ENFORCEMENT DECREE OF THE ACT ON EXTERNAL AUDIT OF STOCK COMPANIES

Article 1(Purpose) #

The purpose of this Decree is to prescribe matters mandated by the Act on External Audit of Stock Companies and those necessary for the enforcement thereof.

Article 2(Financial statements) #

"Documents prescribed by Presidential Decree" in subparagraph 2 (c) of Article 2 of the Act on External Audit of Stock Companies (hereinafter referred to as the "Act") means the following documents:

1. Statement of changes in equity;

2. A statement of cash flows;

3. Notes.

Article 3(Consolidated financial statements) #

(1) "Parent-subsidiary relationship prescribed by Presidential Decree" in the provisions, with the exception of its items, of subparagraph 3 of Article 2 of the Act means a relationship between a company and another company (including any company without legal personality, such as associations) determined in accordance with accounting standards falling under any subparagraph of Article 5 (1) of the Act (hereinafter referred to as "accounting standards"), under which the company (hereinafter referred to as "parent company") has the power to make decisions on financial policies and business strategies of the other company (hereinafter referred to as "subsidiary") in order to gain utility and profit in economic activities.

(2) "Documents prescribed by Presidential Decree" in subparagraph 3 (c) of Article 2 of the Act means the following documents:

1. Consolidated statement of changes in equity;

2. Consolidated statement of cash flows;

3. Notes.

Article 4(Large unlisted stock company) #

"The amount prescribed by Presidential Decree" under subparagraph 5 of Article 2 of the Act means 500 billion won; provided, it means 100 billion won in the case of a stock company falling under any of the following subparagraphs:

1. A domestic company that belongs to business groups subject to disclosure under Article 31 (1) of the Monopoly Regulation and Fair Trade Act (hereinafter referred to as "business groups subject to disclosure") as of the end of the immediately preceding business year (excluding a company deemed notified as those incorporated as an affiliate into business groups subject to disclosure pursuant to Article 33 of the same Act; hereinafter the same shall apply);

2. A corporation subject to business reporting under Article 159 (1) of the Financial Investment Services and Capital Markets Act as of the end of the immediately preceding business year (hereinafter referred to as "corporation subject to business reporting").

[This Article Wholly Amended on May 2, 2023]

Article 5(Companies subject to external audit) #

(1) "Company that meets the standards prescribed by Presidential Decree in terms of assets, liabilities, number of employees or sales, as at the end of the immediately preceding business year" in the main sentence of Article 4 (1) 3 of the Act means any of the following companies: <Amended on Oct. 13, 2020>

1. A company whose total amount of assets as of the end of the immediately preceding business year is at least 50 billion won;

2. A company whose sales in the immediately preceding business year (where the immediately preceding business year is less than 12 months, it shall be converted into 12 months, and less than one month shall be deemed one month; hereinafter the same shall apply) are at least 50 billion won;

3. A company that meets at least two of the following:

(a) Total assets at the end of the immediately preceding business year are 12 billion won or more;

(b) Total debt at the end of the immediately preceding business year is 7 billion won or more;

(c) Sales of 10 billion won or more in the previous business year;

(d) 100 or more employees as at the end of the immediately preceding business year (referring to workers under Article 2 (1) 1 of the Labor Standards Act, excluding any of the following; hereinafter the same shall apply):

(i) Persons falling under any subparagraph of Article 20 (1) of the Enforcement Decree of the Income Tax Act;

(ii) Temporary agency workers defined in subparagraph 5 of Article 2 of the Act on the Protection of Temporary Agency Workers.

(2) "Limited companies meeting the criteria prescribed by Presidential Decree" in the proviso of Article 4 (1) 3 of the Act means any of the following limited companies; provided, in cases of a limited company which has converted its organization from a stock company to a limited company pursuant to Article 604 of the Commercial Act after November 1, 2019, it means a company falling under any of the subparagraphs of paragraph (1) for five years from the date of registration pursuant to Article 606 of the same Act: <Amended on Oct. 13, 2020>

1. A limited company falling under paragraph (1) 1 or 2;

2. A limited company that falls under three or more of the following items:

(a) Total assets at the end of the immediately preceding business year are 12 billion won or more;

Article 6(Accounting standards) #

(1) A company that falls under any of the following shall apply the accounting standards under Article 5 (1) 1 of the Act (hereinafter referred to as "Korean International Financial Reporting Standards") pursuant to the latter part of Article 5 (3) of the Act:

1. A stock-listed corporation; provided, a corporation which has its stocks listed on the KONEX market under Article 11 (2) of the Enforcement Decree of the Financial Investment Services and Capital Markets Act (hereinafter referred to as "KONEX") shall be excluded herefrom;

2. A company that intends to become a stock-listed corporation in the relevant business year or the following business year; provided, a corporation which intends to have its stocks listed on KONEX shall be excluded herefrom;

3. A financial holding company under the Financial Holding Companies Act; provided, a company subject to conversion under Article 22 of the same Act shall be excluded herefrom;

4. Banks under the Banking Act;

5. An investment trader, an investment broker, a collective investment business entity, a trust business entity, or a merchant bank under the Financial Investment Services and Capital Markets Act;

6. Insurance companies under the Insurance Business Act;

7. A credit card business entity under the Specialized Credit Finance Business Act.

(2) Where a parent company that is in a parent-subsidiary relationship under Article 3 (1) applies the Korean International Financial Reporting Standards to consolidated financial statements, it shall also apply the Korean International Financial Reporting Standards to financial statements that are not consolidated financial statements.

Article 7(Entrustment of affairs related to accounting standards) #

(1) Pursuant to Article 5 (4) of the Act, the Financial Services Commission shall entrust the following affairs to the Korea Accounting Institute (hereinafter referred to as the "Korea Accounting Institute"), an incorporated association established with the permission of the Financial Services Commission pursuant to Article 32 of the Civil Act: <Amended on May 2, 2023>

1. Establishment or amendment of accounting standards;

2. Interpretation of accounting standards;

3. Replies to the relevant inquiries about accounting standards;

4. Other affairs determined by the Financial Services Commission in relation to accounting standards.

(2) An accounting standards committee comprised of not more than nine members, including one chairperson, shall be established under the Korea Accounting Institute to deliberate and decide on the following matters, as prescribed by Ordinance of the Prime Minister: <Amended on May 2, 2023>

1. Matters concerning paragraph (1) 1 and 2;

2. Matters concerning paragraph (1) 3, referred to the meetings by the chairperson.

(3) The Korea Accounting Institute shall accumulate an amount equivalent to 10/100 of its total expenditure budget each year until such amount reaches the amount of the total expenditure budget for two immediately preceding business years.

(4) Pursuant to Article 5 (6) of the Act, the Financial Supervisory Service (hereinafter referred to as the "Financial Supervisory Service") established under the Act on the Establishment of Financial Services Commission shall subsidize the Korea Accounting Institute with the amount calculated by subtracting the Korea Accounting Institute’s own revenue in the relevant business year (referring to revenue that remains after excluding the amount subsidized by the Financial Supervisory Service) from the sum of the Korea Accounting Institute’s total expenditure budget for the relevant business year and the amount required to be accumulated in the relevant business year pursuant to paragraph (3), within the limits not exceeding 8/100 of the allotted charge collected by the Financial Supervisory Service pursuant to Article 442 (1) of the Financial Investment Services and Capital Markets Act.

(5) The Korea Accounting Institute may use the amount accumulated under paragraph (3), after obtaining approval from the Financial Services Commission, where it is deemed unable to maintain its business normally due to financial difficulties such as a decrease in subsidies under paragraph (4).

