A lawmaker from the ruling Democratic Party has proposed an amendment to the Certified Public Accountant Act to facilitate mergers among smaller accounting companies.
The proposal, presented by Rep. Park Yong-jin, calls for allowing a small and medium-sized accounting firm that takes the form of a limited liability company to divide itself and merge with an existing accounting firm.
To reform the domestic accounting industry, the National Assembly recently revised the Act on External Audit of Stock Companies.
Under the revised law, which is scheduled to become effective in November this year, mandatory auditor registration will be implemented from 2020, allowing only large, qualified accounting companies to audit listed companies to enhance audit quality.
This new law puts small and medium-sized accounting firms to disadvantage as they cannot audit listed companies.
Park’s proposal is intended to address this problem. Under the current law, accounting firms that take the form of a limited liability company cannot divide itself or merge with another accounting firm. The amendment bill proposes to remove this restriction.
In addition, the proposal allows accounting firms that continue to exist after division to inherit audit contracts, joint funds for damages and compensatory reserves from the split ones.
The bill, however, is not applicable to accounting firms whose business has been suspended by the Financial Services Commission.
The proposal is expected to facilitate M&A activities among small and medium-sized accounting firm, thus enhancing the competitiveness of local accounting firms.
Many in the accounting industry, in the meantime, are expecting that accounting firms’ stability will be enhanced along with their quality competitiveness based on the inheritance of the funds and contracts.