Following amendments to an act ("The Act on External Audit of Stock Companies, etc") on October 31, 2017, many joint stock and limited companies operating in South Korea now have to face mandatory external audits. Moreover these firms will have their financial statements published on the Financial Supervisor Service's website.
Who does this affect?
All joint stock companies (known as Chusik Hoesa or CH entities) are now subject to external audit unless they meet three or more of the following factors:
- They have total assets less than KRW 12 B
- They have total liabilities less than KRW 7 B
- Their revenues are less than KRW 10 B
- They employed less than 100 employees in previous financial year
However, CH entities with total assets or revenues over KRW 50B, will be subject to an external audit in any circumstances.
Limited companies are also affected. Limited firms (known as Yuhan Hoesa or YH entities) will be required to appoint external auditors for their fiscal the year commencing on or after November 1, 2019. The exceptions are YH companies which meet three or more of the following factors:
- They have total assets less than KRW 12 B in previous financial year
- They have total liabilities less than KRW 7 B in previous financial year
- They have revenues less than KRW 10 B in previous financial year
- They employed less than 100 people in the previous financial year end
- They had less than fifty "members" at the previous financial year-end
However, YH entities with total assets or revenues over KRW 50 B are subject to external audit regardless of whether they meet more than three of the above factors.
Actions to take
If your subsidiary in Korea is not exempted, it needs to appoint an external auditor. The appointment must come no more than 45 days after the start of your financial year, and must be reported to the shareholder (or member in case of YH entity). The external auditor then needs to submit the audit report to the Securities & Futures Commission, and the Korean Institute of Certified Public Accountants.
Talk to TMF Group
Complying with these new regulations can be time-consuming and tricky. TMF Group South Korea can help. Our team of experts have in-depth knowledge of corporate secretarial services, so they can take care of the problem and allow you to focus on your core business activities.
Want to know more about our services? Talk to us.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.