Kim Young-sik, Chairman of the Korean Institute of Certified Public Accountants, "Three Years of Visible Achievements in Accounting Reform... Will Focus on Implementing Proper Auditing"

[Asia Economy Reporter Park Jihwan] Kim Young-sik, chairman of the Korean Institute of Certified Public Accountants, stated that the accounting reforms carried out over the past three years have shown tangible results, and that moving forward, efforts will focus on implementing principles-based audits (Jeongdo Gamsa) that take into account the difficulties faced by companies.

On the 1st, Chairman Kim said at the 2021 1st Press Seminar held at the LW Convention Center in Jung-gu, Seoul, "It has been exactly three years since the new External Audit Act, known as Korea's accounting reform, was implemented," adding, "With close cooperation and communication among companies, the accounting industry, and the government, the new system is being stably implemented in the market and is showing visible results." In November 2019, the new External Audit Act was introduced, focusing on improving audit quality and transparency through the introduction of a standard audit hours system and periodic auditor designation system. Notably, after the implementation of the new External Audit Act, Korea ranked 37th out of 64 countries in the 2021 Accounting Transparency Ranking announced by the International Institute for Management Development (IMD) in Switzerland, rising 9 places from 46th the previous year. Compared to 61st place in 2019, which was near the bottom, this is a remarkable jump of 24 places. Chairman Kim emphasized, "The accounting transparency ranking has risen sharply for two consecutive years, and Korea's accounting reform is receiving positive evaluations internationally," adding, "I believe that investors' increased awareness and deep interest in accounting transparency have also supported the Donghak Ants craze that pushed the stock index above 3000."

However, while companies agree with the purpose of strengthening accounting transparency, they are voicing concerns about the increased burden of audit costs, calling for the abolition of the periodic auditor designation system or relaxation of the standard audit hours system. In particular, small and medium-sized enterprises and mid-sized companies are expressing difficulties in business management due to the COVID-19 situation and are complaining about the additional costs incurred for outsourcing services and hiring related personnel to comply with the new accounting system. Chairman Kim said, "Hourly audit fees have remained stagnant over the past 10 years," and added, "Considering the increase in audit workload and audit risk due to accounting reforms, the recent rise in audit fees and hours can be understood as a normalization process of an abnormal situation."

Chairman Kim plans to devise improvement measures that consider companies' difficulties without compromising the principles of Jeongdo Gamsa. He said, "Accounting reform is a global concern, and advanced accounting countries such as the UK, which have transparent corporate governance, are closely watching Korea's accounting reform and are also conducting reforms to enhance accounting transparency." He added, "Ahead of the full-scale audit season, on the 10th of this month, we plan to convene a meeting of accounting firm representatives to share companies' difficulties and discuss ways to implement Jeongdo Gamsa considering these challenges."

Furthermore, plans are underway to begin a precise verification of the achievements of the accounting reform system over the past three years. Chairman Kim stated, "Although it may be somewhat early in the initial stage of system implementation, it is necessary to properly review whether the accounting reform has achieved its intended results," emphasizing, "It is also important to check whether Korea's backward corporate management culture, such as corporate ownership and governance structures that caused the need for accounting reform, has changed to the level of advanced accounting countries."

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