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Biz News Korea(Eng)
Over 50% of firms in Korea to be required to appoint external auditors selected by the govt starting 2019
- Collected
- 2017.01.22
- Distributed
- 2017.01.23
- Source
- Go Direct
More than half of the companies on the markets in Korea will be subject to tighter auditing regulations starting 2019, as the financial authority has decided to increase the number of companies which will be restricted from appointing external auditors.
Such decision came to prevent accounting firms from cooking the books as in the case of Daewoo Shinbuilding and Marine Engineering Co. found to have covered up its losses which undermined the local industry and the overall economy.
According to the guideline released by the Financial Services Commission (FSC) Friday, the Securities and Futures Commission will appoint external auditors for up to 10 percent of the listed firms in Korea starting 2019. Another 40 percent – companies that are subsidiaries of conglomerates with assets over 5 trillion won ($4.25 billion), financial organizations, firms whose ownership and management is not separate and firms whose major shareholders change frequently – will also be required to replace existing auditors with those recommended by the regulator after six years. This means over 50 percent of firms in Korea will be given auditing service by external auditors selected by the government.
Moreover, reward for whistleblowers who report accounting frauds will be upped from current 100 million to 1 billion. Punitive measures for firms and accounting firms found to have indulged in window dressing will also be toughened. Fine limit will be uncapped and current imprisonment period set at 5 – 7 years will be increased to 10 years.
Such decision came to prevent accounting firms from cooking the books as in the case of Daewoo Shinbuilding and Marine Engineering Co. found to have covered up its losses which undermined the local industry and the overall economy.
According to the guideline released by the Financial Services Commission (FSC) Friday, the Securities and Futures Commission will appoint external auditors for up to 10 percent of the listed firms in Korea starting 2019. Another 40 percent – companies that are subsidiaries of conglomerates with assets over 5 trillion won ($4.25 billion), financial organizations, firms whose ownership and management is not separate and firms whose major shareholders change frequently – will also be required to replace existing auditors with those recommended by the regulator after six years. This means over 50 percent of firms in Korea will be given auditing service by external auditors selected by the government.
Moreover, reward for whistleblowers who report accounting frauds will be upped from current 100 million to 1 billion. Punitive measures for firms and accounting firms found to have indulged in window dressing will also be toughened. Fine limit will be uncapped and current imprisonment period set at 5 – 7 years will be increased to 10 years.
By Bae Mi-jung and Chun Gyung-woon
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