The Securities and Futures Commission Strengthens Financial Statement Review for IPO Companies

"Review and Audit Scope Expanded from 1 Trillion Won in Assets to 500 Billion Won and Above"

Financial statement reviews for companies preparing to go public are set to be strengthened. This is a follow-up measure in response to cases where suspicions about companies' financial conditions have arisen due to sharp stock price declines immediately after listing.

On the 26th, the Financial Services Commission's Securities and Futures Commission announced at its 6th regular meeting that, together with the Financial Supervisory Service and the Korean Institute of Certified Public Accountants, it has finalized the 2025 financial statement review and audit operation plan and decided to strengthen financial statement reviews for companies planning to go public.

Companies are subject to the Korean Generally Accepted Accounting Principles (K-GAAP) until they list on the stock market. However, after listing, they are required to apply International Financial Reporting Standards (IFRS), thereby increasing the responsibility to ensure accounting transparency. As a result, supervisory agencies conduct strict financial statement reviews and audits during the listing preparation and review process to protect investors.

First, the Korean Institute of Certified Public Accountants decided to improve the existing sample selection method, which was based mainly on asset size, by adding "risk of accounting fraud" as a new criterion to enhance the effectiveness of financial statement reviews. Additionally, the Financial Supervisory Service will expand the scope of financial statement reviews and audits from companies with assets of 1 trillion won or more to those with assets of 500 billion won or more.

Previously, the Financial Supervisory Service conducted financial statement reviews and audits only for companies planning to list with assets of 1 trillion won or more. However, as the Korean Institute of Certified Public Accountants increases the number of reviews due to strengthened sample selection criteria, the review scope has been expanded.

The Securities and Futures Commission stated, "With the Korean Institute of Certified Public Accountants strengthening the criteria for selecting financial statement review targets and the Financial Supervisory Service accumulating experience and capabilities in reviewing financial statements of listed companies applying IFRS, strict investor protection is expected to be possible."

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