Korea's watchdog fined and banned the auditors of Samsung BioLogics's inflated books

In November 2018, the Securities and Futures Commission ruled that Samsung BioLogics, the biopharmaceutical arm of Samsung Group, intentionally violated accounting rules by inflating its net profits in 2015 before its 2016 IPO — reporting a 1.9 trillion won net profit that year after changing the method used to calculate the value of its core affiliate Samsung Bioepis, following years of losses. The SFC had looked into allegations that the sudden profit was the product of fraudulent accounting.

For the auditors, the consequences were immediate. Samjong KPMG was found to have made a 'serious error' in auditing BioLogics: a 170 million won fine, a ban from auditing the company for five years, and a request to the Financial Services Commission to suspend the licences of four of its accountants. Deloitte Anjin was found to have made an 'error' and banned from auditing BioLogics for three years, without a fine. Both firms refused to comment.

Industry analysts said the high-profile case would make it harder for both firms to win new audit contracts or keep existing ones, tarnishing their image just as the amended Act on External Audit of Stock Companies introduced an auditor-designation system with penalty points: firms holding more than 100 penalty points as of 31 March the next year would lose a designated client per 30 points.

The audit firms judged the Bioepis accounting-method change permissible under IFRS's expert-judgment reliance — the SFC overturned that reading.

Samjong's 'serious error' versus Anjin's 'error' showed regulators ranking how the sign-offs failed, not just that they did.

The case landed under a new penalty-points regime created after the Daewoo Shipbuilding fraud, turning reputation into concrete commercial risk.

Officials warned the ruling blurred the line between judgment and violation, chilling auditors on complex clients.

Auditors inherit their client's fraud: the penalty lands on the signature, and under penalty-point regimes one tainted engagement costs future mandates.

The SFC's decision went to its umbrella Financial Services Commission for confirmation of the accountant licence suspensions, while the penalty-points assessment loomed over both firms' ability to win designated-audit mandates. The ruling was received, in one official's words, as "a confusion to the domestic accounting industry".