Korean financial authorities to limit audit inspection period to one year

[Photo by MK DB]

The period of the Korean financial authorities’ inspection into corporate audit will be stipulated to one year to reduce regulatory uncertainty on overall corporate operation while a company’s defense rights against any accounting fraud allegation will be expanded.

According to a measure announced by the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) on Thursday, the period of audit inspection by the FSS will be limited to one year. When an extension is necessary for unavoidable reasons, prior approval from the FSS Governor should be required for each six-month extension.

The announcement comes after the FSC’s calling for a measure to improve the financial watchdog’s audit inspection practice and to reinforce the company’s defense right on March 11 when it ruled not to press charges against Celltrion and its affiliates for accounting fraud because it was ‘not intentional’, ending its nearly four-year investigation. The lengthy inspection caused unnecessary corporate uncertainty in Celltrion Group.

Regarding the company’s defense right guarantee, the defenses of companies under investigation are enhanced in several areas. For example, a company’s agent who participates in the investigation will be permitted to manually record the investigation. The company under investigation will be able to access the investigator’s Q&A file created during the audit inspection about two weeks earlier than before.

In addition, a prior notice for audit inspection will be sent to the company under investigation with detailed information such as decision by the audit inspector and sentencing.

To reflect the improvement in the Act on External Audit of Stock Companies, revision for legislation will be completed within the third quarter of this year and some measures that do not require legislation will be implemented immediately, a financial authority official said.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]