65 Listed Companies Last Year Received 'Adverse' Audit Opinions... 51% Increase Compared to Previous Year

[Asia Economy Reporter Ji-hwan Park] Analysis of companies' audit reports from last year revealed that 65 listed corporations received non-standard audit opinions such as 'disclaimer of opinion.'

According to the Financial Supervisory Service's announcement on the 18th titled 'Analysis and Implications of Audit Reports of Listed Corporations for Fiscal Year 2019,' the proportion of standard audit opinions among listed companies last year was 97.2%, a 0.9 percentage point decrease from 98.1% the previous year. The number of listed companies receiving non-standard audit opinions increased by 22 to 65 compared to the previous year. The FSS believes this trend is due to the stricter audit environment created by the enforcement of the new External Audit Act, leading to a continuous rise in companies receiving non-standard opinions such as audit scope limitations. This announcement was based on an analysis of 2,358 listed companies, excluding foreign corporations and paper companies.

The proportion of listed companies receiving standard audit opinions has steadily declined each year since 2015, when it was 99.4%. Among the 65 companies with non-standard audit opinions, 7 received a 'qualified opinion,' and 58 received a 'disclaimer of opinion.' The reasons for non-standard opinions were primarily audit scope limitations (62 companies), going concern uncertainties (42 companies), and accounting standard violations (1 company).

The proportion of companies audited by the four major accounting firms?Sam-il, Sam-jung, Han-young, and An-jin?has steadily decreased. The share of companies audited by these four firms, which was around 50.5% in 2015, dropped by 12.3 percentage points to 38.2% last year. However, the proportion of large listed companies with assets exceeding 500 billion KRW audited by the four major accounting firms increased from 80.1% in 2018 to 82.9% last year.

The FSS evaluated that "large listed companies are audited by the four major accounting firms, while small and medium-sized listed companies are audited by small and medium-sized accounting firms, resulting in a tiered structure that somewhat alleviates competition among accounting firms for audit engagements."

The FSS plans to encourage accounting firms to avoid price-centered competition for audit engagements and promote healthy competition focused on audit quality by providing incentives to firms with high audit quality.

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