Transparency Management
On June 8, POSCO decided to adopt the amendment to the Act on External Audit of Stock Companies that the Financial Services Commission submitted to the National Assembly in January this year. The amendment is currently pending in the National Assembly and POSCO has become the first South Korean company adopting it before its implementation. This means that the POSCO Group will exclude its management’s involvement in the process of appointing external auditors from now on.
In this regard, POSCO recently evaluated and appointed external auditors at its audit committee consisting of three outside directors, adding to its accounting transparency and the independence of its external auditors. The evaluation and appointment were conducted in a fair and transparent way and based on strict ethical standards with inappropriate accounting firms ruled out from the beginning.
In addition, the POSCO Group recently divided its business units into steel and non-steel and adopted an auditing mechanism consisting of main and auxiliary auditors. Previously, the entire group had been divided into four with the four largest accounting firms in the country responsible for the auditing of the respective parts. In the new mechanism, however, the main auditor is in charge of the auditing of the steel part and the group’s consolidated financial statements while the auxiliary auditor is responsible for the auditing of the non-steel part. This is expected to result in a higher level of efficiency and reliability.
The necessity of the amendment has been a hot issue since the accounting scandal of Daewoo Shipbuilding & Marine Engineering occurred two years ago. The bill tabled by the South Korean government in relation to the revision of the law includes 10 individual modifications. According to one of them, an external auditor is to be appointed based on selection by an auditor or an audit committee instead of appointment by an executive following an approval from an auditor or an auditor appointment committee.
The amendment was passed at the Cabinet meeting in January this year but the passage of the bill in the National Assembly was delayed in March due to the impeachment of former President Park Geun-hye. It is scheduled to be handled again this month or later during an extraordinary session of the National Assembly.