FSS Listens to Opinions on External Audit System... "Promoting Improvements on Supplementary Measures"

[Asia Economy Reporter Lee Jung-yoon] The Financial Supervisory Service (FSS) announced on the 27th that it will listen to opinions on the external audit system and strengthen improvements and communication.

According to the FSS, participants in the opinion hearing meeting raised practical issues and suggestions for improvement regarding the auditor designation system, audits of consolidated internal accounting control systems, and standard audit hours.

In particular, company representatives expressed practical difficulties related to the increase in audit fees due to auditor designation and the scope of application for audits of consolidated internal accounting control systems.

Representatives from accounting firms explained that when designated companies request more audit materials compared to the previous year, although it is an essential procedure for the audit, it is perceived as an "excessive demand for materials." They also suggested the need to establish safeguards to maintain the classification criteria for the designated auditor group throughout the year.

Overseas investment banks (IBs) and others evaluated that the periodic designation system, which does not exist abroad, positively complements the weak governance issues of domestic companies and improves accounting transparency. However, they emphasized consistent policy implementation, noting that frequent changes in the system could send negative signals to the stability of the domestic capital market.

Additionally, a second survey targeting designated companies was conducted to grasp the actual burden of auditor designation.

The survey results showed that audit fees and audit hours for designated companies tend to decrease somewhat during the negotiation process after the initial audit fee proposal. Even after negotiations, compared to the previous year's free appointment, audit hours and fees increased due to auditor designation, initial audits, and internal accounting control system audits.

Furthermore, companies that applied for re-designation cited high audit intensity or excessive audit fees of the designated auditor as the main reasons for their application, and more than 70% of these companies were satisfied with the re-designated auditor.

It was also confirmed that over 90% of designated companies received explanations regarding the basis for calculating audit fees, indicating a significant improvement in compliance with the "Model Code of Conduct for Designated Audit Work."

An FSS official stated, "Among the opinions heard through meetings, necessary system improvements are being pursued through consultations with related organizations to reflect the evaluations and demands of companies and auditors," adding, "We will continue to establish or expand online and offline channels for two-way communication with the market to listen to the opinions of various stakeholders."

He continued, "We will create an online space where companies and auditors can freely express their opinions on the external audit system at any time and regularize meetings with listed companies and accounting firms to continuously collect opinions and implement necessary system improvements."

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