[1] The meaning of "when a false statement is made in the audit report" under Article 20 (2) 2 of the former Act on External Audit of Stock Companies

[2] In a case where the Defendant, a certified public accountant affiliated with the accounting corporation A, was indicted for violating the former Act on External Audit of Stock Companies by making false entries in the audit report while taking charge of the accounting audit of the corporation B, the case holding that the Defendant guilty on the charge of false entries in the audit report at least as to the fact that it was false when comprehensively considering all the circumstances

[1] Article 20(2)2 of the former Act on External Audit of Stock Companies (amended by Act No. 9408 of Feb. 3, 2009) refers to a case where an external auditor, who is an actor, knows that his/her recognition judgment is inconsistent with the contents written in the audit report when he/she expresses his/her awareness of, or the result of, judgment on, the facts he/she audit. Therefore, even if the defendant was negligent or somewhat insufficient, he/she cannot be deemed as having committed a false offense against his/her own perception or judgment, unless he/she made a false statement contrary to objective facts contrary to his/her awareness or judgment.

[2] In a case where the Defendant, a certified public accountant of the accounting corporation A, was indicted for violation of the former Act on External Audit of Stock Companies (amended by Act No. 9408 of Feb. 3, 2009) on the financial statements for a specific fiscal year, which was submitted by the Company B, while taking charge of the accounting audit of the Company B, by stating the false statement in the audit report on the financial statements for the specific fiscal year, which was submitted by the Company B, the case affirmed the Defendant on the grounds that the Defendant had been aware of the financial status and business status of the Company B by continuously participating in the accounting audit of the Company B, and that the person in charge of the accounting affairs of the Company B knew the Defendant when changing the method of the existing accounting audit or taking the method of division of the accounts, the case affirmed the Defendant on the grounds that he knew of the window dressing accounting of the Company B, and that at least there was an incomplete intention as to the false statement on

[1] Article 20 (2) 2 (see current Article 20 (3) 2) of the former Act on External Audit of Stock Companies (Amended by Act No. 9408, Feb. 3, 2009) / [2] Article 20 (2) 2 (see current Article 20 (3) 2) of the former Act on External Audit of Stock Companies (Amended by Act No. 9408, Feb. 3, 2009)

Defendant

Yang Hosan et al.

Law Firm Gyeongsung, Attorneys Cho Jae-soo et al.

A defendant shall be punished by imprisonment for one year.

The Defendant, as a certified public accountant of the first accounting firm, was in charge of the audit of Nonindicted Co. 2 in the fiscal year 2006 and 2007, and was in charge of the review of audit records, audit reports, and formation of audit opinions.

When preparing the financial statements of Nonindicted Co. 2 for the fiscal year 2007, Nonindicted Co. 3 received a report from Nonindicted Co. 4 who was in charge of the accounting and accounting affairs of Nonindicted Co. 2 for the fiscal year of 2007 that the net loss will occur in the current fiscal year after the settlement of accounts of Nonindicted Co. 2 for the fiscal year of 2007, and Nonindicted Co. 4 ordered Nonindicted Co. 4 to make the enemy (which caused the current net loss) using the gold punishment as black (which caused the current net profit). Nonindicted Co. 4’s external processing expenses for the products would be treated as the acquisition cost of the gold type (construction section and apparatus), which is a tangible asset, even though the external processing expenses for the products were originally treated as the acquisition cost for the current fiscal year, and prepared the financial statements of Nonindicted Co. 2 for the accounting and accounting affairs as if they were normally possessed, and submitted the false financial statements of KRW 7.7 billion in the current fiscal year and KRW 2.5 billion in the net income amount to KRW 7.7.5 billion in the net income.7 billion.

The Defendant, along with Nonindicted 1’s certified public accountant, carried out the audit of Nonindicted 2’s financial statements for Nonindicted 3 months, with Nonindicted 1’s current financial statements for Nonindicted 207, and carried out the audit and inspection of Nonindicted 2’s financial statements for Nonindicted 3 months from March 13, 208 to May 15, 200, using Nonindicted 2’s current financial statements for the audit and inspection of Nonindicted 1’s current financial statements for Nonindicted 200 million won, and prepared an audit and inspection report for the 207 fiscal year’s current financial statements for the audit and inspection of Nonindicted 1’s current financial statements for Nonindicted 200 million won, with Nonindicted 3’s current financial statements for the audit and inspection of Nonindicted 1’s current financial statements for Nonindicted 200 million won, and instead, with Nonindicted 2’s financial statements for the audit and inspection of Nonindicted 3’s current financial statements for the audit and inspection of 20 billion won, to the extent that the amount of the audit and inspection would be less than KRW 3.5 billion.5 billion.

