock transactions. The FSC referred them to the prosecutors’ office, and some were indicted in November after being found to have invested using their clients’ internal information such as financial standing and investment plans. The rest were not indicted, but were still punished by the CPAs’ association, according to Sung Gil-hyun, a director of audit screening team at the FSS.

Still, analysts doubt the actual impact of the investigation because the FSS is only allowed to inspect investment accounts registered in the accountant’s own name, according to the Real Name Financial Transaction Act. The watchdog can’t request inspection of the accountant’s family members or other close relatives, whose names he or she could have used to invest.

Some accountants argue the FSS is being excessively controlling.

“It’s difficult to keep updated on which listed company I’m banned from investing, because each of us is working on auditing hundreds of companies,” an accountant told the JoongAng Ilbo.


BY LEE TAE-KYUNG, KIM JI-YOON [kim.jiyoon@joongang.co.kr]

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