'4-Year Audit' Celltrion Sparks System Improvement... Financial Supervisory Service Investigation Period Limited to '1 Year'

[Asia Economy Reporter Ji Yeon-jin] Taking the accounting audit of Celltrion, which lasted over four years, as an opportunity, the Financial Supervisory Service (FSS) has set the accounting audit investigation period to one year and strengthened the defense rights of companies.

The Financial Services Commission (FSC) announced on the 2nd that it has prepared a plan to advance accounting audit procedures to prevent excessive prolongation of accounting audits and to ensure that the defense rights of the investigated parties are substantially protected during the FSS investigation stage.

Accounting audits are supervisory tasks that check whether a company's financial statements and audit reports are properly prepared according to accounting standards and audit standards, protecting various stakeholders such as investors and promoting sound corporate management. However, the accounting audit of Celltrion, which lasted for four years, was criticized for increasing uncertainty about the company's value. Earlier, the FSC Securities and Futures Commission announced that although Celltrion Group companies including Celltrion, Celltrion Healthcare, and Celltrion Pharm violated accounting standards, there was no intentional wrongdoing.

The advancement plan first limits the audit investigation period to one year in principle, and if an extension is unavoidable, it must be approved in advance by the FSS Commissioner and extended in six-month increments.

Currently, investigated parties such as companies or external auditors can have representatives participate in the investigation process according to the Administrative Procedures Act, but representatives are prohibited from filming, recording, or documenting the investigation process. Due to this, there have been criticisms that investigated parties have difficulty responding at the Audit Committee or the Securities and Futures Commission because they cannot fully understand their own statements and issues. Therefore, representatives are now allowed to take notes on the main points of questions and answers.

Also, there have been concerns that investigated parties face restrictions on their substantive defense rights because they appear before the Audit Committee and Securities and Futures Commission without sufficient review of the exact charges such as their Q&A content. Accordingly, the timing for reviewing the Q&A documents will be moved forward by about two weeks compared to before.

Currently, there have been many cases where the investigated parties were verbally requested to submit materials during the audit process, but this has been criticized for causing confusion about the specific content and scope of the requests due to lack of clarity and potentially imposing unnecessary burdens on the investigated parties. Therefore, materials requested verbally must be supplemented afterward through written electronic means (SMS, email, fax, etc.) within three business days.

Furthermore, the violation grounds and the calculation details of the pointed-out amounts recorded in the Audit Committee agenda will also be provided in the prior notice sent to the investigated parties, and the specific paragraphs of the accounting standards and audit standards directly related to the pointed-out issues will be clearly presented. The grounds for motive judgment and the expected level of measures recorded in the Audit Committee agenda will also be specified in the prior notice.

The FSC plans to announce changes to regulations such as the External Audit Regulations next month and aims to complete the revisions by the third quarter of this year.

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