This article was displayed on the ChosunBiz MoneyMove (MM) site at 11:10 a.m. on July 8, 2025.
Earlier this year, it was belatedly discovered that Korea Investment Securities and Shinhan Investment Corporation had overstated foreign exchange transaction profits, and the financial authorities are likely to conclude the investigation without expanding it to an accounting audit since there is no impact on net profit and no intent to deceive.
According to the financial investment industry on the 8th, the Financial Supervisory Service is reportedly discussing concluding the investigation during the accounting review stage regarding the overstatement of foreign exchange transaction profits by Korea Investment Securities and Shinhan Investment Corporation that occurred earlier this year.
A source familiar with the internal situation of the financial authorities said, "While the amount of the accounting error is significant, it seems they are leaning towards the conclusion that there was no intent to deceive," adding, "However, we need to wait and see how the final judgment will turn out."
Korea Investment Securities and Shinhan Investment Corporation both reported and corrected to the financial authorities that the foreign exchange transaction profits listed in their business reports for March and April of this year were overstated.
Korea Investment Securities revised and publicly disclosed its business reports covering five years from 2019 to 2023 on March 21. This was due to double counting of profits and losses from foreign exchange transactions between internal departments in the financial statements. As a result, about 57 trillion won, which should not have been recorded as sales, was listed as revenue from foreign exchange transactions in the financial statements.
Although the same amount of operating expense was recorded along with the revenue, which did not affect operating profit or net profit, there are concerns that there may be issues with accounting practices in the securities industry, considering the 5 trillion won accounting error was discovered more than five years later.
Less than a month after the accounting incident at Korea Investment Securities, a similar incident occurred at Shinhan Investment Corporation. On April 3, Shinhan Investment Corporation corrected its semi-annual report and quarterly report from last year due to an error in the exchange rate recorded during the internal foreign exchange transaction process, which inflated foreign exchange transaction revenue and expense by 455.3 billion won. Shinhan Investment Corporation also found that the operating profit was not affected since both revenue and expenses were inflated together.
As accounting errors were confirmed in two major securities firms in succession, the FSS commenced an accounting review. The FSS stated that it would investigate the circumstances surrounding the accounting error directly and would impose sanctions through an audit if any issues were found. The accounting review is a stage where violations of accounting treatment standards are examined, while audits are procedures that impose sanctions on violations.
Ham Yong-il, Deputy Head of the Capital Markets Division at the FSS, mentioned in a media briefing on April 1 that "the accounting review for Korea Investment Securities has begun," and noted that if gross negligence or intent to deceive is revealed, there is a possibility of shifting to an audit.
An industry source stated, "The impact of accounting errors can vary significantly depending on the judgment criteria," adding, "In this case, intent to deceive was an important judgment criterion, but since a self-report was made, the review is being conducted in a direction not to shift to an audit on this point." The FSS remarked, "We cannot confirm the progress of the accounting review or audit."