The number of corporations that failed to meet the requirement to file pre-audit financial statements jumped sharply in a year. In particular, violations by listed companies roughly doubled from the prior year.
The Financial Supervisory Service on Dec. 3 announced the "2024 fiscal year pre-audit financial statement review results and guidance on key points," saying a total of 76 violations were tallied. That is 24 more than a year earlier, up about 46%.
Pre-audit financial statements are those that corporations prepare on their own before undergoing an external audit and file with the Securities and Futures Commission. The system was introduced to clarify a company's responsibility for preparing its financial statements and to enhance the reliability of external audits.
By type of violation, late filings past the statutory deadline were the most common at 39. Cases that omitted some financial statements totaled 29, and eight cases were deemed not filed at all.
The rise in violations by listed companies was notable. Violations by stock-listed corporations came to 33, up 16 from 17 the previous year. Unlisted corporations also increased to 43 from 35 over the same period.
Listed companies that fail to submit pre-audit financial statements by the deadline must disclose the reason on the Financial Supervisory Service's Data Analysis, Retrieval and Transfer System (DART) by the following day. However, among the 33 listed companies that violated the rule in the 2024 fiscal year, 29 also failed to make this reason disclosure.
The Financial Supervisory Service (FSS) designated auditors for nine corporations among the violators. One was designated for three years, one for two years, and seven for one year. The remaining corporations received 29 warnings and 38 cautions. Listed companies that also failed to file the reason disclosure were ordered to submit a letter pledging faithful compliance with external audit regulations.
The Financial Supervisory Service (FSS) said, "We found that many of these violations stemmed from the person in charge not being familiar with the relevant regulations or misapprehending the facts."
It added, "Stock-listed corporations, financial companies, and unlisted corporations with total assets of 500 billion won or more in the immediately preceding business year must submit pre-audit financial statements," and emphasized, "In particular, all financial companies are obligated to submit regardless of listing status or size."
It also noted, "Submit to the SFC all financial statements provided to the auditor, including notes, and parent companies must also submit consolidated financial statements."
The Financial Supervisory Service (FSS) advised companies to reconfirm whether any financial statements were omitted and to recheck statutory deadlines during the pre-audit filing process, and to reassess the filing deadline if the regular shareholders meeting schedule changes. Among public institutions, stock-listed corporations are also subject to the External Audit Act and therefore must file.