Falling Audit Fees for Listed Companies... FSS Vows Zero Tolerance for Declining Audit Quality

"Audit hours are also decreasing as audit fees decline"

As concerns over declining audit quality due to overheated competition over audit fees continue, the Financial Supervisory Service (FSS) convened the heads of audit divisions from major accounting firms.

The FSS announced on June 14 that it held a meeting with the heads of audit divisions from 12 accounting firms at its Yeouido office in Seoul on June 10.

The meeting was organized to prevent deterioration in audit quality amid intensifying competition driven by falling audit fees. Recently, audit fees have been declining and competition has grown fiercer. The average audit fee for listed companies dropped steadily from 265 million won in 2023 to 252 million won last year. For this year, considering only companies with a December year-end closing, the average audit fee has fallen further to 246 million won.

Yoon Jeongsuk, a senior deliberation committee member at the FSS, stated, "We have observed a trend where a decrease in audit fees is accompanied by a reduction in audit hours," and emphasized, "If audit hours decrease excessively in the future without reasonable grounds, we will initiate auditor inspections as well as reviews and inspections of financial statements."

She added, "Establishing a reliable system for managing audit hours at accounting firms is a core requirement for auditors of listed companies. The actual audit hour data forms the basis for external audit systems such as the standard audit hour system, so thorough management is essential."

The committee also provided guidance regarding information security when utilizing artificial intelligence (AI) in audit work. Yoon said, "AI technology has significant potential to improve audit efficiency and enhance audit quality, so we encourage its active use. However, it is vital to ensure strict information security so that audit information is not leaked externally and public trust in accounting audits is not compromised during the process."

Additionally, Yoon expressed the FSS's commitment to improving the audit designation system, stating, "We will steadily push ahead with reforms to expand auditor designation for firms with high audit quality."

The FSS plans to hold a research seminar on June 24 to gather expert opinions on improving the review and inspection system. Currently, the FSS is pursuing the expansion of personnel and the advancement of inspection tools to shorten review and inspection cycles and strengthen the soundness of the capital market.

An FSS official stated, "Next month, we will continue efforts for meaningful communication by providing guidance on major supervisory issues through an information session for auditors of listed companies."

This content was produced with the assistance of AI translation services.