Financial Supervisory Service Notifies Designated Auditors... 1,261 Companies Targeted

15.8%↓ Compared to Last Year

On the 20th, the Financial Supervisory Service (FSS) announced that it has sent advance notifications of auditor designations for the 2024 fiscal year periodic designations to 1,261 companies and external auditors, respectively.

According to the FSS, this 10th advance notification covered 546 companies under periodic designation and 715 companies under discretionary designation, totaling 1,261 companies. This represents a decrease of 237 companies compared to the 10th advance notification last year (1,498 companies).

The auditor designation system was introduced with the enforcement of the new External Audit Act in 2019. This system aims to secure auditor independence and improve quality by having financial authorities directly classify and designate companies and auditors, instead of companies freely appointing auditors.

In this notification, 546 companies were subject to periodic designation. Among them, 166 listed companies and 17 unlisted companies were newly designated. The periodic designation system is a system where the authorities designate auditors for the next three fiscal years for listed companies with continuous six fiscal years of freely appointed auditors (excluding KONEX) and unlisted companies where ownership and management are not separated.

For discretionary designation, 715 companies received advance notifications. Discretionary designation is a system where external auditors are designated when reasons arise requiring fair audits to protect investors based on supervisory results. This year, 352 companies were newly designated due to reasons such as planned listing (202 companies) and financial criteria including three consecutive years of operating losses (74 companies).

The FSS evaluated that the number of designated companies decreased due to the application of the revised external audit regulations, which raised the asset threshold for large unlisted companies from 100 billion KRW to 500 billion KRW and rationalized the financial criteria for discretionary designation.

After the advance notification, the FSS will receive opinions from companies and auditors, including requests for redesignation, for two weeks and review them before issuing the official notification on July 13. However, considering difficulties in negotiating designation fees, the deadline may be flexibly extended within a range that does not interfere with audit work.

The FSS stated, “We will actively respond to reports of unfair practices by companies, such as excessive demands for designated audit fees, through the Designated Auditor Unfair Practices Reporting Center,” and added, “If a designated auditor refuses to cooperate in adjustments without reasonable grounds after a report of unfair practices, the auditor designation will be canceled as a priority.”

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