FSS Concludes Financial Statement Reviews for 153 Firms Over 2 Years... 56.9% Rate of Issues Identified

[Asia Economy Reporter Park Jihwan] The Financial Supervisory Service (FSS) concluded reviews on 153 companies through the financial statement examination system operated during 2019 and 2020. Among these, 87 companies received corrective actions or were converted to audits, resulting in a review finding rate of 56.9%.

According to the FSS on the 29th, since the introduction of the financial statement examination system in April 2019, a total of 153 companies had their financial statement reviews concluded by the end of last year. The financial statement review finding rate among these was 56.9%.

Among the 153 companies under review, 87 were pointed out for violations of accounting standards. Of these, 66 received corrective actions and 21 were converted to audits. The review finding rate is similar to the audit finding rate of 57.2% over the three years prior to the introduction of the examination system.

There were 66 cases concluded with corrective actions. The proportion of significant violations causing changes in equity capital (53 cases) accounted for 80.3%. This is comparable to the proportion of significant violations (72 cases) among 94 completed financial statement audits during the same period, which was 76.6%. The main issues cited in corrective action cases were related to revenue recognition standards, recognition and measurement of financial instruments, consolidated financial statements, asset impairment, and disclosures of related party transactions.

Fifty-three audit firms were responsible for the external audits of the 153 companies that underwent financial statement reviews. Among these, 20 audit firms handled audits for two or more companies.

Among the 87 companies pointed out for accounting standard violations, 43 audit firms were involved, resulting in an auditor-based finding rate of 59.5%. The finding rate for small and medium-sized accounting firms (average 67.7%) was higher than that of the Big Four major accounting firms (average 48.6%).

The FSS stated, "We plan to reflect the results of the financial statement examinations in evaluations of accounting firms' quality control levels," and added, "We will also continue to provide education and guidance to support companies in enhancing their accounting processing capabilities."

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