Under the current Act and its Enforcement Decree, the mandatory (external) audit requirements apply to the below companies in Korea:
- Listed in Korea; or
- Total asset exceeds KRW 12 billion; or
- Total asset and liability exceed KRW 7 billion; or
- The number of employees is over 300 and total asset exceeds KRW 7 billion
It’s been controversial that the above criteria are too loose for certain business in Korea. For example, limited liability companies (LLCs) with huge revenue were not required for external audit in Korea.
On April 19, 2018, the Financial Services Commission (FSC) announced and proposed amendments to the Enforcement Decree of the Act on External Audit of Stock Companies that will provide for enhanced independent external audit regime.
The amended Act brings a revenue threshold (KRW 10 billion) to the existing criteria. Also, in additional to listed companies and prospective listed companies, other companies will be subject to external audit unless they are small-sized companies.
The amended Act becomes effective on November 1, 2018. It is advisable the companies to review this Act and be prepared for external audit, if necessary.
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