CPA attorney, in what cases does a company become subject to an external audit?

Hello. This is a CPA attorney at Daeryun Law LLC.

Whether a company is subject to an external audit is determined by statutory criteria such as assets and revenue, and strict deadlines apply to the procedures for appointing an auditor and for reporting.

Companies subject to an external audit are classified according to whether they are listed and their financial size.

In the case of a stock-listed corporation, if the total assets for the immediately preceding year or the annualized revenue is 50 billion won or more, it is subject to an external audit.

In the case of a non-listed corporation, if it meets two or more of the following requirements, it becomes subject to an external audit.

① Revenue of 10 billion won or more

② Number of employees of 100 or more

③ Assets of 12 billion won or more

④ Liabilities of 7 billion won or more

When a company becomes subject to an external audit, it must first appoint an external auditor, and as a rule, the appointment is made within 45 days after the beginning of the business year with the approval of the audit committee or the auditor.

However, in the case of an initial audit (the first audit after becoming subject to an external audit), the appointment is exceptionally permitted up to within four months after the beginning of the business year.

After appointing the auditor, the company must report to shareholders at a regular general meeting or notify shareholders by document or internet announcement, and it must submit a report on the appointment to the Financial Supervisory Service within two weeks after concluding the external audit contract.

If these procedures or deadlines are not observed, this may lead, regardless of intent, to an administrative fine, a criminal fine, or criminal liability, so caution is required.

Because everything from determining whether a company is subject to an external audit to appointing and reporting the auditor is an area where accounting and law arise at the same time, it is advisable to check in advance through the advice of a CPA attorney.