Mandatory Audits for Officetels and Commercial Buildings Starting Next Month...Will It Ensure Accounting Transparency?

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[Asia Economy Reporter Park Jihwan] Office-tels and commercial buildings, which have so far been blind spots in management fee monitoring, will be subject to mandatory accounting audits starting next month, raising interest in whether the management fees of these collective buildings can be managed transparently. Experts say that while the mandatory audits will partially resolve issues of unfair management fee collection or usage, there are doubts about whether accounting transparency can be ensured given that the selection of auditors is left to the discretion of the management.

According to the Ministry of Justice on the 29th, large office-tels with 150 or more households will be required to undergo accounting audits annually starting next month. Medium-sized office-tels with 50 to less than 150 households will be subject to audits if 20% of the individual owners request it. Until now, accounting audits could be conducted with the approval of more than 50% of the owners, but it was not mandatory. If the building manager of a building meeting the criteria fails to undergo an audit or undergoes an audit by fraudulent means, they will be fined up to 5 million won. The designation of accounting auditors will be left to the discretion of the building manager.

Disputes over management fees in collective buildings such as office-tels have been ongoing. Even when tenants raised issues about management fees, building managers often did not properly prepare separate accounting books, making it difficult to accurately know the calculation, imposition, and detailed usage of management fees. Experts expect that the mandatory management fee audits will help prevent unfair collection or misuse of management fees to some extent.

However, there are also criticisms that transparency in management fees will not be guaranteed by mandatory audits alone. This is because the entities required to undergo audits themselves choose the auditors. There is a high possibility that they will avoid strict auditors and select auditors who accommodate their demands. While full designation of auditors may be difficult, alternatives such as the periodic designation system introduced for listed companies (6 years of free appointment followed by 3 years of mandatory designation) are needed.

Professor Jeong Dojin of the Department of Business Administration at Chung-Ang University said, "Leaving the appointment of auditors to the free choice of the building manager undermines the independence of auditors and results in a failure to guarantee transparency in management fees through mandatory audits alone," adding, "From the residents' perspective, it could become a failed accounting audit system that only increases costs without benefits."

In the case of medium-sized office-tels, the requirement of consent from more than 20% of owners is also controversial. Critics argue that audits will only be conducted after major corruption scandals occur. Since most office-tels are occupied by tenants rather than owners, the fact that the consent of owners, who often do not even receive management fee statements, is a prerequisite for audits raises questions about the effectiveness of the system.

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