Establishment of Audit Standards for Financial Statements of Small Businesses... Expected to Ease External Audit Burden

[Asia Economy Reporter Lee Jung-yoon] The Korean Institute of Certified Public Accountants announced on the 16th that the Financial Services Commission has approved the amendment to the audit standards, which newly establishes audit standards for financial statements of small-scale enterprises.

This amendment was made to reduce the external audit burden on small-scale enterprises by establishing separate audit standards, in accordance with the Financial Services Commission's "Measures to Rationalize Accounting Burden for Small and Medium Enterprises."

The scope of application for the small-scale enterprise audit standards includes non-listed companies subject to external audits with assets under 20 billion KRW or sales under 10 billion KRW. However, companies planning to be listed with many stakeholders and high audit risk, companies preparing consolidated financial statements, financial institutions, corporations required to submit business reports, and firms designated by auditors ex officio are excluded.

The key features of the small-scale enterprise audit standards are ▲independent separate standards ▲an approach centered on substantive procedures ▲focus on core procedures. Additionally, risk assessment procedures have been simplified, and mandatory communication items have been reduced to suit the characteristics of small-scale enterprises. Furthermore, the standard materiality amount set by the Financial Supervisory Service is used as the materiality criterion, or grounds have been established to raise the materiality threshold.

This will be implemented for audits of financial statements for reporting periods beginning on or after January 1 of this year. The existing audit standards required extensive procedures, resulting in a high external audit burden for small-scale enterprises. However, with this amendment, unnecessary audit procedures for small-scale enterprises will be minimized, allowing auditors to focus on essential audit procedures, thereby maintaining audit quality while reducing the external audit burden.

A representative from the Korean Institute of Certified Public Accountants stated, "We will hold briefing sessions introducing the small-scale enterprise audit standards and continue to provide education to enhance auditors' understanding. We also plan to release sample working paper forms that can be used for audits of small-scale enterprises to ensure smooth practical adoption of the small-scale enterprise audit standards."

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