As of September this year, 290 companies had auditors assigned due to violations related to the appointment of external auditors. That is 93.5% of the total violators last year (310 companies).
The Financial Supervisory Service on the 27th urged companies to check and comply with the appointment procedures for external auditors under the Act on External Audit, which vary depending on whether the company is listed and the size of its assets. If a company violates legal requirements such as the appointment deadline or the selection procedures of the auditor appointment committee, an auditor will be designated.
First, companies subject to external audit under the law are those with total assets of at least 50 billion won and sales of at least 50 billion won. In addition, joint-stock companies that meet at least two of the following are also subject to external audit: ▲ assets of at least 12 billion won ▲ liabilities of at least 7 billion won ▲ sales of at least 10 billion won ▲ at least 100 employees.
Generally, a company must appoint an external auditor within 45 days from the start date of its fiscal year. For companies required to have an audit committee, the deadline is before the start of the fiscal year. An auditor may be appointed for a one-fiscal-year unit, but listed companies, large unlisted companies, and financial companies must appoint the same auditor for three consecutive fiscal years.
A company may appoint an accounting firm or an audit team as the auditor, but large unlisted companies and financial companies may appoint only an accounting firm. In particular, listed companies may appoint an auditor only from among accounting firms registered as auditors for listed companies with the Financial Services Commission (currently 39).
In companies with an audit committee, the audit committee selects the auditor, and in listed companies, large unlisted companies, and financial companies without an audit committee, the auditor must be selected by the statutory auditor with the approval of the auditor appointment committee.
For other unlisted companies, the statutory auditor selects the auditor; however, if the law allows a company not to have a statutory auditor, the company may select one. A limited liability company without a statutory auditor and with capital of at least 1 billion won requires approval by the general meeting of members.
A company must report the appointment of the auditor to the Financial Supervisory Service (FSS) within two weeks from the date of the audit contract. If the auditor has not been changed, this may be omitted. When a listed company, a large unlisted company, or a financial company appoints an auditor with approval from the audit committee or the auditor appointment committee, it must report each time it appoints an auditor regardless of whether the auditor has changed.
The Financial Supervisory Service (FSS) said it would convey points to note to each member company through related organizations, including the Korea Listed Companies Association, the KOSDAQ Association, the KONEX Association, the Korea Federation of Small and Medium Enterprises, and The Korean Institute of Certified Public Accountants, and hold a traveling briefing session in January next year for companies located in provincial areas that have relatively fewer training opportunities. It also plans to provide guidance through Q&A on the FSS website and by phone consultation.