Financial Supervisory Service Expands Accounting Inspections for Listed Companies This Year... Review and Audit of 180 Companies

17 Accounting Firms Subject to Auditor Inspections

[Asia Economy Reporter Ji Yeon-jin] The Financial Supervisory Service (FSS) announced on the 27th that it will conduct financial statement reviews and audits for 180 listed companies and others this year, and carry out auditor inspections for 17 accounting firms. The number of financial statement reviews and audits for listed companies and others has increased by nine compared to last year.

Financial statement reviews and audits apply to listed companies as well as non-listed financial companies and corporations required to submit business reports, and the number may vary depending on the number of accounting standard violations, the scale, nature, and impact of the violations.

The FSS plans to simplify the sanction procedures for minor violations by issuing warnings or cautions from the FSS Governor to promptly conclude cases, and to continuously expand the scope of reviews in the future by improving work processes and enhancing operational efficiency.

The sample review targets, numbering around 100, include companies audited by accounting firms with a high ratio of companies flagged for pre-announced accounting issues or financial statement review and audit results, companies with significant or excessive deficiencies found in individual audit tasks during auditor inspections, companies with high indicators of earnings manipulation risk, and companies where embezzlement or breach of trust has occurred. The suspicion review targets are expected to be around 50, based on violations identified through accounting error corrections, reports of accounting fraud, and other supervisory tasks, considering past experiences.

The FSS plans to conduct audits if gross negligence or intentional misconduct is found during the financial statement reviews. Financial statement reviews involve the FSS examining disclosed materials for accounting errors and recommending corrections or concluding with warnings or cautions if minor errors are found. In contrast, audits are conducted when significant accounting errors are detected, involving requests for document submissions from the company and audits of the accounting firm, with enforcement authority resting with the Financial Services Commission.

The FSS will also conduct auditor inspections for 17 accounting firms this year. Auditor inspections check whether accounting firms have properly designed and operated quality control systems and whether they comply with auditing standards when performing audit tasks on financial statements.

This year’s auditor inspection targets include 13 accounting firms that have never undergone an inspection since the implementation of the auditor registration system in 2019, and an additional four firms selected based on inspection cycles, quality control levels, and the proportion of audits for listed and designated companies.

Additionally, joint inspections will be conducted on Samjong and Anjin among the 13 domestic accounting firms registered with the Public Company Accounting Oversight Board (PCAOB) in the United States. According to the Sarbanes-Oxley Act, accounting firms auditing U.S.-listed companies must register with the PCAOB and undergo regular inspections. Since signing a memorandum of understanding for joint inspections with the PCAOB in March 2007, the FSS has conducted a total of 20 joint inspections on five accounting firms through the end of last year.

Meanwhile, as economic uncertainty continues this year and accounting risks such as deteriorating performance persist, the FSS plans to strengthen activities to prevent, detect, and sanction serious accounting fraud, while promptly concluding reviews of minor accounting violations to provide accurate financial information in a timely manner and expand accounting inspections of listed companies.

An FSS official stated, "With improved audit conditions following accounting reforms, we will establish a quality control self-assessment system to encourage the enhancement of accounting firms’ capabilities, improve the audit process to protect the rights of those subject to measures, and perform accounting supervision tasks in an advanced manner by strengthening digital supervisory capabilities in line with technological and environmental changes."

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