Only 2% of Listed Companies with Assets Over 2 Trillion Have Internal Audit Departments Evaluating Accounting Management Systems

Samjong KPMG Publishes 'Audit Committee Journal No. 15'
Only 3 out of 123 Companies with Over 2 Trillion KRW in Assets Evaluated by Internal Audit Departments

[Asia Economy Reporter Minji Lee] Since last year, the internal accounting control system audit has been gradually expanding according to asset size, starting with listed companies with total assets of over 2 trillion won. However, the proportion of domestic companies where the internal audit department conducts evaluations of the internal accounting control system remains low.

According to the 'Audit Committee Journal No. 15' published by Samjong KPMG on the 19th, among 123 domestic companies with total assets exceeding 2 trillion won that have an internal accounting control system organization, only 3 companies (2%) have the internal audit department responsible for this task. The remaining companies are estimated to perform this function in dedicated internal accounting control departments (75 companies, 61%), accounting and finance departments (27 companies, 22%), and separate task forces (5 companies, 4%).

In the United States, where using the internal audit department for internal accounting control system evaluations is common, about half (46%) of major companies have their internal audit departments involved in internal accounting control system and internal control tasks. Among these 3 companies, one reported dedicating more than half of their total working hours to internal accounting control system and internal control tasks.

Kim Yukyung, leader of the Audit Committee Support Center (ACI) at Samjong KPMG, stated, “It is desirable for the audit (committee) to conduct an independent evaluation of the internal accounting control system with the assistance of the internal audit department,” adding, “If the audit (committee) utilizes the internal audit department to perform an independent evaluation of the internal accounting control system, it not only strengthens the checks and balances on management but also secures the independence of the internal audit department.”

This journal also examined the training status of audit committee members in KOSPI 200 companies. The Enforcement Decree of the External Audit Act requires companies to disclose annual training records for audit committee members to enhance their expertise in overseeing financial reporting. Last year, 88.5% of companies provided at least one training session to their audit committee members, an increase of more than 35 percentage points from the previous year (52.6%). Among these, 66.4% utilized external training, significantly up from 37.3% the previous year. The average number of training sessions also increased to 3.2 times from 2.5 times the previous year.

Additionally, the remuneration of audit bodies (audit committees and auditors) was investigated. Last year, the remuneration for audit committee members in KOSPI 200 companies was 61.3 million won, and for full-time auditors, it was 135 million won, representing increases of 4.4% and 0.8%, respectively, compared to the previous year. In the United States, the remuneration for outside directors of the top 300 major companies ranged from $155,500 (approximately 190 million won) to $285,000 (approximately 340 million won) last year, which is at least three to up to 5.5 times higher than the average remuneration of domestic audit committee members.

Han Eunseop, head of the Audit Division at Samjong KPMG, emphasized, “The audit committee, as the highest governing body responsible for preventing and detecting accounting fraud, plays an important role in improving accounting transparency,” and added, “With strengthened legal systems, it is necessary to expand the roles and activities of audit committee members and review the appropriateness of their input time and remuneration levels accordingly.”

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