In an inspection of internal accounting control systems at listed companies and large unlisted firms, a total of 14 legal violations were uncovered last year. Although the number of violations has decreased from the past, officials noted that cases of violations due to a misunderstanding of who is subject to the system and its obligations continue.
Listed companies and unlisted firms with total asset of 500 billion won or more on a separate basis in the previous fiscal year must establish an internal accounting control system. However, companies required to file business reports, entities belonging to business groups subject to disclosure, and financial companies must establish the system if their total asset is 100 billion won or more.
The Financial Supervisory Service said on Dec. 24 that it found a total of 14 violations, including by companies, chief executive officers, and external auditors, after reviewing the operation of internal accounting control systems for the 2024 fiscal year. By type, there were four cases of failure to establish an internal accounting control system, six cases of failure by chief executive officers and others to report on operational status and evaluations, and four cases of external auditors failing to express a review opinion related to internal accounting.
Among these, the Securities and Futures Commission imposed fines ranging from 3 million won to 8.4 million won in seven cases, including four involving chief executive officers and three involving external auditors. Under the Act on External Audit of Stock Companies, violations of obligations related to internal accounting control systems can result in fines of up to 30 million won on the company, the chief executive officer, auditors, and external auditors.
The number of violations is trending down. The annual average number of violations over the past five years (2019–2023) was about 27, but last year it fell to 14, roughly half. Still, financial authorities noted that some violations remain due to companies' management difficulties or misunderstandings of laws related to internal accounting control systems.
Typical cases included not recognizing the obligation to establish an internal accounting control system in the first year of listing, or failing to put the system in place due to misjudging the asset criteria despite being an unlisted company required to file a business report. In some cases, even if the operational status of internal accounting was reported, it was deemed unreported because relevant records were not left in the minutes of the general shareholders' meeting or the board of directors.
Financial authorities also emphasized that sanctions may be heightened if deficiencies in internal accounting control systems are linked to violations of accounting standards. If, as a result of financial statement inspections, the cause of an accounting violation is determined to be a material weakness in the internal accounting control system, the level of sanctions may rise by one step.
Meanwhile, from the 2025 fiscal year, the standards for evaluating and reporting internal accounting control systems become mandatory. Listed companies and large unlisted firms must newly disclose in their operational status reports the control activities designed to prevent and detect cash irregularities such as embezzlement.
The Financial Supervisory Service said, "Violations stemming from a failure to fully understand laws related to internal accounting control systems are recurring," and added, "We will continue to promote the system's effective settlement through inspections and reviews after financial statement disclosures."