Son Byung-du, Vice Chairman of FSC, "Measures to Improve Audit Quality to Be Prepared by the End of This Year"

[Asia Economy Reporter Minji Lee] “Accounting reform is only complete when the increased audit quality of accounting firms is felt and acknowledged on the ground.”

Son Byung-du, Vice Chairman of the Financial Services Commission, attended the accounting reform meeting held at the Seoul Listed Companies Association at 10 a.m. on the 22nd and stated that they will prepare improvement measures for the auditor designation method by the end of this year to enable competition focused on audit quality.

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On that day, Vice Chairman Son pointed out, “Auditors are being criticized for focusing only on the fruit of increased audit fees and neglecting the improvement of audit quality,” adding, “The current auditor designation method is designed mainly based on quantitative factors without considering audit quality elements.”

Currently, the financial authorities classify accounting firms into five levels based on the number of affiliated accountants and asset size. If an accounting firm has 600 or more accountants, it is classified as Grade Ga; 120 or more as Grade Na; 60 or more as Grade Da; 30 or more as Grade Ra; and less than 30 as Grade Ma. For listed companies undergoing audits, classification is based on asset size. Only accounting firms with 600 or more accountants can audit listed companies with assets of 5 trillion won or more, which fall under Grade Ga. Until now, the Financial Services Commission designated auditors solely based on the number of accountants, but going forward, ‘audit quality’ will be added as a designation requirement to promote competition among accounting firms centered on audit quality.

Vice Chairman Son continued, “Along with accounting reform, competition focused on audit quality among accounting firms must be triggered,” emphasizing, “To improve the auditor designation method, the accounting industry’s own efforts, as well as active institutional improvements by financial authorities, the Korean Institute of Certified Public Accountants, and related organizations, are necessary.”

At the meeting, measures to reduce the burden on companies due to the introduction of the new external audit law were also announced. Vice Chairman Son said, “During the process of promoting accounting reform, some systems did not sufficiently consider the realities of the industry,” adding, “Within the scope that does not undermine the basic purpose of accounting reform, we will revise and supplement systems that cause excessive burdens.”

The related improvement plans include △ easing the enforcement decree standards related to the discretionary designation system △ establishing regulations for the standard audit time deliberation committee △ relaxing the composition requirements for the auditor appointment committee △ and initial guidance-focused supervision related to the internal accounting management system.

Furthermore, Vice Chairman Son urged, “This year is the first year when core accounting reform systems such as the periodic designation system and auditor registration system are implemented,” adding, “As this is a crucial time that will determine the success or failure of accounting reform, we must communicate sufficiently with the market and steadily promote accounting reform.”

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