FSS to Review Financial Statements of 170 Companies and Inspect 10 Accounting Firms This Year

This Year’s FSS Accounting Review and Inspection Plan

Four Thematic Issues to Be Promptly Reviewed

The Financial Supervisory Service (FSS) will conduct reviews and inspections this year on 170 companies, including listed firms, and 10 accounting firms. The FSS will focus on companies with signs of being marginal firms or high risks of accounting fraud, such as those investing less time in audits, and will diversify measures taken against accounting firms to enhance audit quality.

On March 29, the FSS announced the "2026 Financial Supervisory Service Accounting Review and Inspection Work Plan," which details these measures. The number of companies selected for financial statement reviews and inspections this year is 170, up by 10 from last year, while the number of accounting firms remains at 10, the same as the previous year.

The 170 companies subject to review and inspection include listed companies, unlisted financial institutions, and corporations required to submit business reports. Minor violations will be quickly resolved through cautionary or warning measures issued by the governor of the FSS, while resources will be concentrated on cases of high economic or social significance. Key reasons for sample reviews include major accounting issues, signs of marginal firms, pending listings, and companies not reviewed for more than 10 years. Companies found to have accounting errors, reports of accounting fraud, or suspected violations detected during other supervisory work will be subject to suspicion-based reviews.

Audit supervision for the 10 accounting firms will be conducted by group: one firm in Group A, four in Group B, and five in Group C, with inspections lasting from three to seven weeks depending on the group. The FSS will notify the firms in advance of the inspection schedule after selecting the firms to be reviewed. The FSS also plans to intensively check vulnerable areas identified in previous inspections of accounting firms. In joint inspections with the Public Company Accounting Oversight Board (PCAOB) of the United States and domestic accounting firms, the FSS will maintain a cooperative framework.

This year, the FSS set the following as the basic directions for accounting reviews and inspections: ▲ Supporting a major leap in the capital market through zero tolerance for accounting fraud ▲ Enhancing the reliability of accounting supervision through process advancement ▲ Strengthening the supervision and inspection of auditors to improve audit quality. This year’s thematic review accounting issues include investor agreements, issuance and investment in convertible bonds, disclosure of supplier financial agreements, and impairment of investments in subsidiaries and affiliates.

The FSS will focus on companies with signs of being marginal firms or high risks of accounting fraud, such as those investing less audit time, to induce the prompt delisting of insolvent KOSDAQ companies. The review and inspection cycle for KOSPI200 companies will be shortened from 20 years to 10 years, and penalties will be strengthened, such as prohibiting those responsible for accounting fraud from being appointed as executives of listed companies.

The scope of internal accounting control system inspections will be expanded to include companies with assets between 100 billion and 500 billion won based on the 2025 financial statements, and the FSS will strengthen corporate guidance and reflect market opinions. Throughout the entire review and inspection process, the FSS plans to establish a smart inspection system through a new accounting supervision system.

For accounting firms, in addition to existing measures such as registration cancellation and exclusion points, new measures such as work suspension, warnings, and cautions will be introduced. This is to strictly sanction those responsible for neglecting audit quality. The FSS will make it mandatory to establish management oversight bodies within major accounting firms to enhance audit quality, and will release the results of quality management evaluations of accounting firms to further strengthen related capabilities.

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