The meaning of “accounting on accounting” as stipulated in Article 2 of the Certified Public Accountant Act, and whether performing appraisal and assessment on the land as stipulated in the “Act on the Public Announcement of Values and Appraisal of Real Estate” at the request of other persons is included in the scope of a certified public accountant’s duties (negative)

In light of the legislative intent and purpose of the Certified Public Accountant Act and the purport and content of Article 2 of the Certified Public Accountant Act, which prescribes the scope of functions of a certified public accountant in order to ensure the accuracy and adequacy of accounting information, “appraisal on accounting” under the above provision refers to the business of reporting analysis and judgment based on the professional accounting knowledge and experience on accounting documents, such as statement of financial position and income statement prepared by the company. This includes not only determination as to whether the accounting documents recorded by measuring the economic activities of the company have been accurately and appropriately prepared in accordance with the accounting standards, but also the submission of opinions as to whether the book value of assets is based on reliable data. However, an appraisal on land under the Public Notice of Values and Appraisal of Real Estate Act (hereinafter “Real Estate Public Notice Act”) at the request of another person cannot be deemed as falling under “appraisal on accounting” or “business incidental thereto” due to lack of professional knowledge or experience and experience in accounting documents, but also cannot be deemed as included in the scope of other duties performed by a certified public accountant.

Therefore, a certified public accountant who is not an appraisal business operator is engaged in an appraisal business of land under the Act on the Public Announcement of Real Estate at the request of another person and receiving a certain remuneration constitutes an act subject to punishment pursuant to Article 43 subparag. 2 of the Public Disclosure of Real Estate Act, and barring any special circumstance, it cannot be deemed as an act pursuant to Article 20 of the Criminal Act and an act

Article 20 of the Criminal Act; Articles 1 and 2 of the Certified Public Accountant Act; Article 2 Subparag. 7, 8, and 9 of the Public Notice of Values and Appraisal of Real Estate Act; Article 43 Subparag. 2 of the Public Notice of Values and Appraisal of Real Estate Act; Article 21 of the former Public Notice of Values and Appraisal of Real Estate Act (Amended by Act No. 12018, Aug. 6, 2013); Articles 27 and 28 of the former Public Notice of Values and Appraisal of Real Estate Act (Amended by Act No. 11690, Mar. 23, 2013)

Defendant 1 and two others

Defendant 1 and Prosecutor

Law Firm Slun Law Firm, Attorneys Song-yeong et al.

Seoul Northern District Court Decision 2013No1125 decided December 19, 2013

The part of the lower judgment against Defendants 2 and 3 is reversed, and that part of the case is remanded to the Panel Division of the Seoul Northern District Court. Defendant 1’s appeal is dismissed.

The grounds of appeal are examined.

1. Regarding the prosecutor's grounds of appeal (to the extent of supplement in case of supplemental appellate briefs not timely filed) against the prosecutor's defendants 2 and 3

A. Article 2 subparags. 7 through 9 and Article 43 subparag. 2 of the Public Notice of Values and Appraisal of Real Estate Act (hereinafter “Public Notice of Values and Appraisal Act”) stipulate that appraisal means determining the economic value of land, etc. and indicating the result at the price. An appraisal business entity means a certified public appraiser who has reported pursuant to Article 27 and an appraisal business entity who has obtained authorization pursuant to Article 28, and an appraisal business entity who has obtained authorization pursuant to Article 28. In that context, an appraisal business entity, other than an appraisal business entity, shall be punished for running an appraisal

Meanwhile, Article 2 of the Certified Public Accountant Act provides that the scope of duties performed by a certified public accountant upon the commission of another person shall be limited to “accounts on the audit, appraisal, certification, calculation, organization, drafting, establishment, etc. of accounts” (Article 1), “tax-free representation” (Article 2) and “business incidental to subparagraphs 1 and 2” (Article 3). However, in light of the legislative intent and purpose of the Certified Public Accountant Act, the purport and contents of the above provision stipulating the scope of duties of a certified public accountant in order to ensure the accuracy and adequacy of accounting information, “appraisal on accounting” under the above provision refers to a business reporting based on the professional accounting knowledge and experience of accounting documents, such as statement of financial position and statement of profits and losses prepared by an enterprise, and this includes not only whether the accounting documents recorded after measuring the economic activities of an enterprise have been accurately and appropriately prepared in accordance with the accounting standards, but also whether the book value of assets has been based on reliable data, etc. However, it cannot be deemed that the appraisal and assessment of another person’s real estate has no special knowledge or special knowledge of the scope of accounts.”

