The Seoul City Council restored the local government ordinance to prevent accountants from handling the accounting audits of private consignment businesses, and the accounting industry expressed support.
The Korea Institute of Certified Public Accountants noted on the 10th that it welcomed the approval of the partial amendment to the local government ordinance on the private consignment of administrative services in Seoul, which was passed at the Seoul City Council plenary meeting on the 7th, as a responsible decision for ensuring accounting transparency and fairness.
The purpose of this ordinance is to require 'strict accounting audits' rather than 'simple inspections' for business expenses amounting to 1 trillion won that the city of Seoul has consigned to private entities annually. Previously, in 2014, the city implemented an accounting audit system to block the possibility of improper expenditure of project costs for private consignment matters and to enhance the fairness of project execution and financial efficiency.
However, in April 2022, the 10th Seoul City Council amended the ordinance to change the accounting audit to an inspection of the settlement of accounts to reduce the burden on entrusted organizations through an expansion of the scope of work execution experts, allowing accountants to also perform the inspections. In response, the mayor of Seoul filed a lawsuit with the Supreme Court to confirm the ordinance's invalidity due to violations of the Certified Public Accountant Act.
The Supreme Court dismissed the case in October 2024, ruling that ▲ there is no obligation for accounting audits for management and supervision of private consignment matters under the Local Self-Government Act, thus acknowledging the discretion of local councils to choose between strict accounting audits and simple inspections, and ▲ the inspection of the settlement of accounts in the ordinance amended by the Seoul City Council in April 2022 was aimed at easing to a simple inspection that can be performed by accountants, not just in terms of the name of the work but also its content.
Following the Supreme Court ruling, concerns have been continually raised from academia and the accounting industry that if the existing level of accounting verification for private consignment matters, which involves a massive amount of taxpayer money, is relaxed to a simple level, the transparency and trustworthiness of public finances could be seriously compromised.
In response, the Planning and Economy Committee of the Seoul City Council passed a bill in December 2024 to strengthen post-verification procedures for the use of private consignment project funds to ensure transparency, requiring strict accounting audits as before with the agreement of both parties. This bill was passed at the plenary meeting on the 7th, with 37 votes in favor, 2 against, and 23 abstentions out of 62 members present.
A representative of the Korea Institute of Certified Public Accountants said, "We will actively cooperate with government and local governments' policies to strengthen transparency in the public and non-profit sectors and ensure that taxpayers' money is used properly."