Article 8(Responsibility for preparation and submission of financial statements) #

(1) "Period prescribed by Presidential Decree" in Article 6 (2) of the Act means the deadline classified as follows: <Amended on May 2, 2023>

1. Financial statements: Not later than six weeks before an ordinary general meeting is held (within 45 days after the end of each business year in cases of a company under rehabilitation proceedings);

2. Consolidated financial statements: The corresponding deadline set in the following categories:

(a) A company governed by the Korean International Financial Reporting Standards: Not later than four weeks before an ordinary general meeting is held (within 60 days after the end of each business year in cases of a company under rehabilitation proceedings);

(b) A company not governed by the Korean International Financial Reporting Standards: Within 90 days after the end of each business year (within 70 days after the end of each business year, in cases of a corporation whose total amount of assets at the end of the immediately preceding business year is at least two trillion won from among corporations subject to submitting a business report).

(2) Notwithstanding paragraph (1), where a corporation subject to business reporting holds an ordinary general meeting after the deadline for submission of a business report under Article 159 (1) of the Financial Investment Services and Capital Markets Act (hereinafter referred to as "deadline for business reporting"), the deadline by which the corporation is required to submit financial statements to an auditor shall be classified as follows:

1. Financial statements: Not later than six weeks before the deadline for business reporting (within 45 days after the end of each business year in cases of a company under rehabilitation proceedings);

2. Consolidated financial statements: The corresponding deadline set in the following categories:

(a) A company governed by the Korean International Financial Reporting Standards: Not later than four weeks before the deadline for business reporting (within 60 days after the end of each business year in cases of a company under rehabilitation proceedings);

(b) A company not governed by the Korean International Financial Reporting Standards: The deadline set in paragraph (1) 2 (b).

(3) "Company prescribed by Presidential Decree" in the former part of Article 6 (4) of the Act means the following companies:

Article 9(Operation of internal accounting control system) #

(1) "Companies prescribed by Presidential Decree" in the proviso, with the exception of the subparagraphs, of Article 8 (1) of the Act means any of the following companies: <Amended on Feb. 17, 2021; May 2, 2023>

1. A limited company;

2. A company falling under any subparagraph of Article 51-2 (1) of the Corporate Tax Act or under Article 104-31 (1) of the Act on Restriction on Special Cases concerning Taxation;

3. A company whose total assets as of the end of the immediately preceding business year are less than 500 billion won; provided, any company falling under the following items shall be excluded:

(a) A stock-listed corporation;

(b) A domestic company belonging to business groups subject to disclosure as of the end of the immediately preceding business year;

(c) A corporation subject to submitting a business report as of the end of the immediately preceding business year;

(d) A financial company;

4. Other companies which have difficulty in operating the internal accounting control system under Article 8 (1) of the Act (hereinafter referred to as "internal accounting control system") when considering their characteristics, and which meet the standards determined and publicly notified by the Financial Services Commission.

(2) "Any other act prescribed by Presidential Decree" in Article 8 (1) 6 of the Act means the following:

1. Procedures for establishing and amending internal accounting control regulations under Article 8 (1) of the Act (hereinafter referred to as "internal accounting control regulations");

2. Qualification requirements for, and procedures for appointment and dismissal of, an internal accounting manager under Article 8 (3) of the Act (hereinafter referred to as "internal accounting manager");

3. Standards and procedures for reporting the operational status under Article 8 (4) of the Act [including whether the representative of a company and its statutory auditor [where an audit committee under subparagraph 6 of Article 2 of the Act (hereinafter referred to as "audit committee") has been established under a company, referring to the audit committee; hereafter the same shall apply in this Article], and executive officer or employee in charge of managing and operating internal accounting control regulations or in charge of preparing and publishing accounting information (hereafter referred to as "representative, etc. of a company" in this Article) have complied with Article 8 (2) of the Act];

Article 10(Qualification of auditors) #

(1) "Person trained in actual business, etc. prescribed by Presidential Decree" in Article 9 (4) of the Act means a person who has completed an on-the-job training course at an institution under any subparagraph of Article 12 (1) of the Enforcement Decree of the Certified Public Accountant Act for at least two years (or at least three years in cases of an institution provided for in subparagraph 4 of the same paragraph). In such case, on-the-job training periods under Article 7 (1) of the Certified Public Accountant Act shall be included in the period of the aforesaid on-the-job training course for calculation purposes.

(2) Article 12 (3) and (4) of the Enforcement Decree of the Certified Public Accountant Act shall apply mutatis mutandis to the on-the-job training under paragraph (1).

Article 11(Registration of Auditors of Stock-Listed Corporations, and Revocation Thereof) #

(1) A person who intends to become the auditor of a stock-listed corporation pursuant to Article 9-2 (1) of the Act (hereafter referred to as "applicant" in this Article) shall submit an application for registration to the Financial Services Commission.

(2) Upon receipt of an application for registration under paragraph (1), the Financial Services Commission shall examine whether the applicant fulfills all of the requirements under subparagraphs of Article 9-2 (1) of the Act (hereafter referred to as "registration requirements" in this Article), decide whether to register the applicant within four months from the date of receipt of the application for registration, and notify the applicant of the result of, and reasons for, its decision in writing without delay. In such case, where any defect is found in the application for registration, the Financial Services Commission may request the correction thereof and conduct a field investigation, if necessary, to verify whether the applicant fulfills registration requirements.

(3) In calculating the period of examination under paragraph (2), the period determined by the Financial Services Commission, such as the period for correcting a defect in an application for registration, shall not be included in the period of examination.

(4) "Cases of receiving from the Securities and Futures Commission a disposition prescribed by Presidential Decree which is severer than suspension of business" in Article 9-2 (5) of the Act means cases of receiving a measure under Article 29 (3) 1 or 2 of the Act.

(2) Article 12 (3) and (4) of the Enforcement Decree of the Certified Public Accountant Act shall apply mutatis mutandis to the on-the-job training under paragraph (1).

Article 12(Auditor Appointment Committee) #

(1) The auditor appointment committee under Article 10 (4) 1 (b) of the Act (hereinafter referred to as the "auditor appointment committee") shall be comprised of at least five members, including one chairperson. <Amended on Jan. 12, 2021>

(2) The following persons shall be members of the auditor appointment committee (hereafter referred to as "members" in this Article); provided, under unavoidable circumstances, such as the absence of a person falling under the following, the auditor appointment committee may be comprised of persons with expertise in management, accounting, law or external audit who can fairly examine an auditor independently from the company that appoints the auditor: <Amended on Jan. 12, 2021; May 3, 2022>

1. One statutory auditor;

2. Not more than two outside directors (referring to directors who are not involved in routine business activities of the relevant company; hereafter referred to as "outside directors" in this Article), where the company has outside directors appointed pursuant to other statutes or regulations;

3. One executive officer or employee of the institutional investor that holds the greatest number of voting stocks (excluding stocks acquired by a securities finance company referred to in Article 9 (17) 3 of the Financial Investment Services and Capital Markets Act for the purpose of security for conducting lending business referred to in Article 326 (1) 2 of the same Act, and on the basis of the stocks held as of the end of the immediately preceding business year; hereafter the same shall apply in this subparagraph) from among institutional investors (referring to institutional investors referred to in Article 161 (1) 4 of the Enforcement Decree of the Corporate Tax Act and the National Pension Service under the National Pension Act; hereinafter the same shall apply), excluding a controlling stockholder and stockholders specially related to the controlling stockholder under Article 43 (7) or (8) of the Enforcement Decree of the Corporate Tax Act; provided, an institutional investor whose number of voting stocks has decreased significantly from the commencement of the relevant business year until the day immediately before the date on which holding of a meeting of the auditor appointment committee is notified shall be excluded herefrom;

4. One stockholder (in cases of an institutional investor, referring to its executive officers or employees) who holds the greatest number of voting stocks (excluding stocks acquired by a securities finance company under Article 9 (17) 3 of the Financial Investment Services and Capital Markets Act for the purpose of security for conducting lending business under Article 326 (1) 2 of the same Act, and on the basis of the stocks held as of the end of the immediately preceding business year) from among stockholders, excluding any of the following stockholders; provided, a stockholder whose number of voting stocks (excluding stocks acquired for the purpose of security) has decreased significantly from the commencement of the relevant business year until the day immediately before the date on which holding of a meeting of the auditor appointment committee is notified shall be excluded herefrom:

Article 13(Appointment of auditors) #

(1) "Size ... prescribed by Presidential Decree" in Article 10 (4) 2 (b) of the Act means one billion won in capital.

