This article was published on Jan. 6, 2025, at 3:44 p.m. on the CHOSUNBIZ Money Move (MM) site.
The four major accounting firms in Korea have wrapped up the competition for external auditor contracts, which featured many 'big catches' this year. Kia, with assets totaling 87 trillion won, and Hana Financial Group, which approached 10 billion won in audit fees, were both acquired by Ernst & Young Han Young. As the number of freely appointed corporations is expected to increase next year, forecasts suggest that the rankings among these accounting firms may shift based on the bidding results.
According to the accounting industry on the 6th, more than 30 corporations with assets exceeding 2 trillion won that entered the freely appointed market this year were designated auditors in the 2022 business year. This marks the third round of freely appointed contracts since the introduction of the new external audit law in 2019, with competition among the four major accounting firms being particularly fierce this year. Last year, there were only six corporations with assets over 2 trillion won eligible for free appointment, but this year that number has more than tripled.
The most notable player in this bidding war was Han Young. Han Young successfully acquired Kia and Hana Financial Group, both considered 'big catches,' from their respective previous auditors, Samjong and Anjin. Additionally, they took on ▲SK Gas ▲SK Discovery ▲Daesang Group ▲CJ Logistics, among others.
Samjong lost Kia but, conversely, secured Hyundai Mobis, which has assets worth around 62 trillion won, previously assigned to Han Young. They also acquired leading companies in the KOSPI market, such as Naver (NAVER), which is within the top 10 by market capitalization, and telecommunications giant SK Telecom. Anjin obtained Samsung Securities and Kakao Bank in the financial sector, while Samil secured Samsung C&T and Amorepacific Corporation.
According to the new external audit law, corporations designated by financial authorities for auditors for three years can freely appoint auditors for the next six years. Unlike designated corporations, where the government assigns accounting firms, the freely appointed system involves competition among accounting firms to earn the clients' choice. The competition among large accounting firms is intensifying.
The industry anticipates that the results of the audit firm competition for free appointment will impact the industry's rankings. The proportion of audit income within the overall revenue of accounting firms is about 30-40%. For example, Samjong's recent ability to maintain its position as the second-largest firm in the industry was significantly influenced by securing audits for Samsung Electronics, which became available for free appointment two years ago. Prior to the introduction of the new external audit law, Samil PricewaterhouseCoopers had virtually monopolized the auditing of Samsung Group, including Samsung Electronics. With over 100 corporations with assets exceeding 2 trillion won expected to become eligible for free appointment next year, competition is anticipated to become even fiercer.
An industry representative noted, "There was significant internal tension between departments regarding the bid for auditor contracts and transaction advisory services to ensure there would be no conflict of interest." However, they added, "Although there were manpower shortages at the beginning of the designated auditor system, there are now many idle workforce due to the recent industry slump, leading to a heightened atmosphere of competition in the freely appointed market."