Financial Supervisory Service Urges Compliance with External Auditor Appointment Procedures by Company Type

[Asia Economy Reporter Eunmo Koo] The Financial Supervisory Service (FSS) urged companies to verify their company type and comply with the relevant appointment procedures, as auditors can only be appointed if the auditor appointment is not violated.

On the 21st, the FSS provided guidelines on auditor qualification requirements, appointment procedures, and appointment deadlines that must be observed when appointing auditors according to company type. Since the implementation of the new External Audit Act in November 2018, which shortened the auditor appointment deadline and changed the appointment procedures, some companies have violated the external audit regulations due to a lack of understanding of the appointment system.

Looking at the precautions by company type, first, listed companies on the KOSPI, KOSDAQ, and KONEX markets must appoint only from the currently 40 registered accounting firms as auditors, and must enter into and maintain an audit contract with the same auditor for three consecutive business years. However, companies required to establish an audit committee with total assets of 2 trillion KRW or more must appoint an auditor before the start of the business year.

Unlisted large companies with assets of 100 billion KRW or more at the end of the previous business year and financial companies must also appoint only accounting firms (audit teams not allowed) and maintain an audit contract with the same auditor for three consecutive business years. For both listed companies and unlisted large companies/financial companies, companies with an audit committee must appoint the auditor selected by the audit committee, while companies without an audit committee appoint the auditor approved by the auditor appointment committee.

Unlisted stock companies undergoing their first audit that did not receive an external audit in the previous year must appoint an auditor within four months after the start of the business year, and unlisted stock companies undergoing continuous audits that received an external audit in the previous year must appoint an auditor within 45 days after the start of the business year. The auditor is selected by the company’s auditor, but if there is no auditor as stipulated by law (capital less than 1 billion KRW), the company selects the auditor.

Limited companies are practically the same as unlisted stock companies, with differences in auditor appointment procedures depending on whether the company has an auditor. The auditor is selected by the company’s auditor, but if there is no auditor, the company selects the auditor, and if there is no auditor and the capital is 1 billion KRW or more, approval from the general meeting of members is required.

The FSS announced that it plans to cooperate with related organizations such as the Korea Listed Companies Association, KOSDAQ Association, Korea Chamber of Commerce and Industry, and the Korean Institute of Certified Public Accountants to provide guidance on precautions and conduct continuous education for their member companies.

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