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S. Korea to tighten auditing regulations

Collected: 2017.01.13

Distributed: 2017.01.16

Source: Go Direct

South Korean financial authorities will tighten auditing regulations to improve accounting transparency and prevent accounting firms from abetting book-cooking, just like the case of Daewoo Shipbuilding & Marine Engineering Co. found to have hidden massive losses that undermined the local industry and the overall economy.

According to the latest guideline released during a policy briefing by the Financial Services Commission announced on Thursday, large influential companies in terms of company size or the number of shareholders, those vulnerable to financial wrongdoings or those put on the watch list by the Securities and Futures Commission will be restricted from appointing external auditors. After a certain period of time, those companies are required to replace existing auditors with those recommended by financial regulators.

The new policy aimed at reinforcing transparency and trust in accounting practices is based on independent studies conducted last year.

The government will also conduct quality evaluation over accounting service firms and allow only those that meet quality standards to provide audit services for listed companies.

In addition, an accounting firm will be banned from providing M&A due diligence, business evaluation, brokerage for financing and investment to a client company it is auditing in order to prevent conflict of interest.

By Bae Mi-jung

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