(2) "Grounds prescribed by Presidential Decree, such as dissolution" in Article 10 (7) 3 of the Act means any of the following cases:

1. Where an auditor is dissolved due to bankruptcy or any other cause (excluding cases of dissolution due to a merger);

2. Where an accounting corporation that has served as an auditor has its registration revoked or becomes subject to suspension of all or part of its business pursuant to Article 39 (1) of the Certified Public Accountant Act;

3. Where an audit team that has served as an auditor has its registration revoked or ineffective, as prescribed by Prime Ministerial Decree;

4. Where a member of an audit team that has served as an auditor becomes subject to disciplinary action falling under Article 48 (2) 1 through 3 of the Certified Public Accountant Act;

5. Where the auditor of a stock-listed corporation has his or her registration revoked pursuant to Article 9-2 (5) of the Act;

6. Where an auditor becomes unable to continue to conduct the audit of the relevant company due to a measure taken under Article 29 (3) or (4) of the Act;

7. Other cases where an auditor is deemed by the Securities and Futures Commission unable to conduct an accounting audit for the relevant business year.

(3) A person who appoints an auditor pursuant to Article 10 (4) of the Act (including approval; hereafter the same shall apply in this Article) shall establish standards and procedures necessary for the appointment in advance. In such case, when falling under Article 10 (4) 1 (b) of the Act or (4) 2 (b) or (c), he or she shall obtain approval of such standards and procedures from the auditor appointment committee or the general meeting of members.

(4) The standards under the former part of paragraph (3) shall include the following matters:

1. The appropriateness of audit hours, audit personnel, audit fees, and audit plans;

2. An auditor’s independence (referring to avoiding interests that are likely to cause a prejudice against or make other unfair impacts on an auditor’s opinion) and professionalism (referring to being fully equipped with education, training and experience necessary for conducting an audit, expertise in the affairs, etc. of the company subject to an audit, etc.);

Article 14(Companies subject to designation of auditors by Securities and Futures Commission) #

(1) Deleted. <Oct. 13, 2020>

(2) Deleted. <Oct. 13, 2020>

(3) The Securities and Futures Commission shall designate a company that is deemed to require a fair audit from among companies designated as issues for administration under the listing regulations under Article 390 of the Financial Investment Services and Capital Markets Act pursuant to Article 11 (1) 7 of the Act; provided, any of the following companies designated as issues for administration shall be excluded: <Amended on Dec. 19, 2023>

1. Where a company fails to meet stock diversification standards, such as the number of shareholders or the number of listed stocks;

2. Where a company fails to meet minimum volume requirements for stock trading;

3. Where a company fails to meet market capitalization requirements.

(4) "Shareholder prescribed by Presidential Decree" in Article 11 (1) 8 of the Act means a person recognized by the Securities and Futures Commission as a stockholder that is an institutional investor to effectively perform the duty of promoting the long-term interests of customers and beneficiaries by pursuing the long-term value enhancement and sustainable growth of a company subject to investment (hereinafter referred to as "fiduciary duty"). In such case, the Securities and Futures Commission shall take into consideration the following matters, as determined by the Financial Services Commission:

1. Whether the institutional investor has performed shareholder activities according to core principles necessary for effectively fulfilling the fiduciary duty;

2. The period of holding shares in the company subject to investment;

3. The ratio of shareholding in the company subject to investment;

4. Other matters determined by the Financial Services Commission.

(5) If a principal creditor bank under subparagraph 5 of Article 2 of the Corporate Restructuring Promotion Act or a stockholder that is an institutional investor under paragraph (4) intends to request the Securities and Futures Commission to designate an auditor pursuant to Article 11 (1) 8 of the Act, it shall prepare and submit documents for application for such designation, as determined by the Financial Services Commission. In such case, a stockholder that is an institutional investor under paragraph (4) shall attach data verifying the matters under the subparagraphs of the same paragraph.

Article 15(Designation of auditors for stock-listed corporations) #

(1) The Securities and Futures Commission may request a company, which has appointed an auditor for 6 consecutive business years in accordance with Article 11 (2) of the Act, to appoint an auditor designated by the Securities and Futures Commission or substitute its auditor (hereafter in this Article referred to as “request for appointment of designated auditor”) for 3 consecutive business years from the following business year. <Amended on May 20, 2025>

(2) Where a company files an application for deferment of the request for appointment of a designated auditor after meeting all the following requirements, the Securities and Futures Commission may conduct an evaluation of the company's corporate governance for accounting and audit in accordance with the evaluation standards, methods, and procedures determined and publicly notified by the Financial Services Commission: <Added on May 20, 2025>

1. It shall be a company that has established an audit committee;

2. It shall have appointed an auditor whose appointment or substitution was requested by the Securities and Futures Commission in accordance with Article 11 (1) or (2) of the Act and it shall been audited for at least 1 business year among the business year commencing on or after November 1, 2018;

3. None of the following shall exist during the 3 business years immediately preceding the business year in which the evaluation is conducted:

(a) Where the financial statements included in the audit report disclosed in accordance with Article 23 (2) of the Act or the financial statements included in the business report, etc. disclosed in accordance with Article 163 of the Financial Investment Services and Capital Markets Act are revised and disclosed; provided, cases where the financial statements are revised and disclosed due to changes in accounting standards or the amount included in the financial statements is revised and disclosed below the amount determined and publicly notified by the Financial Services Commission shall be excluded;

(b) Where the auditor's opinion on the current operational status of the internal accounting control system and financial statements included in the audit report under Articles 8 (7) and 18 of the Act is not an unqualified opinion;

4. It shall not fall under any of the following during the immediately preceding 3 years from June 1 of the business year in which the evaluation is conducted (hereafter in this Article referred to as "base date of evaluation"):

Article 16(Standards for designation of auditors) #

(1) The Securities and Futures Commission shall designate an auditor from among the following accounting corporations pursuant to Article 11 (2) of the Act:

1. An accounting corporation registered pursuant to Article 9-2 (1) of the Act;

2. An accounting corporation that has never received measures determined by the Financial Services Commission, under Article 29 (3) of the Act or Article 39 (1) of the Certified Public Accountant Act, from any of the following agencies for the latest three years:

(a) The Financial Services Commission;

(b) The Securities and Futures Commission;

(c) The Korean Institute of Certified Public Accountants established pursuant to Article 41 of the Certified Public Accountant Act (hereinafter referred to as the "Korean Institute of Certified Public Accountants").

