[Exclusive] Samil Appointed as CJ Auditor... Fierce Year-End 'Accounting Battle'

220 Companies Ending Forced Audit Contracts
Big 4 Accounting Firms Fiercely Compete for External Auditor Orders
Samil vs Samjeong Pride Battle... Anjin and Hanyoung Chase

[Asia Economy Reporter Lee Seon-ae] Amid fierce competition among the 'Big 4 accounting firms (Samil PwC, Samjong KPMG, Deloitte Anjin, EY Hanyoung)' for external auditor contracts from 220 listed companies, Samil PwC has been appointed as the auditor for CJ and CJ CheilJedang.

According to the accounting industry on the 27th, Samil has been assigned as the auditor for CJ and CJ CheilJedang for the 2023 fiscal year, which were open for free auditor selection. A Samil representative stated, "We will serve as the auditors for CJ and CJ CheilJedang for the next three years." The audit contract details will be disclosed soon.

Since the government implemented a full revision of the External Audit Act (hereafter External Audit Act) in November 2018 and applied the 'Periodic Auditor Designation System' for the first time the following year, the three-year term has expired, intensifying the year-end bidding war among accounting firms. The three-year contracts with accounting firms forcibly assigned by financial authorities in 2019 are expiring this year for as many as 220 companies. The Periodic Auditor Designation System allows companies to freely select auditors for six years, after which the government appoints the auditor for the next three years. This system was introduced in 2019 following a full revision of the External Audit Act aimed at enhancing accounting transparency and reliability, triggered by the Daewoo Shipbuilding & Marine Engineering accounting scandal in 2015. Accordingly, at that time, the auditors for CJ and CJ CheilJedang were forcibly switched from Samil to EY Hanyoung.

With Samil once again taking on the auditorship for CJ and CJ CheilJedang, it is assessed that the winner of the ongoing free auditor selection competition is difficult to determine.

Since November, the auditor appointment war among the Big 4 accounting firms has seen a fierce pride battle between the industry’s top two, Samil and Samjong KPMG. Initially, Samjong took the lead. After Samsung Electronics, which had been audited by Samil for about 40 years, chose Samjong as its new auditor, Samil’s pride was hurt. However, Samil regained face by securing Samsung Life Insurance. Subsequently, it demonstrated its presence by being reappointed as auditor for Samsung Heavy Industries, KB Financial Group, KB Card, and KB Insurance in succession.

Samjong’s momentum is also formidable. Following the appointment as auditors for the two semiconductor giants Samsung Electronics and SK Hynix, it also took on Shinhan Financial Group, Woori Financial Group, and Mirae Asset Securities. In December, it was also selected as the auditor for Korean Air and NCSOFT. It has achieved remarkable results by securing not only prestigious large corporations but also major financial sector clients.

Deloitte Anjin and EY Hanyoung are also fiercely pursuing. Anjin was appointed as auditor for LG Chem, Samsung Electro-Mechanics, and Hyundai Marine & Fire Insurance. Hanyoung secured appointments with GS Engineering & Construction, Lotte Chemical, BNK Financial Group, Korea & Company, and Nexen Tire, among others, gaining substantial contracts.

Audit appointment contract disclosures will be released by February next year. Initially, attention was focused on Samjong, but Samil has since asserted its presence, and Anjin and Hanyoung have also made advances, gradually bringing the intense competition to a close. Although some large corporations have yet to make decisions, making it premature to predict the final results for accounting firms, a showdown between Samil and Samjong is expected until the end.

An industry insider said, "Auditing large corporations is a matter that affects the reputation and pride of accounting firms," adding, "The competition to secure even one more client is fierce."

However, there are also concerns about this accounting battle. The domestic accounting industry is experiencing its second 'accounting war' since the turbulent year of 2019, and conflicts between incumbent and new auditors may arise due to the bidding competition. Since financial authorities have selected designated audit firms annually since October 2019, the number of designated audit firms has increased from 220 in 2019 to 434 in 2020 (cumulative), and 593 in 2021. The business community points out that if auditors keep changing, conflicts over accounting treatments between former and current auditors or between auditors and auditees may intensify.

An industry source said, "Even when there are no clear errors, excessive audit supervision can cause conflicts," adding, "When the Periodic Auditor Designation System was first implemented, newly appointed accounting firms had disputes over the accounting treatments of previous auditors, showing differences in interpretation, which led to the formation of consultative bodies to reconcile disagreements between incumbent and new auditors."

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