Dispute erupts over audit of Dong-Ah Construction Industrial

A controversy has emerged over a Samil Accounting Corp. audit of Dong-Ah Construction Industrial, which recently went bankrupt. Samil said it knew Dong-Ah had doctored its books but had no way of reflecting that in its inspection report because Dong-Ah refused to submit the data.

But creditors, mainly subcontractors of Dong-Ah, argued that the accounting firm had no excuse not to include its suspicions in the report. Other accounting experts also expressed doubts about the legitimacy of Samil¡¯s explanation.

A Samil official said upon completion of the audit Tuesday that the company had no way of knowing when and how Dong-Ah had rigged its books. The inspection was begun earlier this at the court`s request. The official added that Samil repeatedly asked Dong-Ah to present documents but was refused. Samil`s inspection report was based on data from 1991 to 1999.

An accounting professor said on condition of anonymity that if Samil knew the scale of Dong-Ah`s wrongdoing it could have reflected this fact in its report.

Another accountant said that it did not make sense to cover up a company`s illicit accounting methods just because it failed to present current data.

An official of Dong-Ah¡¯s creditor group also argued that when an accounting firm calculates the future value of a company, it should assume that the company is conducting business normally and industry averages to set the period of sales payment collection instead of unreliable past records.