Changwon Chamber of Commerce, "Struggling Due to COVID-19" ... Proposal to Improve the 'Periodic Designation System'

Complaints of Increased Corporate Burden Due to Soaring Costs in Audits of the Same Financial Statements

[Asia Economy Yeongnam Reporting Headquarters Reporter Hwang Choi Hyun-joo] The Changwon Chamber of Commerce and Industry announced on the 15th that it has sent a proposal for system improvement to reduce audit costs for companies related to the 'Periodic Designation System' to the Financial Services Commission and the State Affairs Committee.

The proposal from Changwon Chamber of Commerce and Industry was sent on the 13th. According to the chamber, the government introduced an amendment to the "Act on External Audit of Stock Companies, etc." in November 2018 to enhance transparency in corporate accounting, and has been implementing it since November last year.

The 'Periodic Designation System' is one of the amendments reflecting the government's strong will for accounting reform. The main point is that among listed companies nationwide and large unlisted stock companies where ownership and management are separated, only companies that have freely appointed auditors for six consecutive business years must have their auditors designated by the Securities and Futures Commission for the next three business years.

Companies that must physically enter into contracts with designated auditors will pay audit costs at least 1.5 times and up to more than 3 times higher than the previous freely appointed system.

Moreover, with the overall audit hours increased due to the 'Standard Audit Hours System' introduced prior to the implementation of the 'Periodic Designation System,' it is reported that some companies are struggling with the sharp rise in audit costs.

In fact, in the case of Company A located in Changwon, audit costs jumped from 60 million won to 180 million won due to the implementation of the 'Periodic Designation System.' Additionally, since most designated auditors are concentrated in the Seoul metropolitan area, companies located in provincial areas face even greater burdens when various actual expenses incurred during audits are added.

The Changwon Chamber of Commerce and Industry stated, "After monitoring the relevant companies, most agree with the purpose of the legal amendment," but added, "It is regrettable that audit costs have simply surged for the same financial statements that have been accounted for based on corporate accounting standards even before the legal amendment."

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