Accounting firms have come under criticism for their incompetence and moral hazard as they increasingly fail to spot fraudulent accounting in clients and trade stocks using information obtained during audits, government officials and industry people said Friday.

Most recently, Deloitte Anjin LLC confessed its failure to uncover that Daewoo Shipbuilding & Marine Engineering had cooked the books to make its snowballed losses in recent years look smaller, according to the Financial Supervisory Service (FSS). 

Early this year, the FSS entered an audit review on Daewoo Shipbuilding amid speculations that the world's No. 2 shipbuilder by order backlog deceived investors by window-dressing its financial statements. Deloitte Anjin's 'mea culpa' confession followed.

The accounting firm's move is widely accepted as a willful act to avoid a heavy penalty for the malpractices from the financial watchdog.      

Meanwhile, the FSS and Deloitte Anjin found that 2 trillion won ($1.7 billion) out of 5.5 trillion won operating loss for the year of 2015 should have been reflected in the shipbuilder's earnings results in 2013 and 2014.

Inevitably, investors suffered heavy losses as the shipbuilder's stocks plunged 73 percent last year from 18,650 won to 5,070 won. Shipbuilders still struggle with oversupply and competition with smaller rivals from China. "To reduce investor losses resulting from accounting frauds, companies, accounting firms and financial authorities should be more committed to playing their own part," an FSS official said.

In 2011 when some savings banks went bankrupt, accounting firms' unfaithful auditing led to investor losses and a series of lawsuits. Last year, dozens of accountants invested in stocks using information they acquired from auditing client companies. (Yonhap)