Hangonghoe "Private Consignment Project Expense Audit, Accountant's Exclusive Duty" Regret Over Supreme Court Ruling

After the Supreme Court ruled that the Seoul Metropolitan Council's amendment of the ordinance allowing tax accountants and tax firms, in addition to certified public accountants, to conduct project expense settlement audits for privately commissioned tasks was lawful, the Korean Institute of Certified Public Accountants (KICPA) expressed regret.

On the 29th, KICPA released a statement regarding the "Supreme Court ruling on the Seoul Metropolitan Government ordinance concerning private commission of administrative affairs," stating, "We express regret and deep concern that the dismissal of the plaintiff's claim in the lawsuit seeking invalidation of the re-adoption of the ordinance may significantly set back accounting transparency in the nonprofit sector."

This case concerns the Supreme Court's ruling on the Seoul Metropolitan Council's ordinance, re-adopted in April 2022, which changed the name of the accounting audit for private commission task entrusted institutions?previously performed only by certified public accountants (accounting firms)?to "project expense settlement inspection" and allowed tax accountants (tax firms) to perform it as well.

During the trial, the plaintiff (the Mayor of Seoul) argued, "Even if the name of the task is changed to 'project expense settlement inspection,' the nature and essence of the task correspond to 'audit and verification related to accounting,' which only certified public accountants (accounting firms) can perform," and the Financial Services Commission also stated through an authoritative interpretation that "it is a consistent position that this violates the higher-level Certified Public Accountants Act."

According to KICPA, the original ordinance introduced the "project expense accounting audit (settlement audit)" system in 2014 to strengthen financial control over privately commissioned tasks involving nearly 1 trillion won of citizens' taxes annually, to prevent the possibility of improper expenditure of project funds, and to enhance fairness and financial efficiency in project execution. From the outset, it was clearly defined as an "audit and verification related to accounting" task.

However, the Supreme Court did not regard the ordinance's "project expense settlement inspection" as "audit and verification related to accounting." KICPA pointed out that this is because the ordinance intends not only to change the name of the task but also to newly define the task content as the inspection of local government settlement statements under Article 150 of the Local Autonomy Act, which tax accountants and others can also perform.

KICPA expressed concern that if the Seoul Metropolitan Government's amended ordinance is implemented, it could dampen and reverse the efforts made by the government and local governments to strengthen accounting transparency in the nonprofit sector, which has been steadily working to manage fraudulent receipt of subsidies and private commission project expenses to ensure more transparent use of taxpayers' money.

Accordingly, KICPA announced plans to actively respond through various means, including citizen petitions, to restore the Seoul ordinance to its original state and re-secure accounting transparency for privately commissioned tasks.

Furthermore, KICPA added that it will simultaneously promote legal amendments to mandate external audits for settlement statements of entrusted institutions handling privately commissioned tasks involving local government budgets above a certain scale.

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