68 Listed Companies with 'Defective' Audit Reports... 97.2% Receive 'Unqualified Opinion'

[Asia Economy Reporter Ji Yeon-jin] It has been revealed that 68 domestic listed companies received adverse opinions in their audit reports for the 2021 fiscal year.

The Financial Supervisory Service announced on the 16th that, as of the end of March this year, it analyzed the audit reports of 2,428 companies excluding foreign corporations and paper companies out of 2,502 publicly traded companies, and found that the proportion of unqualified opinions last year was 97.2%. An unqualified opinion is given when the financial statements are deemed to be fairly presented in all material respects in accordance with accounting standards, maintaining a consistent level of 97.2% in 2019 and 97.0% in 2020.

The number of adverse opinions was 68, a decrease of 3 compared to the previous year. Among these, 'disclaimer of opinion,' indicating severe disagreement between auditors and management, accounted for 58 cases, and 'qualified opinion,' indicating disagreement but not to the extent of a disclaimer, accounted for 10 cases.

Adverse opinions were categorized as 'scope limitation' due to insufficient data in 56 cases, 'going concern uncertainty' indicating doubts about the company's ability to continue operations in 31 cases, and 'violation of accounting standards' in 1 case.

The number of listed companies with emphasis of matter paragraphs in their audit reports decreased by 58 from the previous year to 572. By industry, manufacturing accounted for 177 companies, finance and insurance 34, services 33, and wholesale and retail 30. As the number of auditor changes decreased compared to the previous year, the number of listed companies with 'prior period financial statement adjustments' noted as emphasis of matter (81 companies) also decreased by 26.

Although they received unqualified audit opinions, 92 listed companies disclosed going concern uncertainties in their audit reports. This is 13 fewer than the previous year (105 companies). The Financial Supervisory Service advised, "Even if companies with going concern uncertainties receive unqualified opinions, if their financial conditions and business environments do not improve, they are likely to be delisted or receive adverse opinions in the future, so users of audit reports should exercise caution."

Meanwhile, the market share of the Big Four accounting firms (Samil, Samjong, Han Young, Anjin) in audits increased by 1.6 percentage points from 2020 to 32.6%. The proportion of audits conducted by mid-tier accounting firms (the lower six firms among the top ten accounting firms) for listed companies decreased by 4.8 percentage points to 31.2% compared to the previous year.