(2) Notwithstanding paragraph (1), where an accounting corporation falls under the following cases, the Securities and Futures Commission need not designate such corporation as an auditor: <Amended on May 3, 2022>

1. Where it fails to continue to meet the requirements for registration, in violation of Article 9-2 (4) of the Act, after filing for registration as the auditor of a stock-listed corporation pursuant to paragraph (1) of the same Article;

2. Where a public prosecution has been filed against the relevant accounting corporation on charges of failing to enter the matters required to be stated in an audit report under Article 23 (1) of the Act or entering such matters falsely;

3. Where there is a false statement or representation in the business report under Article 25 (1) of the Act or the occasional report under paragraph (5) of the same Article or an omission of any matter required to be reported;

2. An accounting corporation that has never received measures determined by the Financial Services Commission, under Article 29 (3) of the Act or Article 39 (1) of the Certified Public Accountant Act, from any of the following agencies for the latest three years:

(4) "Related persons prescribed by Presidential Decree" in Article 11 (2) 2 of the Act means a related party under Article 43 (8) of the Enforcement Decree of the Corporate Tax Act.

(3) Where the Securities and Futures Commission intends to designate an auditor pursuant to Article 11 (2) of the Act, it shall take into consideration the following matters:

Article 17(Procedures for designating auditors) #

(1) A company falling under any subparagraph of Article 11 (2) of the Act shall submit to the Securities and Futures Commission data necessary for deciding whether to appoint or substitute an auditor under the same paragraph, in the form of electronic documents, as determined by the Financial Services Commission.

(2) Where the Securities and Futures Commission intends to request the appointment or substitution of an auditor pursuant to Article 11 (2) of the Act, it shall notify the relevant company and the accounting corporation, which it intends to designate as the auditor of the relevant company, of the details of the planned designation in writing by not later than four weeks before the base date of designation; provided, such period may be shortened or notified orally where the details of the planned designation shall be notified promptly, as determined by the Financial Services Commission.

(3) The company and the accounting corporation that have received a notice under paragraph (2) may submit their opinions to the Securities and Futures Commission within two weeks from the date of receipt of such notice.

(4) The Securities and Futures Commission may reflect the opinions under paragraph (3) if it judges that they satisfy the standards determined by the Financial Services Commission.

(5) Where the Securities and Futures Commission intends to request the appointment or substitution of an auditor pursuant to Article 11 (2) of the Act, it shall notify the relevant company and the accounting corporation designated as the auditor of the relevant company (hereinafter referred to as "designated auditor") of the details of designation by the base date of designation. In such case, the Securities and Futures Commission may determine and recommend appropriate audit hours or audit fees, etc. to ensure the smooth conclusion of a contract on audit (hereinafter referred to as "audit contract") between the company and the designated auditor, the quality of audit, etc.

(6) A company shall conclude an audit contract within two weeks from the base date of designation unless there is a compelling reason not to do so.

(7) "Ground prescribed by Presidential Decree" in the proviso of Article 11 (4) of the Act means the following cases: <Amended on May 3, 2022>

1. Where the relevant company is a company in which a foreign investor under Article 2 (1) 5 of the Foreign Investment Promotion Act (excluding an individual; hereinafter referred to as "foreign investor") has invested and has specified an auditor in the investment conditions;

Article 18(Reporting on appointment of auditor) #

(1) Pursuant to Article 12 (1) of the Act, a company that has appointed or substituted an auditor shall notify its stockholders (referring to stockholders as of the latest record date for closing of a register of stockholders) or members of such fact in writing or publicly announce such fact on its website until the audit contract with the appointed or substituted auditor expires.

(2) Pursuant to the main sentence, with the exception of its subparagraphs, of Article 12 (2) of the Act a company shall submit the following documents to the Securities and Futures Commission in the form of electronic documents within two weeks from the date it concludes an audit contract:

1. A copy of the audit contract with the relevant auditor;

2. Documents verifying holding of a meeting of the audit committee or approval by the auditor appointment committee or the general meeting of members for the appointment of the auditor;

3. In cases of substituting an auditor, the reasons therefor and the details of the opinion stated by the former auditor.

(3) Deleted. <Oct. 13, 2020>

(4) Pursuant to the main sentence, with the exception of its subparagraphs, of Article 12 (2) of the Act an auditor shall submit a copy of the audit contract with the relevant company to the Securities and Futures Commission in the form of electronic document within two weeks from the date the audit contract is concluded.

(2) Upon receipt of an application for approval filed under paragraph (2), the Minister of Science and ICT shall verify the relevant corporate registration certificate by sharing the administrative data information pursuant to Article 36 (1) of the Electronic Government Act. <Amended on Oct. 13, 2020>

Article 19(Dismissal of auditors) #

"Ground prescribed by Presidential Decree, such as breach of duty" in Article 13 (2) of the Act means any of the following cases:

1. Where an auditor breaches his or her duties, including disclosing a company's confidential information;

2. Where an auditor inflicts damage upon a company by neglecting his or her duties;

3. Where an auditor makes an unreasonable demand or exercises an undue influence concerning an accounting audit;

4. Where a company has been provided with an investment by a foreign investor, and its auditor has been specified in the investment conditions;

5. Where a parent company or subsidiary is required to appoint the same designated auditor as the company in the relevant parent-subsidiary relationship.

Article 20(Former auditor’s right to state opinion) #

(1) Pursuant to Article 14 (1) of the Act, a company shall notify its former auditor in writing that he or she may state his or her opinion in writing or orally, by not later than two weeks before it concludes an audit contract with a new auditor.

(2) Where the former auditor to be dismissed pursuant to Article 13 (2) of the Act has stated his or her opinion, the relevant company shall submit the following matters to the Securities and Futures Commission in writing without delay, as determined by the Financial Services Commission:

1. The reasons for dismissal of the former auditor;

2. The opinion stated by the former auditor;

3. The fact that all of the members of the audit committee or a majority of the members of the auditor appointment committee have verified the details of subparagraphs 1 and 2 and affixed their signature thereto.

Article 21(Termination of audit contract by auditor) #

(1) "Where a ground prescribed by Presidential Decree exists, such as where the independence determined by the standards for accounting audit is impaired" in Article 15 (1) of the Act means any of the following cases:

1. Where a person is not qualified for an auditor pursuant to Article 9 of the Act;

2. Where he or she falls under any of the following:

(a) A case recognized by the Securities and Futures Commission, where the independence determined by the standards for accounting audit is impaired;

(b) A case recognized by the Securities and Futures Commission, where the independence of an auditor under the rules and regulations relating to professional ethics under Article 43 (1) of the Certified Public Accountant Act is impaired;

3. Where a company fails to perform its obligations under the audit contract with regard to the payment of audit fees during the immediately preceding business year or the relevant business year;

4. Where a company fails to renew the existing agreement on audit fees, although the nature of major business division or the size of the company has been significantly changed as a consequence of a merger or division of the company, or the transfer or acquisition of business after the existing audit contract was concluded;

5. Where a company is deemed to have significantly impeded an audit by failing to submit data in relation to the audit (including affairs conducted for the accounting auditor’s verification and comment attached to a half-yearly or quarterly report pursuant to Article 170 (1) of the Enforcement Decree of the Financial Investment Services and Capital Markets Act) without any extenuating circumstances although its auditor (limited to the auditor of a stock-listed corporation, large unlisted stock company or financial company) requested such data.

(2) The deadline by which an auditor may terminate an audit contract on the grounds under paragraph (1) 3 through 5 shall be the first day of the month to which the nine-month period from the date of commencement of the business year of the relevant company belongs.

