External Audit Requirements for Korean Stock Companies and Limited Liability Companies
Hyun-min Chang Managing Partner
Request a consultation1. Relevant Regulations
The Republic of Korea specifies the criteria for corporations (companies) that must undergo external audits by CPA(Certified Public Accountants) in the Enforcement Decree of the Act on External Audit of Stock Companies (hereafter referred to as the "External Audit Act"). The criteria are as follows:
2. Stock Companies
Companies that meet any of the following criteria:
1. Companies with total assets of 50 billion won (approximately USD 37.5 million) or more at the end of the previous fiscal year
2. Companies with annual sales of 50 billion won (approximately USD 37.5 million) or more in the previous fiscal year (if the previous fiscal year is less than 12 months, it is converted to 12 months, and less than 1 month is considered as 1 month. The same applies hereafter)
3. Companies that meet two or more of the following conditions:
a. Total assets of 12 billion won (approximately USD 9 million) or more at the end of the previous fiscal year
b. Total liabilities of 7 billion won (approximately USD 5.25 million) or more at the end of the previous fiscal year
c. Sales of 10 billion won (approximately USD 7.5 million) or more in the previous fiscal year
d. 100 or more employees (referring to workers as defined in Article 2, Paragraph 1, Item 1 of the Labor Standards Act, excluding certain categories) at the end of the previous fiscal year
3. Limited Companies
Companies that meet any of the following criteria:
1. Companies with total assets of 50 billion won (approximately USD 37.5 million) or more at the end of the previous fiscal year
2. Companies with sales of 50 billion won (approximately USD 37.5 million) or more in the previous fiscal year (if the previous fiscal year is less than 12 months, it is converted to 12 months, and less than 1 month is considered as 1 month. The same applies hereafter)
3. Limited liability companies that meet three or more of the following conditions: a. Total assets of 12 billion won (approximately USD 9 million) or more at the end of the previous fiscal year
b. Total liabilities of 7 billion won (approximately USD 5.25 million) or more at the end of the previous fiscal year
c. Sales of 10 billion won (approximately USD 7.5 million) or more in the previous fiscal year
d. 100 or more employees at the end of the previous fiscal year
e. 50 or more members (referring to members registered in the articles of incorporation according to Article 543, Paragraph 2, Item 1 of the Commercial Act) at the end of the previous fiscal year
In other words, while stock companies and limited companies have similar criteria for external audits, stock companies become subject to external audits if they meet two or more requirements, whereas limited companies must meet three or more requirements to be subject to external audits, indicating slightly more relaxed conditions for limited companies.
However, unlike in the past when limited companies were not subject to external audits at all, the need to establish limited companies for the purpose of information disclosure has decreased since the revision of relevant laws in 2018.
※ As of 2023, discussions are underway to amend relevant laws to require external audits for limited liability companies as well.
4. External Audits and Information Disclosure
According to Article 23 of the External Audit Act, external audit reports must be submitted to the Securities and Futures Commission, and the submitted audit reports can be viewed by anyone through the Korean electronic disclosure system.
Link to the Korean electronic disclosure site(English Version)
