Auditor Appointment Rules Violated by 264 Korean Firms, Says FSS
Another common issue was the failing to obtain approval from the audit committee or auditor appointment committee before appointing auditors
Financial Supervisory Service – FSS – Auditor Appointment Rules Violation – Korean Firms Rules Voilation case – Taxscan
Financial Supervisory Service – FSS – Auditor Appointment Rules Violation – Korean Firms Rules Voilation case – Taxscan
Between January and October 2024, South Korea saw a sharp rise in violations related to external auditor appointments, with 264 corporations flagged for non-compliance. This is a huge increase from the 122 cases reported during the same period last year.
The Financial Supervisory Service ( FSS ) disclosed these figures on November 11, urging companies to strictly follow appointment procedures based on their listing status and asset size, reported Chosun Biz En.
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One of the most common violations involved failing to meet deadlines for appointing external auditors. The FSS outlined three important timelines:
- Companies undergoing their first audit must appoint an auditor within four months of the fiscal year’s start.
- Corporations under the External Audit Act must appoint auditors within 45 days of the fiscal year’s start.
- Entities required to establish audit committees must appoint auditors before the fiscal year begins.
Another common issue was the failure to report auditor appointments to the FSS. While companies that retain the same auditor are exempt, listed firms, large unlisted corporations, and financial institutions must report all appointments, even if no changes are made.
Other Irregularities
The FSS also flagged several other violations, including:
- Listed and large unlisted companies signing one-year audit contracts instead of mandatory three-year agreements.
- Appointing auditors from unregistered accounting firms after listing.
- Failing to obtain approval from the audit committee or auditor appointment committee before appointing auditors.
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The FSS announced plans to improve the awareness of auditor appointment rules. It intends to distribute detailed guidelines through organizations like the Listed Companies Association, KOSDAQ Association, and Korea Federation of Small and Medium Enterprises.
Additionally, the FSS will hold regional briefings and provide online and telephone consultations to help companies comply with the regulations, reported the Korean Business news entity Chosun.
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