Tesla Korea Suspected of Accounting Misconduct

This photo provided by Tesla Inc, shows the carmaker’s service center in western Seoul.

SEOUL, April 14 (Korea Bizwire) — U.S. electric carmaker Tesla Inc.’s South Korean unit has failed to properly reflect the fines and penalties levied by the National Tax Service and the Fair Trade Commission (FTC) in its financial statements.

According to the data from the Financial Supervisory Service, Taesung Accounting Corp., the auditor of Tesla Korea, issued a “qualified” opinion about the company’s financial statements for the year 2022.

“Tesla Korea did not reflect the additional corporate tax fines and penalties in its financial statements and instead counted them as accounts receivable and other expenses,” the accounting firm said.

It added, “If Tesla Korea treated the additional corporate tax fines and penalties as expenses, its liabilities and equity would have decreased at the end of the period. We could not obtain appropriate audit evidence for the corporate tax fines and penalties recorded as accounts receivable at the end of the period.”

External auditors typically issue four types of opinions — unqualified, qualified, adverse and disclaimer — for company financial statements.

A qualified opinion is presented when the scope of audit is partially restricted or when the company in question did not comply with accounting standards, even if such misconduct did not have a material impact on the financial statements.

Listed companies can be delisted if they receive consecutive qualified opinions. However, Tesla Korea is a non-listed company.

The FTC, South Korea’s antitrust regulator, has decided to impose a penalty of 2.85 billion won (US$2.24 million) on Tesla Korea in January for misleading advertisements.

The move came as Tesla released advertisements in August 2019, which suggested its electric car can “run at least” hundreds of kilometers, which the FTC considered to be an “exaggeration.”

J. S. Shin (js_shin@koreabizwire.com)