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One Out of Two Listed Korean Firms Has Problems in Audit Reports
Accounting Audits by External Auditors Not Reliable
One Out of Two Listed Korean Firms Has Problems in Audit Reports
  • By Yoon Young-sil
  • April 18, 2019, 10:09
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The Financial Supervisory Service has found that one out of two listed Korean companies had problems with their audit reports.

Following financial authorities' increased scrutiny of financial reporting regarding research and development (R&D) costs of pharmaceutical and biotech firms last year, the ratio of companies with problems in their audit reports has risen.

The Financial Supervisory Service announced on April 17 that it conducted a sampling inspection on 77 listed companies last year and found that 39 of them had problems in their audit reports, which were written by external auditors. In short, it randomly looked into audit reports of companies and one out of two had problems with their audit reports. The ratio greatly increased from 29.9 percent a year earlier.

A spokesperson from the FSS said, “This is because we raised the ratio of pharmaceutical and biotech firms in the process of sample selection last year.”

The FSS carried out a sampling inspection on 212 listed companies over the last three years and the average ratio of companies with problems in their audit reports was 38.2 percent. When it conducted an inspection on 59 suspicious firms, the rate went up to 86.4 percent. The FSS carries out a suspicion-based inspection when it recognizes that a company has committed accounting fraud in advance thanks to reports from outside sources.