Financial Supervisory Service Pre-announces Key Inspection Items for Business Reports
14 Financial and 5 Non-financial Items, Total 19
[Asia Economy Reporter Lee Seon-ae] The Financial Supervisory Service (FSS) announced on the 21st that it will pre-announce key inspection items (14 financial items and 5 non-financial items) to encourage companies to diligently prepare their 2022 business reports. The FSS will conduct inspections of business reports and guide companies with deficiencies to voluntarily correct them. However, in cases of repeated significant deficiencies, the FSS plans to consider these when selecting targets for financial statement reviews. Accordingly, listed companies are required to exercise special caution to avoid inaccurate disclosures.
The FSS stated, "This is to encourage listed companies to prepare their business reports thoroughly and minimize omissions due to negligence. Through this, companies can prevent inaccurate disclosures in their business reports, and investors are expected to receive more reliable information."
The FSS will conduct focused inspections of the 2022 business reports during April and May. The inspection targets include 793 KOSPI-listed companies, 1,585 KOSDAQ-listed companies, 129 KONEX-listed companies, and 545 unlisted companies, totaling 3,052 companies. The inspection items specifically include ▲compliance with corporate disclosure form preparation standards for financial disclosure items (5 items), ▲disclosure of matters related to accounting auditors (5 items), ▲disclosure of internal control matters (2 items), ▲disclosure of detailed schedules (2 items), and ▲appropriateness of disclosure of directors’ management diagnosis and analysis opinions (5 items).
Financial disclosure items were selected focusing on items prone to inaccurate disclosures based on past inspection results, as information such as corporate performance and financial status is essential and important for investment decision-making. The inspection contents include ▲summary (consolidated) financial information, ▲reasons for restating financial statements, details, and impact on financial statements, ▲status of allowance for doubtful accounts, ▲inventory status, and ▲order status.
Matters related to accounting auditors are inspected to understand the status of external audit operations and to use this information for accounting supervision tasks, thereby promoting audit quality enhancement and improving accounting reliability. In particular, items frequently omitted from the main text of business reports but included only in audit reports, such as key audit matters, were selected. These include ▲audit opinions and key audit matters, ▲audit fees and hours, ▲discussions between internal audit organizations and auditors, ▲matters related to discrepancies between current and previous financial statements, and ▲changes in accounting auditors.
The FSS will also review the disclosure of auditor opinions on internal accounting control systems and operation reports.
For non-financial items, the appropriateness of the disclosure of directors’ management diagnosis and analysis opinions (MD&A) will be examined. Since this material contains management’s explanations of changes in the company’s business performance and financial status, as well as information and opinions necessary for future business forecasts, it serves as an important means to reduce information asymmetry between investors and companies.
Based on this, the FSS plans to verify the inspection items for a total of 3,052 companies subject to submission, including 545 unlisted companies, such as those with December fiscal year-ends. The inspections will be conducted during April and May.
The FSS plans to individually notify companies and auditors of any deficiencies found during the inspections between May and June and guide them to voluntarily correct these. In cases of repeated significant inaccurate disclosures, the FSS will issue stern warnings and, if necessary, consider these cases when selecting targets for financial statement reviews.
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