Daewoo Shipbuilding & Marine Engineering has admitted that it manipulated its financial statements for 2013 and 2014.

The ailing shipbuilder reported operating profits of 424 billion won in 2013 and 454 billion won in 2014. But the company announced Friday that it actually suffered operating losses of 776 billion won in 2013 and 743 billion won in 2014.

It also corrected its 2015 operating loss, which was overblown as a result of the window dressing in the preceding two years. Earlier this year, the company reported a crippling loss of 5.5 trillion won for 2015. The figure was scaled back to 2.93 trillion won.

The company made the corrections at the request of Deloitte Korea, its external auditor since 2010. The accounting firm audited Daewoo’s financial statements for 2013 and 2014, but approved them at the time.

But it reviewed the statements again recently, as financial authorities began to scrutinize them for possible data fabrication. The accounting firm said it discovered misstatements which it overlooked at the time of the auditing.

Financial regulators have been monitoring the shipbuilder since July last year when it shocked investors and analysts by reporting an operating loss of 3.2 trillion won for the second quarter of 2015 alone.

The huge quarterly loss was the result of a “big bath” the company took following a management change. The new CEO sought to charge all items that might have a negative impact on the company’s future performance at once.

Yet the size of the loss raised suspicions that its financial data in the preceding years might have been manipulated.

Such suspicions were raised in early 2015, when the company reported its 2014 performance. Among the nation’s three top shipbuilders, it was the only one to report an operating profit. Hyundai Heavy Industries and Samsung Heavy Industries lost 3.2 trillion won and 500 billion won, respectively.

The shipbuilder is likely to face a flood of lawsuits for misleading investors over its performance in 2013 and 2014. Investors who purchased the company’s stock on the basis of its relatively robust 2013-2014 performance took a severe beating last year as its stock price entered free-fall following its announcement of the second-quarter numbers.

Prosecutors should investigate the shipbuilder’s former CEO and other executives to find out whether they intentionally cooked the books to conceal losses.

Deloitte Korea is also likely to face lawsuits from investors, as well as punishment from financial authorities for its failure to audit the shipbuilder properly.

The company also faces a criminal investigation as it is suspected of having helped the shipbuilder fabricate its financial statements.

Domestic accounting companies need serious house cleaning. Recently, financial authorities found that dozens of public accountants, including those affiliated with Korea’s top four accounting firms, breached their code of conduct by trading stocks of the companies they had audited.

The malpractice was brought to light by a probe of the whole of the roughly 10,000 public accountants in Korea. The investigation was prompted by the prosecution’s indictment last year of some 30 accountants who were found to have invested in stocks using information they obtained while auditing companies.

Public accountants are important gatekeepers. Their primary role lies in preventing corporations from misleading investors with fabricated financial data. They need to be held to a higher ethical standard as they are supposed to act as watchdogs. Accounting companies should weed out unethical accountants.