Financial Authorities Find an Average of 8.7 Issues in Accounting Firm Quality Control Inspections

Disclosure of Recommendations for Improvement Based on Audit Inspection Results

As a result of quality control inspections conducted last year by financial authorities on 14 accounting firms, including Samjong and Anjin, an average of 8.7 issues per firm were identified.

On June 1, the Securities and Futures Commission under the Financial Services Commission released its 2024 recommendations for improvements in quality control inspections. The Securities and Futures Commission and the Financial Supervisory Service conduct inspections on a rotating basis each year for some of the 40 accounting firms registered as auditors for listed companies, and recommend improvements for major deficiencies identified.

This year’s inspections covered a total of 14 firms, including two major accounting firms, Samjong and Anjin, as well as Seonghyun, Ichon, Hanul, Samhwa, Daehyun, and Gwanggyo. The investigation found an average of 8.7 issues per firm. This is a decrease compared to last year’s average of 9.1 issues (among 14 accounting firms).

The four largest firms recorded an average of 6.0 issues, which is lower than the average of 9.2 issues for other registered firms. By component, the most common issues were in the execution of work (2.2 cases), leadership responsibility (1.9 cases), and ethical requirements and human resources (1.5 cases). In terms of monitoring, the four largest firms had an average of 1.5 issues, exceeding the average of 0.6 issues for other registered firms.

The recommended improvements identified through the inspections will be disclosed on the Financial Supervisory Service website for three years from the date of recommendation.

The Financial Services Commission stated, “Since the introduction of the auditor registration system for listed companies in 2020, the number of quality control inspection issues has generally been on a downward trend, which is a positive sign for audit quality improvement.” However, the commission also emphasized, “Accounting firms must make active efforts to address the remaining deficiencies that still occur.”