Haitai Confectionery and Foods (101530.KQ) has entered a review process to determine whether it qualifies to remain listed, after regulators penalized the company for accounting violations involving 53 billion won ($38 million). Trading in its shares has also been suspended. The company said the case stemmed from sales inflated by some field staff more than seven years ago and that it has already restated its financial statements and improved internal controls.
The Securities and Futures Commission, an arm of the Financial Services Commission, decided at its 16th meeting the previous day to order Haitai Confectionery and Foods to use a designated external auditor for three years, after finding that the company had prepared and disclosed financial statements in violation of accounting standards, according to financial authorities on the 17th.
The accounting in question took place between 2016 and 2019. According to the commission's investigation, Haitai Confectionery and Foods overstated both revenue and cost of sales by issuing false tax invoices and by failing to record sales discounts and rebates. The overstatements totaled 53.028 billion won over four years — 13.678 billion won in 2016, 15.317 billion won in 2017, 11.256 billion won in 2018 and 12.777 billion won in 2019. The investigation also found that financial statements for the 16th through 18th fiscal years, prepared in violation of accounting standards, were used in securities registration statements.
The company was also found to have obstructed its external auditor. Haitai Confectionery and Foods presented documentation that did not match actual transactions and asked business partners to respond inaccurately to accounts-receivable confirmation requests.
The commission ordered the three-year auditor designation and, for the head of the finance division at the time, recommended dismissal from office along with a six-month suspension from duties. It also imposed a measure equivalent to a recommendation for removal on the former internal auditor. Both were referred to prosecutors. The size of the fines to be levied on the company and those involved will be finalized by the Financial Services Commission.
The Korea Exchange (KRX) has also begun a review of whether the company should remain listed. Trading in Haitai Confectionery and Foods shares was suspended from 6:09 p.m. the previous day pending a disclosure request over reports that the accounting violations had been referred to prosecutors. The exchange will decide whether the company should be reviewed by its listing committee based on the accounting violations and the referral to prosecutors. If it is referred to the committee, the trading suspension will remain in place during those proceedings; if not, trading will resume.
Haitai Confectionery and Foods said the matter dates back several years and that the accounting has since been corrected. The company had its 2016 to 2019 financial statements re-audited and restated, then filed a voluntary correction disclosure in May 2024. It said it has strengthened its internal accounting management system since 2020 and conducted regular ethics training. "We have strengthened our internal accounting management system and internal audit mechanisms since 2020, and we will continue to improve these systems to prevent the same situation from recurring," a company official said.