(3) "Cases with a cause prescribed by Presidential Decree, such as where an auditor has received an unreasonable demand or undue influence concerning his or her audit opinion" in Article 15 (2) of the Act means any of the following cases:

1. Where an auditor has received an unreasonable demand or undue influence from a person referred to in the main sentence, with the exception of its subparagraphs, of Article 635 (1) of the Commercial Act a person in charge of accounting of a company, a stockholder, or a creditor concerning his or her audit opinion;

Article 22(Standards for accounting audit) #

(1) The standards for accounting audit shall include the following matters:

1. Requirements for maintaining the independence of the auditor;

2. Methods for formulating audit plans, and the auditing procedure;

3. Methods for classification and determination of audit opinions;

4. Management of audit affairs, including preparation of audit working papers;

5. Guidelines for reporting the audit findings.

(2) A standards for accounting audit committee comprised of not more than 11 members shall be established under the Korean Institute of Certified Public Accountants to deliberate and decide on matters concerning the standards for accounting audit.

(3) Matters necessary for the composition, operation, etc. of the standards for accounting audit committee under paragraph (2) shall be prescribed by Prime Ministerial Decree.

(4) To obtain prior approval for the standards for accounting audit from the Financial Services Commission pursuant to Article 16 (2) of the Act, the Korean Institute of Certified Public Accountants shall submit a plan for establishment or amendment of the standards for accounting audit to the Financial Services Commission after deliberation and resolution by the standards for accounting audit committee.

(5) The Financial Services Commission may request the Korean Institute of Certified Public Accountants to modify the standards for accounting audit, where necessary for the protection of interested persons, conformity with the international standards for accounting audit, etc.

Article 23(Procedures for determining and modifying standard audit hours) #

(1) "Interested persons prescribed by Presidential Decree, including the Financial Supervisory Service" in the latter part of Article 16-2 (1) of the Act means any of the following:

1. A company;

2. An accounting firm;

3. A user of accounting information, such as an investor or a person analyzing financial statements of a company;

4. Financial Supervisory Service.

(2) A standard audit hours deliberative committee (hereafter referred to as the "committee" in this Article) shall be established under the Korean Institute of Certified Public Accountants to determine standard audit hours fairly.

(3) The committee shall be comprised of not more than 14 members, including one chairperson. In such case, the members of the committee (hereafter referred to as "members" in this Article) shall be composed of five members representing companies, five members representing accounting corporations, three members who represent users of accounting information such as investors or persons analyzing financial statements of companies, and one member nominated by the Governor of the Financial Supervisory Service, from among the heads of accounting-related departments of the Financial Supervisory Service. <Amended on Dec. 19, 2023>

(4) Each of the members representing companies shall be recommended by the following persons respectively and commissioned by the President of the Korean Institute of Certified Public Accountants:

1. Chairperson of the Korea Listed Companies Association that has obtained permission under Article 370 of the Financial Investment Services and Capital Markets Act;

2. Chairperson of the KOSDAQ Listed Companies Association that has obtained permission under Article 370 of the Financial Investment Services and Capital Markets Act;

3. Chairperson of the Korea Chamber of Commerce and Industry established pursuant to the Chambers of Commerce and Industry Act;

4. Chairperson of the Korea Federation of Small and Medium Business established pursuant to the Small and Medium Enterprise Cooperatives Act;

5. Heads of other organizations determined by the Financial Services Commission.

(5) The members who represent accounting corporations shall be commissioned by the President of the Korean Institute of Certified Public Accountants. <Amended on Dec. 19, 2023>

Article 24(Quality control standards) #

(1) The quality control standards under Article 17 (1) of the Act (hereinafter referred to as "quality control standards") shall include the following matters. In such case, the details and method of application of the standards may differ in consideration of the type, scale, etc. of an accounting corporation:

1. Responsibilities of a person who creates and operates a system for the quality control of audit, such as management of an accounting corporation;

2. A plan for internal control that is necessary for fulfilling ethical requirements such as the independence of an auditor;

3. A plan for internal control that is necessary for undertaking and maintaining an audit such as the evaluation of risks of a company subject to audit;

4. The management of human resources who conduct an audit and those for the quality control of audit;

5. The method of conducting affairs necessary for the quality control of audit;

6. Matters related to the continuous inspection and evaluation of the matters under subparagraphs 1 through 5.

(2) To obtain prior approval of the quality control standards from the Financial Services Commission pursuant to Article 17 (2) of the Act, the Korean Institute of Certified Public Accountants shall submit a plan for establishment or amendment of the quality control standards to the Financial Services Commission after deliberation and resolution by the standards for accounting audit committee.

(3) The Financial Services Commission may request the Korean Institute of Certified Public Accountants to modify the quality control standards, where necessary for the protection of interested persons, conformity with the international quality control standards, etc. In such case, the Korean Institute of Certified Public Accountants shall comply with such request unless there is a compelling reason not to do so.

Article 25(Documents to be attached to audit reports) #

(1) An auditor shall attach the following matters to an audit report pursuant to Article 18 (3) of the Act:

1. The number of participants in an external audit classified by their duties or positions and the total number of participants in the external audit;

2. Audit hours of each participant in the external audit classified pursuant to subparagraph 1 and the total audit hours;

3. Details of major audit performed in accordance with the audit procedures based on the standards for accounting audit (including the details of services, such as consultation or advice, where an auditor has been provided with such services by an outside expert);

4. The number of face-to-face meetings with the statutory auditor or the audit committee, attendees at each meeting, and details of major discussions.

(2) Forms for preparation of documents concerning the matters required to be attached pursuant to paragraph (1), and other detailed matters shall be determined by the Financial Services Commission.

Article 26(Scope of related companies) #

(1) "Company which has relations prescribed by Presidential Decree with the relevant company, such as possessing its stocks or shares in a certain ratio or more" in the former part of Article 21 (1) of the Act means any of the following companies:

1. A subsidiary in the parent-subsidiary relationship under Article 3 (1);

2. A related company according to accounting standards (referring to an enterprise over which an investor has a certain influence although it is not a subsidiary);

3. A joint enterprise according to accounting standards (referring to an enterprise jointly governed by at least two investors);

4. Any other company that has an interest in the relevant company, as determined by the Financial Services Commission.

(2) Data which an auditor may request to submit or cooperate for pursuant to Article 21 of the Act shall be in the form of medium which can effectively provide information necessary for the auditor’s auditing regardless of the type, such as books, documents, and electronic documents (including electronic files, etc. that are accumulated in a system for electronically processing information generated in the process of managing a company).

Article 27(Submission of audit report) #

(1) The deadline by which an auditor shall submit an audit report to the relevant company pursuant to the main sentence of Article 23 (1) of the Act shall be classified as follows:

1. A company governed by the Korean International Financial Reporting Standards: Not later than one week before an ordinary general meeting is held (within three months after the end of each business year in cases of a company under rehabilitation proceedings);

2. A company not governed by the Korean International Financial Reporting Standards: The corresponding deadline set in the following categories:

(a) Financial statements: The deadline set in subparagraph 1;

(b) Consolidated financial statements: Within 120 days after the end of each business year (within 90 days after the end of each business year in cases of a corporation whose total amount of assets as of the end of the immediately preceding business year is at least two trillion won from among corporations subject to submitting a business report).

(2) Notwithstanding paragraph (1), where an auditor audits financial statements (excluding consolidated financial statements of a company that is not governed by the Korean International Financial Reporting Standards) of a company that holds an ordinary general meeting after the deadline for submitting a business report, the auditor shall submit an audit report to the relevant company by not later than one week before the deadline for submitting a business report (within three months after the end of each business year in cases of a company under rehabilitation proceedings).

