The Financial Supervisory Service said on the 26th that it held its first roundtable with internal audit bodies—such as audit committees and auditors—at nine listed companies.
The roundtable, held at the Korea Listed Companies Association hall in Mapo-gu, Seoul, was arranged to discuss the role of internal audit bodies in enhancing the transparency and reliability of the capital market and to hear recommendations. Participants included Yoon Jeong-suk, a senior deliberation member at the Financial Supervisory Service; Kim Eun-sun, head of the Accounting Supervision Department; Kang Kyung-jin, head of Policy Division 2 at the Korea Listed Companies Association; and Jin Seong-hun, head of the Research and Policy Group at the KOSDAQ Association.
Senior deliberation member Yoon assessed that since the implementation of the new External Audit Act introduced in 2018, the role of internal audit bodies has been strengthened, establishing them as the substantive actors in securing accounting transparency.
Yoon asked internal audit bodies to function as a core pillar of internal controls to prevent accounting fraud and fund misappropriation, including: ▲ selecting external auditors based on audit quality ▲ collaborating organically with external auditors ▲ rigorously overseeing internal control systems ▲ ensuring independence and a high level of expertise ▲ responding strictly when signs of accounting fraud are detected.
The Financial Supervisory Service (FSS) noted that, after selecting an external auditor, companies should examine the actual hours invested during the audit process and rigorously evaluate whether the agreed audit plan, hours, and staffing at the time of appointment are being implemented, and that they should work to prevent accounting fraud by holding meetings at least once per quarter without management present.
It also emphasized that internal audit bodies should establish a dedicated support organization and secure evaluation authority, consent rights over appointments and dismissals, and a direct reporting line to create conditions for the effective operation of internal audit functions. In addition, it said internal audit bodies are obligated to oversee every stage of investigations and, depending on the degree of breach of the duty of care, may bear responsibility, calling for a strong response to accounting fraud.
Participants at the roundtable said they would work to operate the company's internal control and governance systems effectively so that "substantive oversight," not "formal compliance," can be achieved. They also offered suggestions, including strengthening communication and information accessibility of internal audit bodies with the company and auditors, and expanding training to enhance internal audit expertise.
An official at the Financial Supervisory Service (FSS) said, "We plan to actively support internal audit bodies at the institutional and practical levels so they can function as the 'first line of defense' against accounting fraud, and we will continue to communicate with various stakeholders."