The Financial Supervisory Service will offer a prior briefing for listed companies and accounting firms ahead of submitting the basic materials for auditor designation. Because an auditor can be designated ex officio if the foundational materials for designation are not properly submitted, the aim is to raise corporations' understanding of the system.
On the 28th, the Financial Supervisory Service said it will hold an "online briefing on the auditor designation system" with related bodies 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.
Under the Act on External Audit, listed companies and large unlisted companies without separation of ownership and management, which are subject to periodic designation, must submit the basic materials for auditor designation every year. For companies with a December settlement of account, this year's submission period for the basic materials is from the 1st to the 15th of next month. Accounting firms must submit their materials from the 31st of this month to the 14th of next month. If this is violated, an auditor may be designated ex officio.
The auditor designation system consists of periodic designation and ex officio designation. Periodic designation is a system in which the financial authorities designate the auditors for the following three fiscal years for companies that freely appointed auditors for six fiscal years. Among companies with a December settlement of account this year, about 2,700 are subject to submitting the basic materials for designation.
By contrast, ex officio designation is a system in which the Financial Supervisory Service (FSS) designates an auditor when specific reasons arise at a company. When reasons prescribed by law occur—such as financial criteria, designation as an issue-management stock, or problems with the audit opinion—an auditor is designated ex officio.
At this briefing, the FSS will guide attendees on how to prepare the basic materials for designation. Companies must fill in the status of auditor appointments over the past six years, whether ownership and management are not separated, and whether an industry-specialized designated auditor is needed. Accounting firms must submit the number of affiliated certified public accountants, the number of personnel in charge of quality control, and their capacity for damages compensation.
It will also explain the grounds for auditor designation such as periodic and ex officio designations, the designation period, designation methods, and requests for reassignment. It will cover the recently introduced deferral for periodic designation, how to handle grounds for ex officio designation that arise during the designation period, and the option to extend the designation period.
The FSS plans to continue improving corporations' and accounting firms' understanding of the external audit system through online and offline briefings and to respond quickly to inquiries that arise during the preparation of the basic materials for designation.