Due to the amendment to the Act on External Audit of Stock Companies in 2018 together with the relevant Enforcement Decree and Rules, the new audit thresholds are as follows:
Jusik Hoesa or Stock Company (“SC”)– when a SC meets at least two of the following four conditions at the end of the prior financial year, the company is subject to a statutory audit.
· Total assets of KRW 12 billion or more
· Total liability of KRW 7 billion or more
· Revenue of KRW 10 billon or more
· The number of employees of 100 or more
Yuhan Hoesa or Limited Company (“LC”) – when a LC meets at least three of the following five conditions at the end of the prior financial year, the company must undergo a statutory audit.
· Total assets of KRW 12 billion or more
· Total liability of KRW 7 billion or more
· Revenue of KRW 10 billon or more
· The number of employees of 100 or more
· Total members (unitholders) of 50 or more
Regardless of the company type, if a company had total assets of KRW 50 billion or more at the end of the prior financial year or derived revenue of KRW 50 billion for the prior financial year, the company must undergo a statutory audit.
Further, in case a company is subject to a statutory audit based on the prior year's financials for the first time (i.e. first-year audit), the company must appoint an auditor within 4 months from the commencement of the financial year that the company is subject to a statutory audit. In the subsequent years, the company must appoint an auditor within 45 days from the commencement of the relevant financial year.
Such auditor appointment must be reported to the authority within 2 weeks from the appointment date.
If a company does not appoint its auditor for the required statutory audit within the said time frame, the regulatory authority will designate an external auditor with respect to the statutory audit.
Even though a company is not required to undergo a statutory audit, it may want to have its financial statements audited for various reasons. In such cases, the aforesaid rules for appointing an external auditor do not apply. This type of audit is referred to as a voluntary audit in comparison to a statutory audit.
If you have any questions regarding statutory audit in Korea, please feel free to contact our UHY International Partner, Justin Chun at info@uhy.co.kr.
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