CEO Score, Survey of 308 out of Top 500 Companies
Audit Fees Increased by 108% and Audit Hours by 51% Compared to 4 Years Ago Immediately After 'New External Audit Act' Implementation
"The increase in audit fees was much greater than the increase in audit hours. Companies are paying high prices but not receiving high-quality services.
A senior official from a corporate research institute criticized that the quality of audit services has not improved in proportion to the increased audit fees since the implementation of the new External Audit Act. Audit service fees have more than doubled compared to four years ago, but audit hours have only increased by about 50%. The new External Audit Act includes provisions requiring companies to undergo mandatory audits for three years by accounting firms designated by financial authorities.
According to a survey on the audit status of 308 out of the top 500 domestic companies from 2018 to 2022, released by the Corporate Data Research Institute CEO Score on the 21st, last year's audit service fees amounted to KRW 294.945 billion, an increase of 107.9% compared to 2018. During the same period, audit hours increased by 51.4%, from 1,797,471 hours to 2,721,213 hours.
There were 195 companies (63.3%) where audit service fees more than doubled, while only 79 companies (25.6%) saw audit hours double. CEO Score analyzed that the implementation of the new External Audit Act influenced the phenomenon where audit fees surged but audit hours did not increase proportionally. CEO Score stated, "There are concerns that the excessive growth in corporate audit service fees compared to asset growth encourages overspending."
Samsung Electronics saw the largest increase in audit service fees. Fees rose by KRW 4.024 billion (91.5%) from KRW 4.4 billion in 2018 to KRW 8.424 billion last year. Other companies with significant increases included Samsung Life Insurance (KRW 2.298 billion), SK Hynix (KRW 2.25 billion), Woori Bank (KRW 2.214 billion), Korea Electric Power Corporation (KEPCO) (KRW 2.054 billion), and LG Electronics (KRW 1.95 billion).
Samsung Electronics also had the largest increase in audit hours, which rose by 27,745 hours (55.0%). LG Electronics (18,933 hours), Samsung Life Insurance (18,269 hours), SK Hynix (15,153 hours), GS Retail (12,347 hours), and Hyundai Mobis (12,192 hours) followed.
The highest audit service fee growth rate was recorded by Aekyung Chemical at 638.6%, surging from KRW 70 million in 2018 to KRW 517 million last year. During the same period, its assets increased by 144.6%. Other companies with high audit fee growth rates included Krafton (595.8%), Hanwha General Insurance (525.3%), Shin Young Securities (521.2%), and GS Retail (500.7%). However, asset growth rates were much lower for Hanwha General Insurance (20.7%), Shin Young Securities (19.9%), and GS Retail (103.3%).
Meanwhile, last year, the Big Four accounting firms earned audit fees in the following order: Samil (KRW 81.295 billion), Samjong (KRW 78.668 billion), Han Young (KRW 70.68 billion), and Anjin (KRW 40.139 billion).
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