Regulators are mulling over an accounting reform scheme that would require listed companies to change audit firms periodically.
The Financial Supervisory Service (FSS) said yesterday it is studying the potential impact of requiring a firm listed on the Korea Stock Exchange and the Kosdaq market to rotate all accountants in charge of the firm’s audit every five or six years.
An FSS official said, “If the new regulation is adopted, regulators would be able to place restrictions easily on accounting firms that try to sell non-audit services such as consulting and tax-payment strategy.’’
Five large accounting firms, including Youngwha, Samil and Ahn Kwon & Co., have increased their revenue significantly by offering consulting services and tax strategies to clients.
FSS officials are discussing the measure, under which the FSS would impose limited restrictions on consulting by auditors.
Since the beginning of last year, the FSS has been trying to make accounting firms more independent and end the dual role of providing auditing services along with consulting work.
Most accounting firms ardently oppose rotating auditors and restricting non-audit services.
Asked about limiting auditors to a certain period, a local accountant said changing auditors will not eliminate fraud as long as CEOs want to cook books.
Currently, the local accounting industry has preferred self-regulation by the Korean Institute of Certified Public Accountants, FSS officials said.
Now the FSS plans to draft a bill for the right to investigate accounting firms directly, just as it regulates banks, brokerages, insurers and credit card companies.