South Korea's financial regulator summoned the country's major accounting firms to urge them to improve audit quality, amid growing concerns over excessive competition in audit fees.
According to the Financial Supervisory Service (FSS) on Wednesday, Yoon Jung-sook, the FSS accounting review commissioner, held a meeting Saturday with the audit division heads of 12 domestic accounting firms registered as auditors of listed companies. "If audit hours decline excessively without reasonable grounds, we will immediately launch auditor inspections and reviews of financial statements," she warned.
The FSS is concerned that declining audit fees, accompanied by reductions in audit hours and personnel deployed, will lead to a deterioration in audit quality. This year's average audit fee for listed companies stood at 246 million won (based on listed companies with December year-end closings), down from 252 million won last year. The average audit fee has declined continuously over the past four years, standing at 265 million won in 2023 and 259 million won in 2024.
"Establishing a system to manage audit hours is also a key requirement that auditors must comply with," Yoon said. "Data on actual audit hours invested forms the foundation of the external audit system, including the standard audit hours framework, so please manage it thoroughly to ensure reliability."
Meanwhile, the FSS plans to push for improvements to the auditor designation system focused on audit quality, expanding auditor designations for firms with superior audit quality. To swiftly shorten the review cycle for listed companies (currently 10 years for KOSPI-listed firms and five years for KOSDAQ-listed firms), the regulator plans to hold a research seminar on the 24th of this month to gather opinions from experts across various fields. Next month, it intends to hold an information session for auditors of listed companies to brief them on key supervisory issues, as part of ongoing efforts toward substantive communication.
