Audit of Foreign LLC
The Financial Services Commission announced on January 3 that an amendment to the Act on External Audit of Companies Including Stock Companies passed the Cabinet meeting and the amendment is scheduled to be submitted to the National Assembly before the end of this month.
According to the amendment, global enterprises in South Korea that have the form of limited liability companies are subject to mandatory external audit from this year onwards. In addition, a company subject to mandatory external audit and engaged in an accounting fraud is to face a fine of up to two billion won and the head of an accounting firm involved in inappropriate auditing can be punished.
The Financial Services Commission changed the name of the act from the Act on External Audit of Stock Companies to include limited liability companies. The fine to be imposed on those involved in fraudulent accounting has been increased to up to two billion won. Basically, the specific amount is to be determined by the authorities within 10% of the amount of the money involved with creative accounting. Non-listed companies and limited liability companies subject to mandatory external audit as well as listed companies are subject to the restriction. The punishment of the heads of accounting firms is to improve the quality of auditing.
According to the amendment, the designation of external auditors is to be conducted by the internal auditors or internal audit committees of companies, not the management. This is to ensure the autonomy of external auditing.