The Financial Supervisory Service (FSS) announced on Dec. 27 that the enforcement decree to the Act on External Audit and Accounting will be revised in February next year so that companies conducting a timely correction after violating accounting rules by mistake do not have to face a severe penalty from April onwards.
According to the revision, a light penalty such as warning will be applied to such companies. At present, any large-scale violation is subject to a severe penalty even in the case of violation caused by a mistake. In addition, according to the revision, every unintentional violation will be regarded as a mistake.
The FSS, however, is going to take stern action against every intentional accounting fraud. The revised regulations stipulate that any company can be punished, regardless of its size, once an employer commits an accounting fraud equivalent to five billion won or more for the purpose of concealing embezzlement or malfeasance, listing the company, or avoiding delisting. At present, measures against large companies can be taken only when their accounting frauds are large in scale.
The FSS came up with more detailed rules about accounting firms serving as auditors, too. For instance, a significant audit failure attributable to an accounting firm’s quality control failure can result in a punishment targeting the firm’s representative director or audit quality control director. In addition, an auditor violating an important audit procedure can be punished even when no accounting rules are violated with regard to major financial statement items. Implementation of the new rules is scheduled for April next year after opinion collection for finalization.