Coindesk Korea reports that the Financial Supervisory Service’s Data Analysis, Retrieval and Transfer System (DART) has made public last year’s audit of ICONLOOP.
And to make a long story short, Samjong KPMG — the accounting company that did the audit — issued a “Disclaimer Report.”
Auditors issue “disclaimer reports” when they feel they cannot perform a proper audit.
The Iconist’s Commentary
We’ll be honest — the Coindesk Korea report was a bit disconcerting at first read.
However, after thinking about it a bit and talking with some folks, we now think it’s not so bad.
Frankly, the problem seems to be that accounting firms don’t really know how to handle digital assets. That’s not a surprise — the technology is new, and traditional financial entities are still figuring out what to do with it.
In fact, back in July, a column appeared in the Korean Institute of Certified Public Accountants’ monthly magazine calling on accounting firms to develop expertise on blockchain technology so they can properly evaluate blockchain companies when accounting standards such as IFRS-15 don’t really apply.
Forbes also ran a recent column calling for changes to the way accountants deal with crypto.
It’s also interesting that ICONLOOP underwent independent auditing in the first place. In the Korean ICON community, the news has sparked speculation that ICONLOOP is preparing to IPO — speculation being the operative word here.
Speaking of the Korean ICON community, they seem to be taking the report in stride.
“There hasn’t been as much of a response from the Korean community as I’d have thought,” said Kim Sim-sul, an ICON Korean community manager and the administrator of ICONkr.com. “At first, I was surprised because the article’s headline and language seemed negative, but after calmly reading it, there didn’t seem to be anything in particular that could generate misunderstandings.”
Moreover, from a purely ICON (as opposed to ICONLOOP) perspective, while ICONLOOP and the ICON Foundation are close partners, they are also two independent entities incorporated in two different countries. What happens to ICONLOOP doesn’t necessarily impact the ICON Foundation, and vice versa.
Back to the Coindesk story…
According to Coindesk, some in the crypto community speculate that Samjong KMPG issued the opinion because ICONLOOP created the blockchain engine that allowed the ICON Foundation to issue its ICX.
Somebody at ICONLOOP responded to this by telling Coindesk that ICONLOOP and the ICON Foundation are independent entities, and that while the ICON Foundation is a partner that uses ICONLOOP technology, ICX has nothing to do with ICONLOOP.
The ICONLOOP representative added that their company provides technology to institutional organizations and open-source projects, and that while the company couldn’t say what the exact reasons behind the opinion were, it appears the auditors were uncertain about the process of providing technology to open source projects.
The company stressed that the audit report itself says the “disclaimer report” opinion had nothing to do with the fact that sales that occur in related-party transactions are in digital assets.
An accounting company with the Korea Blockchain Association said Samjong KMPG issued its opinion because it could not verify if sales that occurred in related-party transactions had actually taken place.
He also noted that according to the report, most of those sales originated from the ICON Foundation.
The audit report lists the ICON Foundation, Unha AG PTE. LTD and IBKC-STI New Growth Investment Fund No.1 as “related parties.”
ICONLOOP told Coindesk that it could not say if the auditor’s opinion was due to one particular related party, and that the company was making internal preparations to get a good audit report early next year.
Anyway, you can read the audit report on your own here (in Korean).
