Exchanges See 'Adverse Audit Opinions' as Most Common Reason for Delisting Related to Settlement

[Asia Economy Reporter Song Hwajeong] The most common reason for delisting related to financial statements was found to be 'adverse audit opinion.'

According to the Korea Exchange on the 6th, an analysis of delisting reasons related to regular financial statements over the past five years revealed that 'adverse audit opinion' accounted for the largest proportion at 74.4%. Capital erosion followed at 25.5%. By market, capital erosion (55.5%) was relatively more common in the KOSPI market, while adverse audit opinion (82.3%) accounted for a larger share in the KOSDAQ market.

The number of companies delisted due to financial statement issues has been declining over the past five years. In 2019, only one company was delisted for financial statement reasons, accounting for just 5.5% of all delisted companies. By year, there were 12 companies in 2015, 9 in 2016, 8 in 2017, 13 in 2018, and 1 in 2019. A Korea Exchange official explained, "This is because the delisting system was improved in March last year to decide delisting based on a re-audit or the next year's audit opinion in cases of adverse audit opinions." The 3 companies in the KOSPI market and 24 companies in the KOSDAQ market with adverse audit opinions in 2018 are scheduled to have their delisting status determined based on last year's audit opinions.

A Korea Exchange official stated, "We will establish a cooperative system with related organizations and external auditors regarding the most frequent reason, adverse audit opinions, and prepare a response system so that the Exchange can take timely market measures such as trading suspension." The Exchange plans to provide listed companies with guidelines on major disclosure items during the financial statement period and practical guidelines for shareholders' meetings, and to urge investors to exercise special caution regarding companies at risk of delisting during the financial statement season.

This content was produced with the assistance of AI translation services.