바로가기
Skip to Main content

IR - Corporate Governance

Audit Committee

Hyundai Heavy Industries management and directors value the most of our shareholders, customers and employees. We work on a continuous and long-term relationship.

Auditors

You can move left and right
Auditors table - Name, Date of Appointment, Term, Covered by Liability insurence
Name Date of Appointment Term Liability Insurance Coverage
Standing Auditor - - - -
Non-standing Auditor - - - -

Audit Committee

You can move left and right
Audit Committee table - Name, Remarks
Name Remarks
Outside Directors Hyuk Choi -
Kee Hyun Hong -
Kook Hyun Yoo -

Independent Auditor

You can move left and right
Independent Auditor table - Name of Corporation, Date of Appointment, Contract Period, Auditing Opinion
Name of Corporation Date of Appointment Contract Period Auditing Opinion
KPMG SAMJONG Accounting Corp. Mar. 24, 2017 2017 ~ 2019 Unqualified

KPMG SAMJONG Accounting Corp. 10th Floor, Star Tower, 737 Yeoksam-dong, Gangnam-gu, Seoul 135-984,
Republic of Korea Telephone : 82-2-2122-0100, Facsimile : 82-2-2112-0101

KPMG
The Board of Directors and Stockholders Hyundai Heavy Industries Co., Ltd.:

We have audited the accompanying consolidated financial statements of Hyundai Heavy Industries Co., Ltd. and its subsidiaries (the “Group”) which comprise the consolidated statements of financial position as of December 31, 2016 and 2015 and the consolidated statements of comprehensive income (loss), changes in equity and cash flows for the years then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Korean International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Korean Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2016 and 2015 and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with Korean International Financial Reporting Standards.

Emphasis of Matters

Without qualifying our opinion, users of this audit report need to pay attention to the following key audit matters related to industry with production-to-order transactions.

Auditing the financial statements on entities engaged in production-to-order transactions is a significant matter in our audit of the consolidated financial statements, which determination is based on auditor’s professional judgment and communications with those who charged with governance, in accordance with “Practical Guide of Korean Standards on Auditing 2016-1”. This matter is part of our audit of the consolidated financial statements as a whole, and we do not express an opinion or audit conclusion on this matter.

We have considered the results of the audit procedures for the following key audit matters in forming our audit opinion of the consolidated financial statements of the Group.

(1) Overview
An overview of key audit matters related to the industry with production-to-order transactions described in this audit report is as follows:

As described in the Note 4 to the consolidated financial statements, when the outcome of a construction contract can be estimated reliably, the Group recognizes contract revenues and contract costs associated with the construction contract as revenue and expenses, respectively, based on the percentage-of-completion method at the end of the reporting period. The percentage-of-completion is calculated based on the ratio of contract costs incurred for work performed to date to estimated total contract costs except contract costs that do not reflect the progress of completion. The gross amount due from customers for contract work is presented for all contracts in which costs incurred plus recognized profits (less recognized losses) exceeded progress billings. The gross amount due to customers for contract work is presented for all contracts in which progress billings exceed costs incurred plus recognized profits (less recognized losses).

(2) The Group’s accounting policies of revenue recognition by the input method
As described in the Note 4 to the consolidated financial statements, although contract revenue is measured as the initial amount agreed in the contract, it is possible to be increased by claims and incentive payments, and be decreased by penalties due to delay of construction completion by reason attributable to the Group. Contract revenue measurement, therefore, may be affected by various uncertainty related to result of future event. And also, revenue of construction is influenced by the progress of completion measured by accumulated contract costs, total estimated contract costs are measured based on estimated costs of materials, labour costs and construction period.

As described in the Note 34 to the consolidated financial statements, the variation of estimated amounts has significant impact on profit for the year ended December 31, 2016 and future profit because the uncertainty of estimated total contract revenues and costs is high. Therefore, we identified significant risks associated with revenues recognized by the input method.

We performed the following audit procedures on the Group’s accounting policy of revenue recognition by the input method as of December 31, 2016:
- Perform test whether the internal control is designed and operated effectively in relation to determination of revenue recognition accounting policy
- Inquiries and analytical review of current progress and significant changes of major projects
- Inquiries whether it is possible to reliably estimate total contract cost of major projects in the early stages
- Assessing reliability of estimation on total contract cost by retrospective review on total contract costs of major project.

