FSS to Review and Supervise 180 Companies Including Market Disorder Offenders and Marginal Firms

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[Asia Economy Reporter Ji-hwan Park] This year, the number of companies subject to accounting review and audit by the Financial Supervisory Service (FSS) will increase by more than 20% compared to last year.

On the 11th, the FSS announced the "2021 Accounting Review and Audit Operation Plan," which includes this information. The FSS plans to conduct financial statement reviews and audits on 180 companies, including listed corporations, this year. This is an increase of 21.6% from 148 companies last year. For minor violations, the FSS intends to simplify the sanction procedures by applying lighter measures (caution, warning) by the FSS Governor.

The sample review targets include about 100 companies such as those related to pre-announced accounting issues, companies with risk factors like embezzlement or breach of trust, and companies that have not been audited for a long time. The number of companies subject to suspicion review based on external reports is set at around 50.

Companies related to pre-announced accounting issues include △companies audited by accounting firms with a high rate of companies pointed out in financial statement reviews and audits △companies where significant or excessive deficiencies were found in individual audit tasks during auditor audits.

The FSS also plans to conduct auditor audits on 15 accounting firms. The number of targets has increased by 6 compared to the previous year. The plan is to conduct audits on 15 firms, 8 in the first half and 7 in the second half. By size, there are 4 large firms, 4 medium firms, and 8 small firms.

The FSS will closely cooperate with the Public Company Accounting Oversight Board (PCAOB) of the United States to conduct joint inspections on two accounting firms. The targets are two of the three accounting firms?Sam-il, Sam-jung, and Han-young?that audit domestic companies listed in the U.S.

The FSS plans to strengthen continuous monitoring of companies at risk of insolvency and intentional fraudulent transactions, as well as companies that disrupt market order during the review and audit process. To quickly detect and prove violations, the FSS will activate digital audit operations using data analysis software.

Financial statement reviews will be conducted with the principle of completion within three months after commencement, and the FSS plans to separate the review and audit functions.

To enhance audit quality through prevention-focused supervision, the FSS has expanded the department dedicated to auditor audits and will carry out accounting supervision focused on prevention. For this purpose, in February, the existing two teams within the Accounting Review Bureau were reorganized into the Auditor Audit Office with four teams. The number of accounting firms subject to audit will be expanded to a maximum of 15, and the audit cycle will be shortened from five years to three years.

An FSS official stated, "We plan to strengthen the prevention-focused accounting supervision system by improving audit quality through expanding auditor audit targets and evaluating the quality control levels of accounting firms."