Lee Chanjin: "Listed-Company Inspection Cycle to Be Cut from 20 Years to as Few as 3"

Shortens cycle beyond previous targets of 10 years for KOSPI and five years for KOSDAQ

The Financial Supervisory Service (FSS) will sharply shorten its accounting review and inspection cycle from 20 years to three to five years. This is an even shorter cycle than the current 10 years for KOSPI-listed companies and five years for KOSDAQ-listed companies.

Financial Supervisory Service Governor Lee Chanjin answers lawmakers' questions during a parliamentary audit of the Financial Supervisory Service and other agencies at the National Assembly on Oct. 19, 2026. Photo by Yoon Dongju

On the morning of Nov. 10, FSS Governor Lee Chanjin held a meeting with chief executives (CEOs) and experts from eight accounting firms at the FSS conference room in Yeouido, Seoul. He said, "We will significantly shorten the accounting review and inspection cycle to improve the timeliness of supervision."

Lee stressed the need to establish a regular review system on par with those in advanced economies such as the United States and the United Kingdom. To that end, the FSS plans to expand the teams and staff responsible for reviews and inspections and strengthen its inspection tools. In the United States, the review cycle for all listed companies is three years, while in the United Kingdom, the cycle is five years for 350 FTSE-listed companies. By contrast, South Korea's review cycle for listed companies is about 20 years.

The FSS has brought forward its target for shortening the cycle. It had previously planned to reduce the accounting review and inspection cycle for domestic listed companies over the medium to long term to 10 years for KOSPI-listed companies and five years for KOSDAQ-listed companies.

The FSS also plans to strengthen oversight to improve audit quality. "Concerns about declining audit quality are growing as excessive competition among accounting firms for audit engagements has recently driven down audit fees, reducing the staff and time devoted to audits," Lee said. "We will select firms for regular auditor inspections based on each accounting firm's risk level, and conduct additional, targeted reviews and inspections of companies and auditors showing signs of deficient audits." He added, "We will also oversee whether the 'Audit Quality Oversight Committee' to be established within large accounting firms is faithfully carrying out its intended role."

Lee also expressed his determination to impose strict sanctions for accounting fraud and violations resulting from inadequate internal controls at accounting firms. "If accounting fraud involving a high degree of intent is discovered, we will apply a zero-tolerance policy and impose strict sanctions," he said. "We will make sweeping improvements to the system so that accounting firms can be held more broadly and strictly accountable for their responsibility to oversee and manage internal controls."

Finally, Lee urged accounting firms to build their professional capabilities ahead of the introduction of a new accounting standard. Starting next year, International Financial Reporting Standard (IFRS) 18 will take effect, classifying income and expenses that do not fall under categories such as investing and financing as operating profit or loss. "As the basic structure of the income statement is changing for the first time in about 15 years, accounting firms should develop their own expertise in the new standard and carry out audits diligently to help it take root in the market smoothly," Lee said.

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