(3) Uncertainty of estimated total contract costs
As described in the Note 34 to the consolidated financial statements, estimated total contract costs are calculated based on estimated costs of materials, labour costs and construction period, and uncertainty risk related to exchange rate fluctuation, changes of steel prices and changes in production hours are existed. Accordingly, considering the impacts on profit or loss for the year ended December 31, 2016 and future period, we identified significant risks regarding uncertainty of estimated total contract costs.

We performed the following audit procedures regarding the impact of uncertainty of estimated total contract costs on the consolidated financial statements:
- Perform test whether the internal control is designed and operated so that total contract costs could be reliably estimated
- Inquiries and analytical review procedures on changes in major items of total contract costs in each reporting period
- Retrospective reviews of projects in which significant changes in the estimated total contract costs were made
- Identifying the cause of the significant changes in estimated total contract cost and if necessary, confirming documents
- Comparing estimated total contract costs among similar vessels
- Collecting and inspecting the data of estimated total contract costs managed by production department for major project
- Comparison of estimated material costs to purchase order history of materials purchased of each project
- Comparison of estimated total contract costs reflected in the management plan for the next year to estimated total contract costs reflected in the financial statements
- Verifying whether estimated total contract costs were approved by proper authorized person
- Test the appropriateness of aggregation and allocation of overhead costs to each project by IT audit team

(4) Assessment of the percentage-of-completion
As described in the Note 34 to the consolidated financial statements, the Group should include only generated contract costs for work performed to estimated total contract costs in case the percentage-of-completion is calculated based on estimated total contract costs. We identified significant risks regarding assessment of the percentage-of-completion.

We performed the following audit procedures with respect to the estimated total contract costs and accumulated costs which have an effect on calculating the construction percentage-of-completion as of and for the year ended December 31, 2016:
- Inquiries and analytical review procedures on changes in the construction percentage-of-completion in each reporting period
- Inquiries and analytical review procedures on changes in items of the accumulated costs in each reporting period
- Comparison of the percentage-of-completion by progress of construction and the percentage-ofcompletion by cost of major projects
- Inspection of documentation on existence of cumulative input of material costs for selected samples
- Test the appropriateness of aggregation and allocation of indirect overhead costs to each project by IT audit team
- Risk scenarios test including verification on whether the costs are allocated appropriately to each projects by IT audit team
- Physical observation of ships in construction and site visits for major overseas construction

(5) Assessment of recoverability of due from customers for contract work
As described in the Note 34 to the consolidated financial statements, Heavy-Tail payment plan is a major collection terms in the Shipbuilding segment. Since Heavy-Tail payment plan is able to result in significant losses if contract is cancelled, we identified significant risks regarding the recoverability of due from customers for contract work.

We performed the following audit procedures with respect to the assessment of recoverability of due from customers for contract work as of December 31, 2016:
- Test of operating effectiveness of internal control to identify and manage the impairment indication on due from customers for contract work
- Making inquiries and confirming payment terms, penalties for delay, delivery time, and other obligations of contracts which due from customer for contract work increased significantly
- Inspection of the terms on the contracts to ensure that explanation by management is consistent with the terms on the contracts
- Review of management`s basis of estimation for recoverability of due from customers for contract work
- Inspection of documentation for completion of the construction work to confirm the existence of due from customers for contract work
- Sending the confirmation letters to major customers

(6) Accounting for the variation of construction work
As described in the Note 34 to the consolidated financial statements, although contract revenue is measured as the initial amount agreed in the contract, it is possible to be increased by claims and incentive payments, and be decreased by penalties due to delay of construction completion by reason attributable to the Group. Changes in construction contract, such as specification or design change by clients, have been occurring frequently in Offshore, Industrial Plant and Engineering segment due to characteristics of the industry, and it causes possibility of variation in contract revenue. Accordingly, we identified significant risks regarding the accounting for the variation of construction contracts of Offshore, Industrial Plant and Engineering.

We performed the following audit procedures with respect to the accounting for the variation of construction work as of December 31, 2016:
- Review of internal control system for changes in terms of contract
- Inquiries and analytical review procedures of projects in which significant changes in contract revenue were made
- Inspection of documentation (change order budget and others) to confirm the appropriateness of the change in contract costs
- Comparison contractual delivery date to expected delivery date as of December 31, 2016
- Inquiries of accounting policies for estimated penalties for delay

Other Matter

The procedures and practices utilized in the Republic of Korea to audit such consolidated financial statements may differ from those generally accepted and applied in other countries.

KPMG Samjong Accounting Corp.

Seoul, Korea
March 16, 2017

This report is effective as of March 16, 2017, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that the above audit report has not been updated to reflect the impact of such subsequent events or circumstances, if any