Go Seung-beom "Reconsider Mandatory External Audit of Internal Accounting... Considering Corporate Burden"

[Asia Economy Reporter Park Jihwan] Financial Services Commission Chairman Ko Seung-beom announced that he will reconsider the mandatory external audit of the internal accounting control system, which could be a burden on companies.

Chairman Ko stated at the congratulatory speech during the '4th Accounting Day' ceremony held at the 63 Building Convention Center in Yeouido, Seoul, on the morning of the 1st, "Our companies are not the targets of accounting reform but important partners in accounting reform. Therefore, going forward, we will promote accounting policies while listening to the voices of companies, especially small and medium-sized enterprises."

The internal accounting audit system is a system in which a company’s financial statement preparation and disclosure processes are inspected by an external accounting firm. It was first implemented last year for large listed companies with assets exceeding 2 trillion won. From this year, the scope has expanded to listed companies with assets over 500 billion won. Next year, it will apply to companies with assets over 100 billion won, and from 2023, all listed companies will be subject to the audit.

Chairman Ko said, "First, we will reconsider the mandatory external audit of the internal accounting control system scheduled to apply to small listed companies from 2023," adding, "In the United States, the introduction of the external audit of the internal accounting control system was withdrawn just before implementation for small listed companies because the costs outweighed the benefits." He continued, "Since the U.S. is a case we benchmarked for the introduction of the system, it holds significant implications. To improve the system, amendments to the External Audit Act are necessary, so we will promptly begin discussions with the National Assembly."

He also mentioned that they are closely examining whether accounting standards and audit standards applied to small and medium-sized enterprises act as excessive burdens. Chairman Ko pointed out, "It has been nearly 10 years since international accounting standards and international auditing standards were introduced domestically. While the international consistency of our accounting system has improved, it is also true that it has become somewhat burdensome for small and medium-sized enterprises." He added, "We will review with related organizations such as the Korea Accounting Standards Board and the Korean Institute of Certified Public Accountants whether there are ways to reflect the characteristics of small and medium-sized enterprises without compromising consistency with international standards."

Furthermore, the Financial Services Commission plans to reduce the burden on companies caused by the auditor designation system. Chairman Ko emphasized, "Although the independence of auditors has been evaluated as improved, companies are complaining about increased audit fees and auditors’ conservative attitudes, so we will actively review improvements to the auditor designation system."

He continued, "The accounting reform that began with the amendment of the External Audit Act in 2017 was the first step to restore the public value and trust of accounting, and the efforts over the past four years have shown results. According to the recently announced International Institute for Management Development (IMD) national competitiveness evaluation, the competitiveness ranking of Korea’s accounting sector rose significantly for two consecutive years, from 61st in 2019 to 46th in 2020, and 37th this year."

Meanwhile, at the ceremony, eight individuals who contributed to the development of accounting received government awards, including medals and commendations from the President and the Prime Minister, hosted by the Korean Institute of Certified Public Accountants and the Korea Chamber of Commerce and Industry.

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