Therefore, a certified public accountant who is not an appraisal business operator is engaged in the appraisal of the land as provided by the Public Notice of Real Estate Act at the request of another person and receiving a certain remuneration constitutes an act subject to punishment pursuant to Article 43 subparag. 2 of the Public Notice of Real Estate Act, and barring any special circumstance, such act cannot be deemed as an act pursuant to Article 20 of the Criminal Act and an act

B. According to the reasoning of the lower judgment and the record, Defendant 2 and Defendant 3, a certified public accountant, in collusion with Defendant 1 on July 30, 2009, were requested to assess the fair value following the introduction of the Korea Selection Accounting Standards (hereinafter “International Accounting Standards”) on the land of this case, including the site owned by the said company, even though they are not an appraisal business operator. It can be seen that the said review report was provided to the said company on October 30, 2009, and received KRW 154 million in return, by comparing and analyzing the regional factors and individual factors affecting the formation of the land based on the officially announced land price of the reference land located in the same or similar neighboring areas.

In light of the legal principles as seen earlier and Article 21 of the former Public Notice of Values and Appraisal of Real Estate Act (amended by Act No. 12018, Aug. 6, 2013; hereinafter “former Public Notice of Real Estate Act”), the said Defendants, even though they are not appraisal business operators, have determined the economic value of the instant land and expressed the result thereof at the price in accordance with Article 21 of the former Public Notice of Real Estate Act, which provides for the method of appraisal at the request of an appraisal business operator when the appraisal business operator individually performs an appraisal of the land at the request of another person. As such, such act constitutes an act that conducts an appraisal of the land as stipulated in the Public Notice of Real Estate Act as a business of appraising

In addition, the illegality of the above Defendants cannot be avoided as “act under the law” as stipulated by Article 20(1) of the Criminal Act on the grounds that they are qualified as certified public accountants, and the international accounting standards enacted pursuant to Article 13(1) and (4) of the Act on External Audit of Stock Companies allow the said Defendants to use the book value of land as revaluated based on the “fair value” of the revaluation date, and thus, cannot be deemed otherwise.

Nevertheless, on the erroneous premise that the appraisal duty of the fair value of the instant land constitutes “an appraisal of accounts” as stipulated by Article 2 of the Certified Public Accountant Act, the lower court determined that the said Defendants’ act constitutes a justifiable act under Article 20 of the Criminal Act, since the said Defendants’ act constitutes a crime under Article 43 subparag. 2 of the Real Estate Disclosure Act, although it constituted a crime under Article 43 subparag. 2 of the said Act, was performed as a member of the certified public accountant’s duty. In so determining, the lower court erred by misapprehending the legal doctrine on the scope of certified

2. As to Defendant 1’s grounds of appeal (to the extent of supplement in case of supplemental appellate briefs not timely filed)

For the reasons indicated in its holding, the lower court rejected the Defendant’s allegation in the grounds of appeal disputing this point, on the grounds that Defendant 1’s act constitutes an appraisal business prohibited under Article 43 subparag. 2 of the Public Notice of Real Estate Act, and that it is unreasonable to deny illegality or not an error of law.

Examining the reasoning of the lower judgment in light of the aforementioned legal principles and evidence duly admitted, although the lower court’s reasoning was partially inappropriate, the lower court’s aforementioned conclusion is justifiable, and contrary to what is alleged in the grounds of appeal, the lower court did not err by misapprehending the legal doctrine on the interpretation of Article 43 subparag. 2 of the Publication of Real Estate Act, the scope of legitimate acts, and mistake

3. Conclusion

Therefore, without further proceeding to decide on the remainder of the grounds of appeal by the prosecutor against Defendants 2 and 3, the part of the judgment below against Defendants 2 and 3 is reversed, and that part of the case is remanded to the court below for further proceedings consistent with this Opinion. Defendant 1’s appeal is dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Chang-suk (Presiding Justice)