Lee Chanjin, FSS Chief: "Accounting Firms Must Prioritize Audit Quality Over Short-Term Profits"

Lee Chanjin, Governor of the Financial Supervisory Service, met with CEOs of accounting firms and urged them to strengthen audit quality and ensure accounting transparency in order to enhance trust in the capital market.

On October 14, the Financial Supervisory Service held an 'Accounting Firm CEO Meeting' at the Korean Institute of Certified Public Accountants building in Seodaemun-gu, Seoul, and engaged in dialogue with the heads of 12 accounting firms responsible for external audits of listed companies. The meeting was attended by Governor Lee, Yoon Jeongsook, Professional Deliberation Committee Member, and Choi Woonyeol, President of the Korean Institute of Certified Public Accountants, among others.

Governor Lee Chanjin emphasized that accounting information is a core infrastructure of the capital market, supporting rational decision-making by market participants. He explained, "For accounting information to be reliable, objective verification by a third party is essential, and this is realized through the external audit system. In this regard, accounting firms bear a significant public responsibility."

He also called for the establishment of a market order centered on audit quality. He said, "The true competitiveness of an accounting firm is secured not by pursuing 'short-term profits,' but by building 'long-term trust' based on audit quality. It is necessary to prioritize quality in areas such as workforce management and compensation systems to prevent excessive competition focused on fees from undermining audit quality."

In addition, he stressed the need to secure firm independence under sound governance. He stated, "To ensure that decisions are made with audit quality and the public interest as core values, rather than being swayed by the interests of firm members, it is necessary to establish an effective management oversight mechanism. Please make efforts to prevent independence from being compromised by activities such as non-audit services provided by 'network accounting firms' related to auditors."

Governor Lee also expressed his firm commitment to strict responses against accounting fraud. The Financial Supervisory Service plans to increase fines for intentional and long-term accounting irregularities and to strengthen internal accounting audit measures in cases of repeated minor violations. He emphasized, "When an accounting violation is discovered, it is important not only to correct it, but also to thoroughly investigate the causes and processes to identify any weaknesses in internal controls. Accounting firms that participate in or condone intentional accounting fraud may face strict sanctions and be held accountable accordingly."

He also suggested the importance of conducting audits from the investor's perspective and innovating digital audits. He said, "The audit report serves as a communication channel connecting companies and the capital market, and is a key means of verifying objective corporate information. For complex financial products and new industry sectors, more thorough verification is needed to protect investors and financial consumers."

He added, "If technologies such as artificial intelligence (AI) and big data analytics are utilized appropriately for audit purposes, it is possible to enhance both the efficiency and effectiveness of audits by automating repetitive work and expanding the scope of verification. Efforts should also be made in data security and human resource development to promote balanced audit innovation."