(3) The deadline by which an auditor shall submit an audit report to the Securities and Futures Commission and the Korean Institute of Certified Public Accountants pursuant to the main sentence of Article 23 (1) of the Act shall be classified as follows:

1. Financial statements: Within two weeks after the closing of an ordinary general meeting (in cases of a company under rehabilitation proceedings, within two weeks after reporting to the relevant company's administrator);

2. Consolidated financial statements: The corresponding deadline set in the following categories:

(a) A company governed by the Korean International Financial Reporting Standards: The deadline set in subparagraph 1. In such case, the audit report shall be submitted together with an audit report on financial statements at the same time;

Article 28(Submission, keeping, and publication of business report by accounting corporation) #

(1) Pursuant to Article 25 (3) of the Act, an auditor that is an accounting corporation shall keep a business report at its head office and branch offices, respectively, for three years from the closing date of the relevant business year, and publish the business report on its website. In such cases, significant matters in relation to the quality control of audit, such as the governance structure of the accounting corporation, among the details of the business report (limited to a business report submitted by an auditor that is an accounting corporation registered pursuant to Article 9-2 (1) of the Act) shall be separately published on the website, as determined by the Financial Services Commission. <Amended on May 3, 2022>

(2) The Securities and Futures Commission and the Korean Institute of Certified Public Accountants shall make a business report available for the public inspection for three years pursuant to Article 25 (4) of the Act, and publish it on their websites.

(3) "Significant matters prescribed by Presidential Decree" in Article 25 (5) of the Act means the following:

1. Appearance of any significant matter in the process of conducting an audit;

2. Occurrence of any significant change in an accounting corporation;

3. Occurrence of any significant change in the management of an accounting corporation due to a change in external environments, such as a disposition by an administrative agency;

4. Other matters determined by the Financial Services Commission, which are required to be published urgently for the protection of parties interested in audit, etc.

Article 29(Supervision by Securities and Futures Commission) #

"Duties prescribed by Presidential Decree" in Article 26 (1) 4 of the Act means the following: <Amended on Dec. 19, 2020>

1. Supervising whether a company has operated the internal accounting control system pursuant to Article 8 of the Act (limited to where necessary for performing the supervision specified in Article 26 (1) 2 of the Act);

2. Supervising whether a person registered as the auditor of a stock-listed corporation continues to meet the requirements for registration pursuant to the subparagraphs of Article 9-2 (1) of the Act pursuant to paragraph (4) of the same Article.

3. Supervising whether companies or their auditors and certified public accountants employed by the auditors comply with their obligations under Article 6 (6) of the Act.

[This Article Wholly Amended on May 3, 2022]

Article 30(Demand for submission of materials) #

"Data prescribed by Presidential Decree" in the former part of Article 27 (3) of the Act means taxation-related data held by the National Tax Service, including the name of a company, the name of the representative and the address of the head office of the company, and the company’s business registration number, corporate registration number, telephone number, period of each business year and the dates of commencement and end of each business year, total amount of assets, total amount of liabilities, sales, number of employees, type of corporation, etc., which are necessary for the Securities and Futures Commission to request the appointment or substitution of an auditor pursuant to Article 11 (1) and (2) of the Act.

Article 31(Reporting or notification of wrongful acts) #

(1) Any reporting or notification under Article 28 (1) of the Act shall be made as follows:

(8) An audit report, etc. under paragraphs (1), (2), (5), and (6) shall be submitted in the form of electronic document, as determined by the Financial Services Commission.

2. Where an executive officer or employee of a company has committed a violation: Notifying the company's auditor or statutory auditor or reporting to the Securities and Futures Commission.

(2) A person who reports or gives notice under Article 28 (1) of the Act (hereinafter referred to as "reporter, etc.") shall submit a document stating the following matters (hereinafter referred to "written report"), together with evidence of the relevant violation, etc.:

1. Personal information on the reporter, etc.;

2. The violators;

3. Details of the violation;

4. The purport of and reasons for reporting or notification.

(3) Notwithstanding paragraph (2), a reporter, etc. may report or give notice of a violation verbally where he or she is under extenuating circumstances that prohibit him or her from submitting a written report. In such case, the reporter, etc. shall submit evidence of the relevant violation, etc.

(4) A person who receives a verbal report or notice under paragraph (3) shall write down the matters told by the reporter, etc. in a written report, show or read the same to him or her, and have him or her affix his or her signature or seal to the written report.

(5) The auditor or statutory auditor in receipt of a notice under paragraph (1) 2 shall promptly transfer the relevant written report and the evidence, etc. received from the reporter, etc. to the Securities and Futures Commission.

(6) The Securities and Futures Commission may verify matters necessary for specifying the reported or notified matter, such as personal information on the reporter, etc., the circumstances surrounding and the purport of reporting or notification, and other details thereof. In such case, the Securities and Futures Commission may request the reporter, etc. to submit necessary data within the extent necessary for verifying the authenticity of the relevant matter.

(7) Notwithstanding paragraph (2), a person who files a report on violations with the Securities and Futures Commission pursuant to paragraph (1) (including cases where such violations are reported orally pursuant to paragraph (3)) shall file a written report without stating the matters under subparagraph 1 of the same paragraph may be submitted. In such cases, if the relevant report has been resolved as a violation pursuant to the former part of Article 33 (1), the matters under paragraph (2) 1 may be submitted as determined by the Financial Services Commission. <Added on May 2, 2023>

Article 32(Mitigation of or exemption from measures on reporters) #

(1) The Securities and Futures Commission may mitigate or exempt the measures to be taken under Article 29 of the Act regarding the reporter, etc., pursuant to Article 28 (1) of the Act in accordance with the following classifications:

1. Where a reporter, etc. satisfies all of the following requirements: Mitigation or exemption of measures under Article 29 of the Act:

(a) The reporter, etc. has never played a leading role in the reported or notified violation, nor forced other persons involved to commit such violation;

(b) The reporting or notification has been made under the circumstances in which the Securities and Futures Commission, the auditor, and the statutory auditor has not obtained information on the violation reported or notified by the reporter, etc. or has obtained information about such violation without securing sufficient evidence;

(c) The reporter, etc. has reported or notified the relevant violation, provided evidence necessary for proving the violation, and cooperated until investigations are completed.

2. Where the reporter, etc. satisfies one or more of the requirements of each item of subparagraph 1: Mitigation of measures under Article 29 of the Act.

(2) Detailed standards for mitigation or exemption under each subparagraph of paragraph (1) shall be determined and publicly notified by the Financial Services Commission.

[This Article Wholly Amended on May 2, 2023]

Article 33(Rewards for reporters) #

(1) Pursuant to Article 28 (5) of the Act, the Securities and Futures Commission shall deliberate and decide on whether to and how much to grant a reward for reporting, taking into consideration the gravity of the reported violation and the reporter’s contribution to uncovering the violation or taking countermeasures against the violation, up to one billion won within four months from the date on which the reported act under paragraph (1) of the same Article is determined as a violation (except in extenuating circumstances). In such case, the Financial Services Commission shall pay the reward within one month from the date on which the deliberation and decision is made.

(2) Guidelines for granting rewards and other matters necessary therefor shall be determined by the Financial Services Commission.

Article 34(Inspection of compliance with recommendation for improvement after supervising quality control standards) #

(1) The Securities and Futures Commission may receive a plan for compliance with a recommendation for improvement, the result thereof, etc. from an auditor in writing pursuant to Article 29 (5) of the Act, and may conduct a field investigation where necessary.

