The Financial Supervisory Service has begun improving regulations to prevent obstruction of accounting audits or the submission of false documents. Procedures have been established to provide a list of obtained documents to guarantee corporations' rights of defense during on-site investigations. However, penalties will be strengthened for those who deliberately obstruct on-site investigations or submit false documents.
The FSS announced on the 3rd that it has revised the "regulations on external audits and accounting, etc." which includes such details.
The FSS created this amendment by reflecting the measures and standards discussed in the comprehensive quality improvement task force for accounting, external audit regulations, and others. This is a measure to guarantee the company's right of defense during on-site investigations while increasing the predictability of penalties for obstruction or sanctions.
First, it clearly stated rights protection and judgment criteria for obstruction of audits so that companies can easily understand their rights and obligations related to on-site investigations. Accordingly, audit execution agencies must provide companies with a list of documents and statements obtained during on-site investigations. In addition, if companies request to involve a representative in the on-site investigation process, this should generally be accepted. It also specified that refusing to cooperate in an on-site investigation or blocking entry is considered obstruction of the audit.
Acts of intentionally submitting false documents by companies have been designated as "aggravating circumstances." Since the examination of financial statements is conducted with the cooperation of corporations, it's challenging to verify the authenticity of the submitted documents, prompting the establishment of aggravated punishment provisions.
Additionally, requiring representative preparation of financial statements has been defined as an "act of violating independence obligations," and standards for discretion have been established. The amendment to external audit regulations that reduces penalties for corporations that received awards for value enhancement if punished in external audits will also be reflected. However, intentional accounting fraud is excluded from the reduction criteria.
The review period for registered auditors of listed corporations to conduct self-assessments has been adjusted so they can do so after completing the post-review of audit reports. If the post-review for the audit report issued in the business year subject to examination is not completed, the post-review can be conducted based on the audit report issued in the previous business year.
The FSS stated, "This amendment took effect on the 31st of last month, except for adjusting the auditors' self-assessment period," adding, "Specific amendment details will be announced through the Korea Listed Companies Association, the KOSDAQ Association, and The Korean Institute of Certified Public Accountants."