Article 11(Designation of auditors by Securities and Futures Commission) #
(1) The Securities and Futures Commission may request any of the following companies to appoint the accounting corporation designated by the Securities and Futures Commission as an auditor or substitute for its auditor for a period not exceeding three business years:
1. A company that has requested the Securities and Futures Commission to designate an auditor within the period for appointing an auditor under Article 10, after obtaining approval from the statutory auditor or the audit committee (in cases of a stock-listed corporation, large unlisted stock company or financial company which has not established an audit committee, referring to the auditor appointment committee; hereafter the same shall apply in this Article);
2. A company that has failed to appoint an auditor within the period for appointing an auditor under Article 10;
3. A company which has appointed an auditor in violation of Article 10 (3) or (4) or a company in whose case the Securities and Futures Commission has recognized that the company has wrongfully substituted the auditor;
4. A company found by the Securities and Futures Commission to have prepared financial statements in violation of the accounting standards referred to in Article 5 as a result of supervision by the Securities and Futures Commission; provided, the same shall not apply to companies found to have committed a negligible violation determined by the Securities and Futures Commission;
5. A company whose financial statements have been prepared by an auditor on behalf of the representative director and the executive officer of the company in violation of Article 6 (6), or a company which has requested or received counseling on accounting relating to preparing financial statements;
6. Any of the following companies among stock-listed corporations:
(a) A company with a negative operating profit during three consecutive business years;
(b) A company with a negative operating cash flow during three consecutive business years;
(c) A company with a negative interest coverage ratio less than one during three consecutive business years;
(d) Any other company that falls under the financial standards prescribed by Presidential Decree;
7. A stock-listed corporation recognized and designated by the Securities and Futures Commission as requiring a fair audit, as prescribed by Presidential Decree;
8. A relevant company where the principal creditor bank defined in subparagraph 5 of Article 2 of the Corporate Restructuring Promotion Act or a shareholder prescribed by Presidential Decree requests the Securities and Futures Commission to designate an auditor, in the manner prescribed by Presidential Decree;
9. A company which fails to terminate an audit contract, to dismiss an auditor, or to appoint a new auditor, in violation of Article 13 (1) or (2);
10. A company in whose case the Securities and Futures Commission recognizes that auditor's audit hours are significantly less than the standard audit hours prescribed in Article 16-2 (1);
11. A stock-listed corporation at which the largest shareholder has been changed at least twice or its representative director has been replaced at least three times during the past three years including the immediately preceding business year;
12. Any other company prescribed by Presidential Decree, of which a fair audit is deemed particularly necessary.
(2) Where any of the following companies has appointed an auditor pursuant to Article 10 (1) for six consecutive business years, the Securities and Futures Commission may request it to appoint an accounting corporation or substitute the auditor in accordance with the standards and procedures prescribed by Presidential Decree:
1. A stock-listed corporation; provided, any stock-listed corporation prescribed by Presidential Decree shall be excluded herefrom;
2. A company whose total amount of assets is at least the amount prescribed by Presidential Decree and at least 50/100 of whose total issued shares (excluding non-voting shares; hereinafter the same shall apply) are owned by the large shareholder and his or her related persons prescribed by Presidential Decree, and whose representative director is the large shareholder or his or her related person, among the companies not falling under subparagraphs 1.
(3) Notwithstanding paragraph (2), any of the following companies may appoint an auditor pursuant to Article 10 (1):
1. A company supervised by the Securities and Futures Commission pursuant to Article 26 within the past six years from the base date set by the Securities and Futures Commission, and against which no violation of the accounting standards referred to in Article 5 is discovered during supervision;
2. Any other company prescribed by Presidential Decree due to having a trustworthy accounting process.
(4) Where the Securities and Futures Commission requests a company to appoint or substitute an auditor pursuant to paragraph (1) or (2), the company shall comply with such request, except in extenuating circumstances; provided, the relevant company or the person designated as an auditor may request the Securities and Futures Commission to re-designate an auditor if any ground prescribed by Presidential Decree exists.
(5) Where a company requests the Securities and Futures Commission to re-designate an auditor pursuant to the proviso of paragraph (4), it shall obtain prior approval from the statutory auditor or the audit committee.
(6) No company shall appoint an auditor designated by the Securities and Futures Commission pursuant to paragraph (1) or (2) as the auditor for the first business year following the designated business year.
(7) Article 10 (5) and (6) shall also apply where a company appoints an auditor at the request of the Securities and Futures Commission to appoint or substitute an auditor.