How to make book-cooking accounted for?

Amid the judicial process of punishing Daewoo Group executives for their role in producing false financial statements, public concern is growing over illicit accounting practices, especially following the shocking revelation that the Dong-Ah Construction Industrial made a habit of ``cooking its books.`` In a televised ``Dialogue with the People`` on Thursday, President Kim Dae-Jung said his government would not sit idly in the face of the controversy, indicating that the government would take stern action against this illicit practice. The president`s statement is expected to create shockwaves in the economic sphere.

The manipulation of financial records was done in such a way as to inflate income or corporate results so as to more easily obtain bank loans. In light of the fact that the financial institutions that made loans on the basis of the doctored books and ordinary investors who bought stocks in the firms are destined to sustain losses, Daewoo`s actions amount to swindling. In view of the fact that public funds were injected and the national economy is still facing difficulties even after the debt-ridden enterprises went bankrupt, it is all the more urgent that the government demonstrate the will and determination to end these practices.

However, since falsifying bank records has become a chronic problem in our society, rectifying the situation won`t be easy. Attesting to this fact was the Financial Supervisory Service`s announcement on Feb. 7 that about a third of 100 listed companies were found to have doctored their books during the past 11 years. Is it really possible for the government to fulfill President Kim`s pledge to punish these delinquent executives, as it is in the process of doing with the Daewoo Group managers? It would be extremely difficult to wipe out all such irregularities, assuming they were committed in collusion with financial institutions and accounting firms. Under the bureaucratic financial systems of the past, banks were pressured to provide loans to specific enterprises on the basis of their falsified financial statements and accounting firms were apt to conduct superficial probes into so-called friendly enterprises. Given this situation, how could it be possible to ferret out all irregularities once and for all?

Making matters worse, once business firms begin falsifying their records, the inflated figures necessarily become the starting point for future manipulation. At this point, it is open to question how many enterprises are frank enough to admit their wrongdoing. Understandably, a senior official of the Financial Supervisory Service recently quit his post after insisting that all perpetrators of such illicit practices should be exonerated. The best way to exterminate this practice is not to mete out harsh punishments on those involved but to assist their efforts to end the problem. Imposing overly harsh penalties might undermine the very viability of domestic enterprises, which might cause chaos in the stock and bond markets. The government is urged to make a wise decision.