Country
South Korea
1. Organization
The Financial Services Commission (FSC)
The Act on the Establishment, etc. of Financial Services Commission
Responsibility for public oversight rests with the Financial Services
Commission (FSC), which includes the Securities and Futures Commission
(SFC), and the Financial Supervisory Service (FSS).
The FSC was established for the purpose of protecting the integration of
Korea’s financial markets by promoting sound credit system and fair
business practices as a government organization in February 2008. To this
end, the FSC serves as a consolidated policy making body for all matters
pertaining to supervision of the financial industry. Its responsibilities also
include the public oversight of auditors.
In particular, it
a. can propose new laws with respect to the oversight of auditors
b. exercises oversight over the registration, suspension and de-registration
of audit firms and of individual auditors.
c. sets the requirements for the qualification of individual auditors
d. has overall responsibility for the management of the Korean CPA
examinations.
The Securities and Futures Commission (SFC) was set up under the FSC to
oversee securities and futures markets. More specifically, the SFC
supervises capital markets and reviews audit activities. With respect to
audit regulation and oversight, the SFC reviews accounting and audit
standards for approval by the FSC. It also has the authority to issue
sanctions against publicly traded companies and auditors.
The Financial Supervisory Service, the executive arm of the FSC, reviews
financial reports filed by publicly-held companies, carries out quality
control reviews of audit firms, enforces accounting and auditing standards,
provides interpretations of accounting rules, and administers the CPA
examination.
2. Board
Composition and
Members
The FSC is led by nine Commissioners including the Chairman and the Vice
Chairman. The Chairman is appointed by the President on the
recommendation of the Prime Minister. The Vice Chairman and the two
standing Commissioners are appointed by the President on the
recommendation of the FSC Chairman. The other five Commissioners are
non-standing Commissioners. Four of them are ex-officio Commissioners:
Vice Minister of the Ministry of Strategy and Finance, Governor of the
Financial Supervisory Service, Deputy Governor of the Bank of Korea, and
the President of the Korea Deposit Insurance Corporation. The other nonstanding Commissioner is appointed on the recommendation of the
Chairman of the Korea Chamber of Commerce and Industry.
Chairman (Full-time)
Seok-Dong Kim
Vice Chairman (Full-time)
Kyung-Ho Choo
Standing
Commissioner
(Full-time)
Sang-Che Lee
Non-Standing
Commissioner
Ex-officio Commissioner
(vacancy)
In-Sook Shim
Jae-Yoon Shin
Hyouk-Se Kwon
Ju-Yeol Lee
Seung-Woo Lee
Former Vice Minister, Ministry of
Finance and Economy (MOFE)
Former Director General, Financial
Policy Bureau, FSC
Former Senior Fellow, Financial
Markets & System Division, Korea
Institute of Finance (KIF)
Professor of Law School, ChoongAng University
Vice Minister of Strategy and
Finance
Governor
of
the
Financial
Supervisory Service
Senior Deputy Governor of the
Bank of Korea
President of the Korea Deposit
Insurance Corporation
The SFC is led by five commissioners. The Vice Chairman of the FSC
concurrently serves as the Chairman of the SFC. One of the commissioners
other than the Chairman is a standing commissioner. The commissioners are
appointed by the President on the recommendation of the Chairman of the FSC
and must meet at least one of the following requirements:
- A senior government official who possesses extensive knowledge and
experience in the fields of finance, securities, derivatives, and/or accounting
or a member of the Senior Executive Service of the government;
- A person who has a degree in law, economics, business management, or
accounting and has served as a university faculty member or a researcher for
at least fifteen years; and/or
- A person who possesses extensive knowledge and experience in finance,
securities, derivatives, and/or accounting.
The Financial Supervisory Service is headed by the Governor. The law
provides that up to four Senior Deputy Governors and nine Deputy Governors
can be appointed together with an General Auditor.
There is no legal cooling-off period requirement for former auditors to
become a commissioner or a member of the board but they are subject to
two-year post-employment restrictions.
Are the majority of the governing body non-practitioners : YES
3. Funding
arrangements
Whereas the FSC and the SFC are funded out of the government budget,
the FSS is funded by the Bank of Korea and levies on the financial services
industry as well as fees for securities issuance. The FSS budget is approved
by the FSC.
Is the funding free from undue influence by the profession : Yes
4. Inspection
system
The FSS directly inspects major audit firms falling into the following
categories:
(1) Audit 1% or more of all listed companies;
(2) Audit listed companies whose assets are no less than KRW1 trillion
(approximately US$1 billion);
(3) Have no fewer than 30 CPAs; or
(4) Are deemed subject to SFC and FSS inspection because of audit
oversight by foreign regulators.
The FSS inspect the “Big 4” accounting firms every two years and the other
firms, every three to five years.
The KICPA inspects the remaining audit firms and reports the inspection
results to the SFC.
Do you have the responsibility for recurring inspections of audit firms
undertaking audits of public interest entities : YES
Is this responsibility directly or through oversight of inspection undertaken
by professional bodies : Directly
5. Audit and
Financial Market
As of the end of December 2011, a total of 19,576 companies were subject to
independent external audit. Of these, 1,779 were publicly-held companies.
Under the law, all publicly-traded companies with assets of KRW10 billion
or more are subject to independent external audit.
All the audit firms are inspected by either the FSS or the KICPA. The audit
firms under the FSS’ inspection account for some 83% of the audit of listed
companies in Korea and the Big 4 audit firms account for approximately
56% of the audit of listed companies.
6. Main other
tasks performed
by Member
Registration
All audit firms and CPAs are required to register with the FSC.
Education
The KICPA provides training to CPAs and determines matters necessary
for training and supervising after the FSC approval.
Standard setting
The FSC has the authority to set accounting standards after deliberation by
the SFC. But the FSC delegated the authority to establish, revise, and
interpret accounting standards to the Korea Accounting Institute in
deference to their accounting expertise. The FSC may request the KAI to
revise accounting standards when it deems necessary to protect
stakeholders and to bring the standards in line with international
standards. Since 1997, the International Accounting Standards (IAS) has
been used as the benchmark for Korea’s accounting standards as part of
Korea’s effort to ensure global comparability. Beginning 2011, all listed
companies in Korea must comply with IFRS.
Korea’s auditing standards are set by the KICPA and approved by the FSC.
The KICPA benchmarked the International Standards on Auditing (ISA) in
drawing up auditing standards for Korea.
7. Other
information
8. Major Events
and Activities
Please see 1. Organization above for other tasks.
FSC/SFC
38 Yeoui-Daero, Youngdeungpo-Gu, Seoul 150-743, Korea
Tel: 00 82 2 2156 9923
Website: www.fsc.go.kr
Contact person : Joosung Kook, jkook@korea.kr
FSS
38 Yeoui-Daero, Youngdeungpo-Gu, Seoul 150-743, Korea
Tel : 00 82 2 3145 7710Website: www.fss.or.kr
Contact Person : Sang Won Kim, kswon@fss.or.kr
In 2011, the FSS performed 10 inspections of audit firms.