1. Each legal statement of the witness Nonindicted 4 and 6

1. Partial statement of the witness Nonindicted 3 in the court

1. Partial statement of the suspect interrogation protocol of the accused by the prosecution;

1. The prosecutor’s statement concerning Nonindicted 7

1. Part of the prosecutor’s statement made against Nonindicted 8 and 9

1. Each police statement made against Nonindicted 10 and 4

1. The statement of Nonindicted 6

1. Corporate value analysis, verification, and accused copies of multiple rates on which no statement drawn up money is indicated, business logs, copies of accusations of the Financial Services Commission, and written judgments;

1. Article relevant to the facts constituting an offense and the selection of punishment;

Article 20 (2) 2 of the former Act on External Audit of Stock Companies (amended by Act No. 9408 of Feb. 3, 2009)

1. Article 20(2)2 of the former Act on External Audit of Stock Companies (amended by Act No. 9408 of Feb. 3, 2009) refers to a case where an external auditor, who is an actor, knows that his/her recognition judgment is inconsistent with the details written in the audit report, while expressing the perception or result of judgment on the audit report’s audit. Therefore, even if the Defendant neglected or somewhat insufficient audit, he/she cannot be said to have committed a false offense against his/her own perception or judgment unless he/she made a false statement differently from the objective facts.

However, in a criminal trial, the conviction of guilt should be based on evidence with probative value, which makes it possible for a judge to have the truth that the facts charged are true beyond a reasonable doubt. If there is no evidence to form such a conviction, even if there is doubt that the defendant is guilty, it should be determined with the benefit of the defendant, but such conviction should not be necessarily formed with direct evidence.

2. The following facts can be acknowledged according to each of the above evidence duly adopted and investigated by the Health Board and this Court:

A. Nonindicted 6 and Nonindicted 4, who were in charge of accounting affairs in Nonindicted Co. 2, are consistently making the following statements in investigative agencies and this court.

(1) Nonindicted 4

① Around 2001, Nonindicted 6 instructed Nonindicted 3’s representative director to seek ways to make the enemy in black by using gold punishment, and consider the way to look at the cost of acquisition of the external sales cost corresponding to the product cost, and asked the Defendant, who is the accounting officer of Nonindicted Company 2, as a financial officer of Nonindicted Company 2, about the accounting of such content. The Defendant confirmed the intention of Nonindicted 3’s representative, and responded to the purport that the Defendant would allow him to do so. From that time, the accounting of the gold penalty began.

② From around 2003 to 2007, the Defendant sent five million won each according to Nonindicted 3’s instructions.

(2) Nonindicted 6

In around 198, Non-Indicted 3 issued an order to change the term of imprisonment and the method of depreciation to dismiss the enemy, and the defendant, who is the accountant in charge, presented the color for the method of accounting, but at the time the defendant visited the company by Non-Indicted 3, as instructed by Non-Indicted 3.

B. On December 23, 2010, Nonindicted 3 made a false financial statement from the Busan District Court that “ Nonindicted 3 would have caused a net loss in the current term after the settlement of accounts of Nonindicted 2 Stock Company 2006, and Nonindicted 4 instructed Nonindicted 4 to “the deficit (the net profit of the current term has occurred) using gold punishment as black (the fact that the net profit of the current term has occurred).” Although Nonindicted 4 treated gold-type as the original cost of the current term production, it would be treated as the acquisition cost of the gold-type, which is a tangible asset, as the original cost of the current term production, Nonindicted 3 would be treated as the acquisition cost of the current term production, and Nonindicted 3 would be treated as the original cost of the current term production, which would have been treated as the current term production cost, and Nonindicted 4 would have been treated as the normal cost of the current term production cost, which would have been treated as KRW 200 million,500 million in total, 300 million in total, 2006.

C. Around November 2006, the Defendant received from Nonindicted 3 an inquiry as to whether he would be able to sell the company at 15 billion won, except the factory building and site used by Nonindicted 2 Co. 3, and prepared a report on the title “corporate value analysis” (hereinafter “the report of this case”). On December 31, 2005, the report of this case states that “the value of the company as of December 31, 2005 as of December 31, 2005, the amount of KRW 5 billion was deducted from the inventory and gold assessment, and then, “the value of inventory and gold assessment is lower than the book value.”

D. At the time, Nonindicted 5 and Nonindicted 8, who participated in the audit of Nonindicted Company 2, together with the Defendant, stated at the investigative agency that “When the Defendant prepared the instant report and assessed the amount of KRW 5 billion in gold, it would be appropriate to inform the audit team of such fact before commencing the audit procedure.”

3. The above facts are as follows. ① The accounting firm continued to conduct an external audit for 20 years with respect to Nonindicted Co. 2’s external audit. The officers and employees of Nonindicted Co. 2 may be deemed to have been well aware of the financial status and business status of Nonindicted Co. 2 as the Defendant continuously participated in the audit of Nonindicted Co. 2’s certified public accountants belonging to Nonindicted Co. 1 to the extent that the Defendant was aware of the accounting firm in charge, and ② according to Nonindicted Co. 3’s instructions, it is consistent with Nonindicted Co. 6 and Nonindicted 4’s statement to the effect that the Defendant, who is the accountant in charge, changed the method of accounting or divided the method of accounting and gave answers thereto; ③ The accounting of which the acquisition cost was appropriated as the acquisition cost of the external accounting; ④ the existing accounting firm who was in charge of the audit at the time, may not be deemed to have known that there was an adequate value assessment method of the Defendant’s audit report as well as an adequate value assessment method of the audit report as it appears to have been inconsistent with the Defendant’s opinion on the audit report.

Judges Noh Tae-k