Financial Supervisory Service Governor Lee Chan-jin met with accounting firm chief executive officers (CEOs) and urged them to establish audit practices that prioritize quality over excessive competition focused on fees.
On the 14th, at The Korean Institute of Certified Public Accountants in Seodaemun-gu, Seoul, Lee attended the "accounting firm CEO roundtable" and said, "We will improve the system so that accounting firms with excellent audit quality have an advantage in auditor appointments, and we will provide institutional support by differentiating inspection cycles according to the level of quality control."
The FSS, together with the Financial Services Commission, is operating a "task force to revamp the auditor designation method" and is overhauling the criteria and method for appointing auditors from personnel and size to a focus on audit quality and industry expertise. Starting this year, a plan to differentiate the existing auditor inspection cycle by reflecting the auditor's quality control level and size has been implemented.
Lee said, "I believe the true competitiveness of accounting firms is secured through 'long-term trust' based on audit quality rather than short-term profits," adding, "Excessive competition focused on fees leads to a reduction in audit personnel and hours, resulting in harm to audit quality."
Regarding the governance of accounting firms, Lee also emphasized introducing a management oversight body to ensure soundness.
Lee said, "I hope you will establish transparent governance, such as forming an effective management oversight body that can make audit quality-centered decisions," adding, "The FSS will expand disclosures related to accounting firm governance and broaden the disclosure scope of corporations' non-audit services to include network accounting firms."
Lee added, "A record-high penalty surcharge of 42.1 billion won related to accounting fraud was imposed last year," noting, "This is a warning sign that intentional or serious accounting violations have increased."
Attendees at the roundtable that day expressed their willingness to invest in improving audit quality, while also asking the FSS for institutional improvements such as rationalizing auditor designation and supporting digital audits.