Accounting Firms' 2021 Business Reports Contain 249 Deficiencies... 24% Decrease Compared to Previous Year

[Asia Economy Reporter Lee Jung-yoon] As a result of inspecting the 2021 business reports submitted by accounting firms, the financial authorities confirmed that the number of deficiencies decreased by more than 20% compared to the previous period.

According to the Financial Supervisory Service (FSS) on the 22nd, after inspecting the business reports submitted by 209 accounting firms, the number of deficiencies was 249, a 23.9% decrease from 327 in the previous period. The number of accounting firms with identified deficiencies also decreased from 162 to 143. The average number of deficiencies per accounting firm also decreased from 1.68 in the previous period to 1.19.

Among all deficiencies, 130 cases, accounting for 52.2%, were related to quality items. This represents a 29.0% decrease from 183 cases in the previous period. The main types of deficiencies were insufficient description of the performance evaluation system (63.8%), insufficient description related to governance (10.8%), and insufficient description of internal audit implementation status and document retention policies (6.9%). Although the insufficient description of the performance evaluation system improved by 34.1% compared to the previous year, it still accounted for the largest proportion. Additionally, many deficiencies were pointed out in governance-related descriptions, where preparation guidelines were strengthened.

Deficiencies related to personnel and compensation were also found in 99 cases, with the main types being discrepancies between affiliated personnel compensation and the income statement total (61.6%), and discrepancies in the total by personnel division (21.2%). As a new inspection item, 61 deficiencies were pointed out in the total compensation check, and there were many cases where the total number of personnel across items in the business report did not match.

In other categories, 20 deficiencies were identified, with a significant decrease in deficiencies related to transparency reports, down by 78 cases compared to the previous period. There were also cases where the loss reserve and joint compensation fund in the business report did not match, or where the audit report supervision results were inadequately described.

The FSS conducts annual inspections of accounting firms' business reports to ensure the establishment of the strengthened disclosure system following the introduction of the new External Audit Act.

An FSS official stated, "It is evaluated that the related system is being smoothly established as deficiencies continue to decrease," and added, "We will continue efforts to enhance the usefulness of business reports and minimize description deficiencies through guidance on correcting business reports related to deficiencies, as well as ongoing guidance and education on how to prepare business reports."

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