Second Audit of Samsung BioLogics in Final Stage
The Financial Supervisory Service’s re-audit of Samsung BioLogics is in its final stage. The financial regulator is expected to maintain its previous conclusion that the biotech company had deliberately committed accounting fraud. As a result, the company is likely to suffer heavy penalties.
"A re-audit of Samsung BioLogics is practically in the final stage," said a source from the FSS on Oct. 17.
FSS Governor Yoon Seok-hun also said during a recent parliamentary audit of his agency that he would have the second audit of Samsung BioLogics completed this year.
The FSS said it is aiming not only to complete the re-audit but also to finalize the deliberation of the re-audit results by the Securities and Futures Commission (SFC) within this year.
Accordingly, the FSS is reportedly planning to prepare a new audit report as early as this week and deliver it to Samsung BioLogics and its two external auditors, Samjong KPMG and Deloitte Anjin.
Although the FSS conducted a re-audit of Samsung BioLogics at the request of the SFC, it is unlikely to change the existing conclusion that there was a deliberate accounting fraud and its policy of imposing heavy penalties accordingly.
FSS Gov. Yoon also said, "I don't think there will be any significant changes from the previous conclusion."
Initially, the FSS concluded that Samsung BioLogics had intentionally committed accounting fraud in the process of changing the status of Samsung Bioepis from a subsidiary to an affiliated company in 2015, and demanded heavy disciplinary action from the SFC.
In July, the SFC filed an investigation request with the prosecution, saying that Samsung BioLogics had failed to inform investors of its granting of call options to Biogen of the U.S. through public disclosures, but it refrained from making a conclusion on the alleged accounting fraud, simply asking the FSS to conduct a re-audit.
To make a judgment on the accounting fraud allegations, the SFC said, it needed FSS audit reports on Samsung BioLogics not only for the year of 2015 but for the 2012-14 period.
The focus is what conclusion the FSS will make about Samsung BioLogics’ accounting books for 2012-14. The FSS is likely to conclude that the company committed accounting fraud either intentionally or by negligence.
The FSS basically believes that Samsung BioLogics has problems with its accounting practices.
If the FSS informs Samsung BioLogics of its findings from the second audit, the SFC will hold a meeting on the matter after two weeks of preparation.
As Samsung BioLogics claimed during the last meeting of the committee that it had not committed any wrongdoing, it is expected to challenge the FSS this time again.
Meanwhile, Samsung BioLogics has filed an administrative lawsuit against the SFC over its allegations that the company had intentionally omitted the granting of call options to Biogen from its accounting books for three years from 2012 to 2014. .
When Samsung BioLogics established Samsung Bioepis jointly with Biogen of the U.S. 2012, it gave its joint venture partner a call option to secure 50% plus 1 share of Samsung Bioepis. However, the committee believes that Samsung BioLogics neither informed investors of this part of its contract with Biogen through public disclosures nor included it in its accounting books.
At that time, Samsung BioLogics maintained that it had dealt with accounting properly in accordance with the International Accounting Standards (IFRS) and announced its plan to proceed with administrative litigation.
"We filed an administrative lawsuit on Oct. 8 to hear the court's ruling on the legitimacy of our accounting practice," a Samsung BioLogics official said.