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I have an inquiry regarding reporting accounting fraud.

This is a situation in which shareholders have suffered losses due to accounting fraud. I intend to gather the shareholders and proceed with a lawsuit. The accounting fraud is certain, but specifically what evidence is needed for the lawsuit? Aside from a damages lawsuit, is a criminal complaint also possible?? I would be grateful if an experienced attorney with experience in litigation related to accounting fraud could reply.

accounting audit review

accounting fraud

Answer to Related Inquiry

Author: 김국일

Hello. A shareholder's loss caused by accounting fraud is a very serious matter, and not only a civil claim for damages but also a criminal complaint is possible.

In particular, in the case of a listed company, false disclosure that violates accounting standards, window-dressing accounting, and violations of internal controls may constitute violations of the Financial Investment Services and Capital Markets Act and the Commercial Act.

First, in order to file a claim for damages, evidence is needed, such as materials that can prove the existence of the accounting fraud, the company's financial statements, the external auditor's audit opinion, internal materials (board meeting minutes, emails, accounting vouchers, and the like), materials that can prove the occurrence of the shareholder's loss, and the intent or negligence of the tortious act.

In addition, a criminal complaint is also possible.

Accounting fraud is punished as a violation of the Financial Investment Services and Capital Markets Act, the Act on External Audit of Stock Companies, and the like, and a complaint may be filed against related persons such as management, accounting staff, and the external auditor.

In the case of accounting fraud, it is a matter that can incur imprisonment for not more than 10 years or a fine of 2 to 5 times.

Litigation related to accounting fraud is more complex in expertise and procedure than an ordinary civil suit, so it is very important to thoroughly prepare the collection of evidence and the legal requirements with the assistance of an attorney specializing in the finance and accounting fields.

If the requirements for a class action are met, I recommend that you also review the procedure under the Securities-Related Class Action Act.