FSS plans to bolster audits of local companies this year

The headquarters of the Financial Supervisory Service (FSS), located in Seoul's financial district, Yeouido / Newsis

By Anna J. Park

The Financial Supervisory Service (FSS) plans to strengthen its audits of local companies, aiming to prevent accounting irregularities as witnessed recently in companies like Osstem Implant in times of growing global economic uncertainty.

The financial authority said Sunday it will examine 180 local companies this year, along with 17 accounting firms. The FSS also plans to expand the scope of corporate audit screenings further in the future, by streamlining its audit and sanction processes.

Around 100 of the companies are expected to have their financial records evaluated, while some 50 firms will be scrutinized more thoroughly due to confirmed wrongdoings or alleged violations. The number of accounting firms that will be screened has also risen to 17 from 13 last year.

The financial supervisory agency also plans to maintain a close consultative partnership with the U.S.-based Public Company Accounting Oversight Board (PCAOB), a nonprofit corporation established by the U.S. Congress to oversee and protect investors and public interests, when it comes to any joint audits of local accounting firms.

In its move to strengthen the auditing of local companies, the FSS' priorities are in advancing the country's regulative framework for accounting. Companies that face higher risks of fraudulent accounting, such as wrongful internal contracts between the subsidiaries of a conglomerate, are particularly subject to the FSS' strengthened audit regulations. The financial authority aims to induce accounting firms' enhanced audit capabilities through the audit screenings and strengthened sanctions.

“By strengthening preventive audit screenings as well as punitive sanctions, the FSS aims to reduce attempts of accounting fraud and to contribute to establishing order in the capital market,” an official from the FSS said.