Elected in June... Within a Month After Inauguration
Key Economic Groups and Academia Engage in Preliminary Coordination
Choi Un-yeol, President of the Korean Institute of Certified Public Accountants [Image source=Yonhap News]
Choi Un-yeol, chairman of the Korea Institute of Certified Public Accountants (KICPA), known as the "Father of the New External Audit Act (Shin Oegambeop)," is continuing comprehensive meetings mainly with major economic organizations. Since he has been given a special mission to "defend the Periodic Auditor Designation System (Periodic Designation System)" within the accounting industry, these are interpreted as behind-the-scenes contacts for prior coordination.
On the morning of the 24th, Chairman Choi Un-yeol held a casual meeting with Jung Gu-yong, chairman of the Korea Listed Companies Association (KLCA), at the KLCA headquarters. In addition to the KLCA, he has met or plans to meet with heads of major economic organizations such as the Korea Chamber of Commerce and Industry, the Korea Employers Federation, the Korea Federation of Small and Medium Business, the Korea Federation of Mid-sized Enterprises, and the KOSDAQ Association, as well as academia.
In a phone interview with Asia Economy, Chairman Choi said, "The people we need to meet first are businesspeople," adding, "We are sharing a consensus on why the designated audit system is necessary and why management transparency is important."
The Periodic Designation System, which requires the government to designate a new auditor for listed companies audited by the same accounting firm for six years for a period of three years, has been in effect since 2020. It was introduced under the amended External Audit Act enacted in November 2018 following the Daewoo Shipbuilding & Marine Engineering accounting scandal in 2017. After the COVID-19 pandemic led to economic difficulties and ongoing controversies over excessive accounting burdens, financial authorities considered temporary relief measures last year. However, due to significant differences in views between companies and the accounting industry and only three years having passed since implementation, it was decided to maintain the current system until 2025.
A shift in the financial authorities' stance was detected in April this year. Kim So-young, Vice Chairman of the Financial Services Commission, announced at the "Corporate Value-Up Meeting" that as part of the "Corporate Value-Up Program," companies with excellent governance would receive bonus points in exemption reviews from the Periodic Designation System. Since the purpose of the Periodic Designation System is to prevent collusion between accounting firms and audited companies, the intention was to reduce regulatory burdens on companies judged to have well-established external auditor appointment and supervision systems as governance-excellent companies.
Chairman Choi, who garnered nearly a majority (46.06%) of votes in the 47th KICPA chairman election last month, was entrusted with the mission to defend the Periodic Designation System. A consensus has formed within the accounting industry that the system should not be abolished or relaxed. An accountant from Firm A said, "Before the election, in communities where accountants gathered such as Blind, there was a consensus that 'it is right to go with someone from a political background,'" describing the atmosphere at the time. The nickname "Father of the New External Audit Act" was also given to Chairman Choi, who, during his tenure as a Democratic Party lawmaker, led the design and parliamentary approval of the amended External Audit Act. He is regarded as the figure who persuaded organizations opposing the Periodic Designation System, such as the KLCA, and refined the bill’s contents to secure agreement from fellow lawmakers. Given that many of his colleagues were positioned in the so-called "giant opposition (Geoya)" political landscape, there is also an expectation that he has a wide network.
The financial authorities are also struggling with the exemption review criteria for the Periodic Designation System. The Financial Services Commission is currently considering granting exemption bonus points to listed companies that separately elect two or more audit committee members. Under the current Commercial Act, listed companies with total assets of 2 trillion won or more must elect at least one audit committee member separately, but if they elect two or more, it can be interpreted as strengthening audit independence. Although the official meeting of the "Task Force (TF) for Establishing Governance Evaluation Criteria for Designation Exemption," where authorities and the private sector jointly set broad directions, concluded on the 18th of last month, the final detailed plan is expected to be confirmed in September or later.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
