Deloitte: Over 80% of Companies Flagged for Internal Accounting Issues Rated Themselves 'Unqualified' by Management

Published by the Center for Corporate Governance Development

It has been found that more than 80% of companies that received a qualified opinion from external auditors issued an unqualified opinion in their own assessments.

The Center for Corporate Governance Development at Deloitte Korea Group published the 14th edition of the ‘Corporate Governance Insight’ on June 17. This report comprehensively analyzed audit opinions on the financial statements and audit/review opinions on internal accounting management systems for 2,606 companies listed on the KOSPI, KOSDAQ, and KONEX markets.

According to the analysis, 97.5% of companies received an unqualified opinion on their financial statement audit reports, similar to the previous year's 97.6%. On the other hand, 81 companies (3.1%) received a qualified or adverse audit or review opinion from external auditors, a decrease of 5 companies compared to the previous year. Among these, 60 companies (74%) also received a qualified opinion on their financial statement audits.

Among the 81 companies that received a qualified opinion on their internal accounting management systems, a total of 331 deficiencies were identified from an internal control perspective. The most common reason was 'inappropriate acts by top management,' accounting for 24.5% of the total. This was followed by scope limitation (15.1%), restatement of financial statements during the current audit (10.6%), inadequate control over non-routine transactions (9.4%), and insufficient control over funds (8.2%).

A Deloitte representative stated, “The full report and card news can be found on the Deloitte Korea Group website.”

Han-seok Kim, Head of the Center for Corporate Governance Development at Deloitte Korea Group, emphasized, “In order to resolve the discrepancies between the evaluations of external auditors and those of management and audit (committees), it is essential to have reliable self-assessments and smooth communication. As a governance structure with checks and balances is a key infrastructure supporting sustainable corporate growth, it is crucial to enhance the effectiveness of internal controls through effective supervisory activities.”

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