Accounting Fraud on Digitech Systems

   Hit. 599

The Financial Supervisory Service’s audit revealed that Digitech has committed accounting frauds in the amount of 50 billion won by exaggerating revenue, accounts receivables and tangible assets by means of false purchase agreements and false transactional documents. FSS also revealed that Digitech’s auditor, Sam Duck accounting firm failed to perform the audit procedure as required by audit standard, thus having failed to find those frauds.

After the disclosure of accounting frauds, Digitech’s share price has plummeted to 1,895 won from 5,620 won before the disclosure.

On February 12, 2014, the Korea Stock Exchange stopped Digitech’s shares trading until the delisting decision, and Digitech filed a rehabilitation procedure on February 19, 2014. The lawsuit in this case is against Digitech for its accounting frauds as well as against Sam duck accounting firm for its audit failure on behalf of the victims who purchased Digitech’s shares relying on the false annual report and audit report for the year 2012 disclosed on April 2, 2013. 

These two cases concluded at the appellate court: one lost, the other partial win followed by execution.