(2) When an auditor fails to comply with the Securities and Futures Commission's recommendation for improvement by the deadline determined by the Financial Services Commission, the auditor shall report the reasons therefor and measures to be taken in the future to the Securities and Futures Commission without delay.

(3) Except as provided in paragraphs (1) and (2), detailed matters necessary for inspecting compliance with a recommendation for improvement shall be determined by the Financial Services Commission.

Article 35(Disclosure of recommendation for improvement after supervising quality control standards) #

(1) Pursuant to Article 29 (6) of the Act, the Securities and Futures Commission may disclose a recommendation for improvement under paragraph (5) of the same Article for a period not exceeding three years from the date such recommendation is made to the relevant auditor.

(2) Where an auditor fails to comply with a recommendation for improvement made under Article 29 (5) of the Act without good cause within one year from the date of receipt of such recommendation, the Securities and Futures Commission may disclose the noncompliance for a period not exceeding three years from the date on which it verifies the noncompliance, pursuant to Article 29 (7) of the Act.

(3) The Securities and Futures Commission shall hear the opinion of the relevant auditor before the disclosure under paragraphs (1) and (2).

(4) Except as provided in paragraphs (1) through (3), matters necessary for disclosing a recommendation for improvement, noncompliance therewith, etc. shall be determined by the Financial Services Commission.

Article 36(Publication of violations) #

(1) "Finance-related statutes prescribed by Presidential Decree, such as the Act on Real Name Financial Transactions and Confidentiality" in Article 30 (1) 4 of the Act means the statutes or regulations referred to in subparagraphs of Article 5 (1) of the Enforcement Decree of the Corporate Restructuring Investment Companies Act.

(2) "Financial institutions prescribed by Presidential Decree" in Article 30 (2) of the Act means the following financial institutions:

1. Banks authorized pursuant to the Banking Act (including persons deemed banks pursuant to Article 59 of the same Act);

2. Nonghyup Bank under the Agricultural Cooperatives Act;

3. Suhyup Bank under the Fisheries Cooperatives Act;

4. The Korea Development Bank established under the Korea Development Bank Act;

5. The Export-Import Bank of Korea under the Export-Import Bank of Korea Act;

6. The Industrial Bank of Korea established under the Industrial Bank of Korea Act;

7. Collective investment business entities, trust business entities, and merchant banks under the Financial Investment Services and Capital Markets Act;

8. Insurance companies under the Insurance Business Act;

9. The Credit Guarantee Fund established under the Credit Guarantee Fund Act;

10. The Technology Guarantee Fund established under the Korea Technology Finance Corporation Act.

11. Other financial institutions which request the Securities and Futures Commission to inform them of the results of supervision, etc. to reflect such results in examinations, etc. of credit offering to companies, etc.

Article 37(Liability for damage) #

(1) "Cases of not exceeding the amount prescribed by Presidential Decree" in Article 31 (5) of the Act means where the total of the recognized amount of income (referring to the recognized amount of income under subparagraph 9 of Article 2 of the National Basic Living Security Act) of a person claiming damages during the 12 months immediately preceding the month to which the date of claiming damages belongs shall be equal to or below 150 million won.

(2) The liability for additional amount of damages under Article 31 (6) of the Act shall be borne by persons liable for damages pursuant to the proviso of Article 31 (4) of the Act, excluding any person incapable of paying such damages, to the extent of 50 percent of their respective ratios of liability determined pursuant to the proviso of Article 31 (4) of the Act with respect to the amount of damages which cannot be paid by such incapacitated person.

Article 38(Purchase of compensation liability insurance policy) #

(1) "Indemnity insurance policy prescribed by Presidential Decree" in the proviso of Article 32 (1) of the Act means compensation liability insurance that satisfies all of the following requirements (hereafter referred to as "liability insurance" in this Article):

1. Insurance with coverage of at least an amount calculated by multiplying the number of certified public accountants who belong to an accounting corporation by 50 million won (or three billion won, if the amount so calculated is less than three billion won);

2. Insurance with coverage and deductibles borne by an accounting corporation per incident that conform to the standards determined by the Korean Institute of Certified Public Accountants after obtaining approval from the Financial Services Commission.

(2) Where an accounting corporation purchases a liability insurance policy, it shall notify the Korean Institute of Certified Public Accountants of the fact, along with evidential documents.

(3) Where an accounting corporation that purchases a liability insurance policy falls under any of the following cases, the Korean Institute of Certified Public Accountants shall return the annual reserves deposited by such accounting corporation pursuant to Article 32 (2) of the Act (including profits accrued from the operation of the annual reserves):

1. Where the liability insurance policy purchased by an accounting corporation provides coverage for liabilities incurred before purchasing the liability insurance policy;

2. Where liabilities incurred before purchasing the liability insurance policy are extinguished by the completion of extinctive prescription or any other cause.

Article 39(Reserves accumulated for joint fund for damages) #

(1) Pursuant to Article 32 (2) of the Act, each accounting corporation shall accumulate the following amounts as a basic reserve for the joint fund for damages under paragraph (1) of the same Article (hereinafter referred to as "joint fund"):

1. Where the number of certified public accountants who belong to the accounting corporation (the method of calculation thereof shall be determined by the Korean Institute of Certified Public Accountants; hereinafter the same shall apply) is less than 100: 50 million won;

2. Where the number of certified public accountants who belong to the accounting corporation is at least 100: 250 million won.

(2) The accumulation limit under Article 32 (2) of the Act shall be an amount equivalent to 20 percentage of the average of audit fees for two immediately preceding business years and for the relevant business year. In such case, when calculating the total reserves (referring to the sum of the accumulated amount of the basic and annual reserves that an accounting corporation shall accumulate for the joint fund and the profits from the operation of such reserves; hereafter the same shall apply in this Article and Article 42), the amount additionally accumulated under Article 29 (3) 3 of the Act shall be excluded therefrom.

(3) The annual reserves that each accounting corporation shall accumulate for the joint fund each year shall be an amount equivalent to four percent of their audit fees for the relevant business year; provided, the Financial Services Commission may require an accounting corporation to accumulate annual reserves at a different rate, taking into consideration the accounting corporation's increase in audit fees, total reserves, and actual balance of the joint fund under Article 33 (5) of the Act.

(4) Notwithstanding paragraph (3), the Securities and Futures Commission may allow an accounting corporation falling under Article 29 (3) 3 of the Act to additionally accumulate an amount not exceeding 3/100 of its audit fees for the immediately preceding business year as annual reserves.

(5) As regards the annual reserves additionally accumulated pursuant to paragraph (4) (excluding profits accrued from the operation of such reserves), the Korean Institute of Certified Public Accountants shall return, upon receipt of a claim from the accounting corporation that accumulated the reserves, the reserves with the lapse of the period given for the exercise of rights to claim damages under Article 31 (9) of the Act concerning auditing affairs that become the cause of additional accumulation; provided, where a lawsuit for a claim for damages under Article 31 of the Act is in progress on the ground of such auditing affairs as of the closing date of the period given for the exercise of rights to claim damages, such reserves shall be returned after a judgment on the lawsuit becomes final and conclusive.

