KT&G, KB Financial Group, and Hyundai Motor Securities Granted Three-Year Deferral of Mandatory Auditor Designation

Financial Services Commission Selects Companies with Excellent Accounting and Audit Governance

KT&G, KB Financial Group, and Hyundai Motor Securities have been designated as companies with excellent accounting and audit governance, allowing them to defer the mandatory periodic auditor designation for three years.

According to the Financial Services Commission on September 10, the Securities and Futures Commission approved this measure at its 16th meeting held on the same day. The periodic auditor designation system requires listed companies and similar entities to freely appoint external auditors for six consecutive years, after which financial authorities designate the auditor for the following three years. However, companies with excellent governance may autonomously appoint auditors for nine years.

Previously, in December of last year, the Financial Services Commission and the Financial Supervisory Service announced the "Deferral Plan for Periodic Auditor Designation for Companies with Excellent Accounting and Audit Governance," which allows a three-year deferral for such companies. In June, applications were accepted from companies, and starting in July, an evaluation committee of seven private experts conducted the assessment process. As a result, it was determined that KT&G, KB Financial Group, and Hyundai Motor Securities all met the selection criteria for excellent companies, scoring at least 800 points.

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First, KT&G received high marks for operating a dedicated audit committee support organization with 23 members, placing it in the top 5% in terms of size and expertise. The audit committee also exercises authority over the evaluation and appointment of internal audit department heads, receiving particularly high evaluations in the "effectiveness of accounting and audit systems" category. Additional points were awarded for achievements such as receiving an A+ governance rating from the ESG Standards Institute in 2023, the Value-Up Excellence Award (2025 Financial Services Commission Chairman's Award), and a government commendation on Accounting Day (Prime Minister's Commendation to an employee in 2023).

KB Financial Group was found to have established accounting and audit governance that exceeds legal requirements, such as separately electing two audit committee members and operating a dedicated support organization. The audit committee also exercises authority over the evaluation and appointment of internal audit department heads and actively communicates with external auditors without management involvement. As a result, the company received high evaluations in the areas of "independence of audit functions," "expertise of the audit body," and "efforts to enhance accounting transparency." KB Financial Group has also received an A+ governance rating from the ESG Standards Institute (2022-2023) and the Value-Up Excellence Award (2025 Deputy Prime Minister and Minister of Economy and Finance's Award).

Finally, Hyundai Motor Securities was recognized not only for its proactive compliance with accounting and audit governance regulations but also for having the most experienced staff among the evaluated companies, with the average tenure of its accounting and audit support organization members exceeding 240 months (20 years). The company also received high marks for strengthening internal controls and advancing its accounting systems through the construction of a next-generation ledger system that integrates enterprise systems and enhances data connectivity and management. All areas, including "independence of audit functions," "expertise of the audit body," and "efforts to enhance accounting transparency," were rated as excellent.

A Financial Services Commission official stated, "All three companies have well-established support organizations to enable their audit committees to operate effectively, and the audit committees are structured and operated to appoint high-quality auditors without company interference, with appropriate standards for work execution. It was also confirmed that there is a strong willingness to further improve the transparency of the auditor appointment process."

As a result, these three companies will have the periodic auditor designation deferred for the next three fiscal years. Since the first scheduled periodic designation after selection is deferred for three years, the period for autonomous auditor appointment is extended to nine years. The timing of the periodic designation differs by company: for KB Financial Group and Hyundai Motor Securities, it will be the 2029 fiscal year, while for KT&G, it will be the 2028 fiscal year.

However, from the evaluation reference date of June 1 until the end of the deferral period, there must be no grounds for cancellation of the deferral, such as accounting fraud. In addition, the companies must report their compliance with the deferral requirements to the Financial Supervisory Service during this period.

The financial authorities expect that this periodic designation deferral system will not only encourage companies to voluntarily improve their accounting and audit governance, but also ultimately enhance accounting transparency and advance the capital market in Korea.

Previously, the financial authorities decided to operate the periodic designation system for all listed companies until at least 2028, when each company will have been designated at least once, and to review the system from scratch, including its performance and the need for its continuation or improvement. Accordingly, the deferral system will be operated first from 2025 to 2027, prior to the comprehensive review. Depending on the outcome, legal and institutional improvements will be pursued in 2028.

A Financial Services Commission official said, "We will comprehensively consider shortcomings identified during this evaluation process and recent changes in governance-related systems to improve and supplement the current evaluation criteria, and will continue to provide full support so that companies wishing to apply next year can prepare smoothly."

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