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CaladriaGR

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I was playing a multiplayer game with a friend, I was playing as the USSR and he played PRC in ahistorical mode.
After beating the Axis during the peace conference I satellited Korea creating the Democratic People's Republic of Korea, but instead of using DPRK's flag they used ROC's flag. I have seen that happen in numerous games.
 
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Do you mean RoC or RoK?
The modern day RoC (ie Taiwan) continues to use the KMT flag that was used by Nationalist China (and is associated with Nationalist China in the game.)
In the game, the only way you get to a RoC is if there is a Democratic "overthrow" of the KMT, and in the game it reverts to using the previous "Five Races" flag.

What you should see with the DPRK (and what is confusing to many) is use of the "Taegeukgi" which since 1948 has only been associated with SOUTH Korea, the RoK.
The "Taegeukgi" was adopted as the Korean national flag in the late 1800's.

In the immediate aftermath of the war, "South Korea" was administered as an American Occupation. However in the North, the soviets were quick to set up a puppet state, which, vying to be seen as the "legitimate" government of Korea, was ridiculously called the DPRK and initially adopted the "Taegeukgi" as its flag. Then in 1948, the North adopted its current flag, and the newly formed RoK adopted the "Taegeukgi".