Article 40(Timing to reserve joint fund) #

An accounting corporation shall accumulate the basic and annual reserves for the joint fund by the following deadlines:

1. Basic reserve: Within one year from the date of authorization for establishment; provided, where the number of certified public accounts increases during a business year to reach or exceed 100, the deadline shall be within the closing date of the following business year;

2. Annual reserves: Within three months from the closing date of each business year.

Article 41(Transfer of joint fund) #

(1) Pursuant to Article 32 (3) of the Act, an accounting corporation may transfer the joint fund to another firm, where it is dissolved due to a cause referred to in subparagraphs (excluding subparagraph 3) of Article 37 (1) of the Certified Public Accountant Act.

(2) Where an accounting corporation makes a transfer under paragraph (1), it may transfer the joint fund after the third anniversary (hereafter referred to as "transferable date" in this paragraph) of the date on which the relevant cause occurs (or the date of approval, where approval is required); provided,, where a lawsuit is pending in relation to the relevant accounting corporation's liability for damages under Article 31 of the Act as of the transferable date, the joint fund may be transferred from the date on which payment from the joint fund is completed in compliance with a final and conclusive judgment on the relevant lawsuit.

Article 42(Payment and limit of joint fund) #

(1) When the Korean Institute of Certified Public Accountants pays the joint fund pursuant to Article 33 (1) of the Act, it shall use the joint fund deposited by the accounting corporation that is liable for the causes of the relevant damages (hereafter referred to as "liable corporation" in this Article) first and shall use amounts deposited by other accounting corporations for deficiency, if any, in proportion to the amount deposited by each accounting corporation within the limit for each accounting corporation under paragraph (2) of the same Article (referring to an amount equivalent to twice as much as total reserves as of the end of the immediately preceding business year based on the date on which an accounting corporation files an application for the payment of the joint fund with the Korean Institute of Certified Public Accountants; hereafter the same shall apply in this Article). In such case, when calculating the limit for each accounting corporation, the amount additionally accumulated under Article 29 (3) 3 of the Act shall be excluded from their total reserves.

(2) Where the total amount of damages payable to each applicant in making payments pursuant to paragraph (1) exceeds the limit for each accounting corporation, the Korean Institute of Certified Public Accountants shall distribute such payments to applicants pro rata in accordance with the guidelines set by the Korean Institute of Certified Public Accountants within the limit for each accounting corporation.

(3) The limit for each applicant under Article 33 (2) of the Act shall be the smaller amount of either the amount of a final and conclusive judgment on damages of the relevant applicant or 30 million won.

(4) Pursuant to Article 33 (4) of the Act, the Korean Institute of Certified Public Accountants shall exercise the right to demand reimbursement of an amount paid in excess of the total reserves deposited by a liable corporation.

(5) Where the Korean Institute of Certified Public Accountants receives reimbursement pursuant to paragraph (4), it shall appropriate the reimbursement first for the portion paid from the joint fund deposited by other accounting corporations in proportion to the amount used therefrom.

(6) Where the actual balance of the joint fund falls short of the basic reserve due to the use of the joint fund, the Korean Institute of Certified Public Accountants shall require the relevant accounting corporation to accumulate the amount of deficiency within a fixed period not exceeding one year pursuant to Article 33 (5) of the Act; provided, a liable corporation shall accumulate the amount of deficiency immediately.

Article 43(Criteria for imposition of penalty surcharges, and imposition and collection thereof) #

(1) "Criteria prescribed by Presidential Decree" in the provisions, with the exception of the subparagraphs, of Article 36 (1) of the Act means the standards specified in Appendix 1.

(2) In imposing a penalty surcharge pursuant to Article 35 of the Act, notice of payment of the relevant penalty surcharge shall be given in writing in a manner prescribed and publicly notified by the Financial Services Commission, with the classification of the relevant violation and the amount of the penalty surcharge specified, and a person who receives such notice shall pay the penalty surcharge to a receiving institution designated and publicly notified by the Financial Services Commission within 60 days from the date of receipt of the notice.

Article 44(Entrustment of duty) #

(1) The Financial Services Commission shall entrust its duties concerning the examination of registration under Article 9-2 (1) of the Act to the Governor of the Financial Supervisory Service pursuant to Article 71 of the Act on the Establishment of Financial Services Commission.

(2) The Securities and Futures Commission shall entrust the following duties to the Governor of the Financial Supervisory Service in accordance with Article 38 (1) of the Act: <Amended on May 3, 2022; Dec. 19, 2023; May 20, 2025>

1. Receiving financial statements submitted by a company (excluding a stock-listed corporation) pursuant to Article 6 (4) of the Act;

1-2. Inspecting compliance with the deadline, methods, procedures, etc. for the submission of financial statements pursuant to Article 6 (4) of the Act and Article 8 of this Decree;

2. Where a stock-listed corporation submits its financial statements after the deadline under Article 6 (4) of the Act, receiving and publishing the reasons therefor pursuant to paragraph (5) of the same Article;

2-2. Receiving applications for deferment of requests for appointment of a designated auditor under Article 11 of the Act and Article 15 (2) of this Decree;

3. Receiving documents related to the designation of an auditor under Article 11 of the Act and Article 17 of this Decree, requesting the submission of data and examining such data, notifying the results of appointment or designation of a designated auditor, and conducting other execution-related duties;

4. Where a company reports the appointment or substitution of an auditor pursuant to Article 12 (2) of the Act, receiving and examining the details of the report;

5. Where a stock-listed corporation, large unlisted stock company or financial company reports the termination of an audit contract or the dismissal of an auditor pursuant to Article 13 (3) of the Act, receiving the details of the report;

6. Receiving a report on the opinion stated under Article 14 (2) of the Act;

7. Receiving a report on the termination of an audit contract under Article 15 (3) of the Act;

8. Receiving an audit report submitted pursuant to Article 23 (1) of the Act;

9. Making an audit report submitted by an auditor, available for the public inspection pursuant to Article 23 (2) of the Act;

Article 45(Specialized deliberative body) #

A specialized deliberative body may be established under the Financial Services Commission in order to support the performance of the duties of the Securities and Futures Commission under the Act and this Decree.

Article 46(Support for duties of financial supervisory service) #

To support the duties of the Financial Services Commission and the Securities and Futures Commission under the Act and this Decree, the Financial Supervisory Service may employ one accounting expert who has overall control over the relevant duties.

Article 47(Processing of sensitive information and personally identifiable information) #

The Securities and Futures Commission (including a person who is entrusted with the duties of the Securities and Futures Commission pursuant to Article 44) may manage information equivalent to criminal history records under subparagraph 2 of Article 18 of the Enforcement Decree of the Personal Information Protection Act, or data that contain a resident registration number, passport number, or alien registration number under subparagraph 1, 2 or 4 of Article 19 of the same Decree, where it is inevitable to conduct the following affairs:

1. Affairs such as supervision, etc. under Article 26 of the Act;

2. Affairs such as the request for the submission of data, investigation, etc. under Article 27 of the Act;

3. Affairs concerning the protection of a person who reports wrongful acts, provision of rewards to such reporter, etc. under Article 28 of the Act;

4. Affairs concerning the measures taken under Article 29 of the Act.

Article 48(Criteria for imposition of administrative fines) #

(1) When imposing administrative fines under Article 47 of the Act, the Governor of the Financial Supervisory Service may suggest imposing administrative fines to the Securities and Futures Commission, stating the fact of violation after investigating and verifying the relevant violation.

(2) The standards for imposing administrative fines under Article 47 (1) through (4) of the Act shall be specified in Appendix 2.

Article 49(Re-examination of regulations) #

The Financial Services Commission shall re-examine the feasibility of the subject of external audit under Article 5 every three years as of January 1, 2020 (referring to before January 1 of every third year) and take measures for improvement, etc.

[This Article Wholly Amended on Oct. 13, 2020]