The Financial Supervisory Service said on the 14th it will immediately launch an inspection if the risk of deficient audits grows due to undercutting of audit fees stemming from overheated competition among accounting firms for engagements.
On the 10th, under the chair of Commissioner Yoon Jeong-suk, the Financial Supervisory Service (FSS) held a roundtable with heads of the audit institutional sector at 12 large accounting firms with 200 or more certified public accountants and discussed measures to manage audit quality.
The meeting aimed to prevent overheated competition for engagements from leading to deteriorating audit quality and overwork for accountants, as average audit fees fell from 2.65 million won in 2023 to 2.46 million won this year following the introduction of the new External Audit Act.
Commissioner Yoon noted that if audit fees become excessively low, the personnel and time投入 shrink and can result in deficient audits. If audit hours drop sharply without reasonable grounds, the position is to immediately begin auditor inspections and financial statement reviews and inspections. However, for firms with excellent audit quality, the designation system will also be improved by expanding auditor designations.
Views diverged between authorities and the industry over adopting AI technology. Commissioner Yoon emphasized actively using AI technology to boost efficiency and strengthening information security accordingly. Industry participants, however, took a cautious stance, saying that even if AI technology is adopted, the final verification stage could require more personnel and time, and that further validation is needed on whether expense savings can offset the recent decline in audit fees and the burden of development costs.
Meanwhile, the FSS also set a goal of sharply shortening the review and inspection cycles to 10 years for KOSPI and five years for KOSDAQ to enhance capital market transparency. It plans to consult with the Financial Services Commission on expanding staff and advancing inspection tools to that end. On the 24th, it will hold a research seminar to improve the review and inspection system.
Earlier, in Nov. last year and Mar. this year, a 30-something accountant at a large accounting firm died in succession, raising suspicions of death from overwork. Inside the firm, some argued that long working hours coinciding with audit season were the cause of death. (☞ [Exclusive] Two accountants died at Samjong KPMG within three months… claims of overwork)
In response, the Ministry of Employment and Labor (MOEL) launched a planned labor inspection of the firm. The Korean Institute of Certified Public Accountants also began discussing the issue of work intensity. Some accounting firms were reported to have begun reviewing their internal work systems and taking steps to improve them.