Mandatory Implementation of Internal Accounting Control System Delayed by 1 Year... Sequential Application from 2023

[Asia Economy Reporter Park Jihwan] The mandatory implementation timeline for the consolidated internal accounting control system has been postponed by one year, from next year to 2023. This measure was taken due to difficulties companies faced in connecting subsidiary IT systems amid the prolonged COVID-19 pandemic over the past two years.

On the 14th, the Financial Services Commission announced that the amendment to the Enforcement Decree of the External Audit Act, containing this provision, was approved at the Cabinet meeting and will be enforced. The obligations to establish, operate, and undergo external audits of the consolidated internal accounting control system will be postponed by one year according to the size of listed companies: △ companies with assets of 2 trillion won or more (2022 → 2023) △ companies with assets between 500 billion won and less than 2 trillion won (2023 → 2024) △ companies with assets less than 500 billion won (2024 → 2025), and will be applied sequentially starting in 2023.

Originally, listed companies were required to establish and operate the consolidated internal accounting control system and receive audits from external auditors starting next year, in accordance with the full revision of the External Audit Act implemented in November 2018.

However, the Financial Services Commission explained that due to restrictions on domestic and overseas business trips for listed companies during the COVID-19 pandemic over the past two years, significant difficulties arose in establishing the internal accounting control system, which requires essential connection with subsidiaries' IT systems. In fact, among 168 listed companies with assets of 2 trillion won or more, 152 companies (90.5%) have overseas subsidiaries. The total number of overseas subsidiaries is 4,338, with an average of 28 subsidiaries per company.

Nonetheless, the Financial Services Commission stated that companies wishing to apply the system earlier may implement the consolidated internal accounting control system according to the originally scheduled enforcement date.

A Financial Services Commission official said, "The burden on listed companies will be alleviated," and added, "With the extended preparation period for the system's introduction, it is expected that a more effective system will be established."

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