Google & Apple to take external audit due to ¡®tax evasion¡¯¡¦ Application as of 2020
Kim Dong Wook | east@ | 2018-04-09 11:17:29

Foreign global companies such as Google Korea, Apple Korea and Microsoft Korea shall be audited by external auditors from 2020. These foreign IT companies have benefited enormously from the domestic market, but they have been excluded from the disclosure of financial information because they are limited companies. There has been a constant controversy over avoiding offshore tax evasion, market monopolies, and network fee burden. However, from 2020 onward, these global companies are expected to be the starting point of transparent management by disclosing major financial and management information such as assets, liabilities, sales, and number of employees.

The Financial Supervisory Commission, on April 8, announced that it has prepared an amendment to the Enforcement Decree of the External Audit Law, which includes adding a limited liability company to the external audit target. The core of the amendment to the Enforcement Decree of the External Audit Act is the extension of external auditing standards from corporation to Limited Liability Company.

The Korean subsidiary of foreign global companies such as Google, Apple, and Facebook is newly included in the external audit target. The external audit of a limited liability company will be applied for the first business year since November 2019. If a company makes an accounting settlement at the end of December, it will be applied from 2020.

Park Jung-hoon, director of the finance and capital market, mentioned, "We will apply the same standards to joint-stock companies and limited companies," he said. "About 3,500 of the limited companies are required to undergo external audits." As a result, only 28,900 joint-stock companies have been audited, but after the revision of the enforcement decree, a total of 31,300 companies including 3500 limited companies were audited, and the resulting financial information and management information should be disclosed. In the case of unlisted small corporations that fall under three of the four categories, including assets less than 10 billion won, liabilities less than 7 billion won, employees less than 100 employees, and sales less than 10 billion won, exempted from external audit except for investment companies in the form of limited companies.

The exception to the `6 + 3` auditor designation system is also limited. The 6 + 3 Auditor Designation System is a system in which, the listed company, ownership and management are not separated. The large-size unlisted company elects the auditor designated by the Securities and Futures Commission for three years after freeing the auditor for six consecutive years.

As a result of the Supervisory Board`s supervision within the last 6 years, an amendment to the amendment provides an exception to the auditor designation clause for those companies for which no accounting fraud has been found and which are committed to replacing the next auditor by them.

In this case, it is necessary to apply for supervision one year before the designated date. If the Supervisory Board considers that the application of the internal accounting control system of the applicant company and the examination of past financial statements are necessary, it is possible to reject the application.

Besides, the scope of the corporation for which the Supervisory Board appoints an auditor by direct authority is expanded. If you do not fulfill the obligation to submit financial statements to KOSPI, or if you are designated as a venture capitalist in the KOSDAQ market, or if you do not submit the necessary data to KOSPI, you will become a designated company. However, in order to prevent excessive increase of corporate burden due to the appointment of auditors, the Company plans to expand the provision of accounting interpretation, establish guidelines for designated audit fees, and operate an abuse reporting center for auditors. We have also laid the groundwork for adjusting the timing of the designation so that auditor designation is not overly concentrated in a particular year.

As a result of the financial simulation, it is expected that 630 companies, 32% of listed companies in 2020, will be designated as the first year of auditor designation.

Accordingly, at the end of next month, the Financial Supervisory Commission will revise the regulations so that about 200 to 250 companies will be designated in accordance with the criteria such as the debt-to-equity ratio.

Also, a group of four large accounting corporations called "Big 4" will be newly established in the designated auditing assignment standard, and plans to increase the fairness of the assignment audit of the large-sized and small-sized accounting law human designation will be included in the regulations.

As a way to reduce the concentration of the general shareholders `meeting, the shareholders` meeting was held after March 31, and the time for submitting the financial statements to the auditor was changed to 6 weeks before the submission of the report.

The Financial Supervisory Commission plans to revise the Enforcement Ordinance by mid-August, and the Financial Supervisory Commission to announce legislation at the end of next month. In the second half of the year, standard audit times are announced and auditing standards are revised.

By Kim Dong Wook east@


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