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ACT ON EXTERNAL AUDIT OF STOCK COMPANIES

Wholly Amended by Act No. 15022, Oct. 31, 2017

Amended by Act No. 15040, Nov. 28, 2017

CHAPTER I GENERAL PROVISIONS
 Article 1 (Purpose)
The purpose of this Act is to protect interested persons and to contribute to the sound growth of companies and the development of the national economy by prescribing matters necessary for the accounting management of companies subject to external audit and auditing conducted by external auditors.
 Article 2 (Definitions)
The definitions of terms used in this Act shall be as follows:
1. The term "company" means a stock company or a private limited company subject to external audit under Article 4 (1);
2. The term "financial statement" means all of the following documents:
(a) Statement of financial position (referring to the balance sheet under Articles 447 and 579 of the Commercial Act);
(b) Income statement or all-inclusive income statement (referring to the income statement under Articles 447 and 579 of the Commercial Act);
(c) Other documents prescribed by Presidential Decree;
3. The term "consolidated financial statements" means all of the following documents prepared by a parent company where a company and other companies (including any unincorporated company, such as an association) have a parent-subsidiary relationship prescribed by Presidential Decree (hereinafter referred to as "parent company"):
(a) Consolidated statement of financial position;
(b) Consolidated income statement or consolidated all-inclusive income statement;
(c) Other documents prescribed by Presidential Decree;
4. The term "stock-listed corporation" means a stock-listed corporation under Article 9 (15) 3 of the Financial Investment Services and Capital Markets Act, among stock companies;
5. The term "large unlisted stock company" means a company that is not a stock-listed company among stock companies, with total assets at the end of the immediately preceding business year of at least the amount prescribed by Presidential Decree;
6. The term "executive officer" means a director, a statutory auditor (including members of an audit committee under Articles 415-2 and 542-11 of the Commercial Act (hereinafter referred to as "audit committee")), an executive director under Article 408-2 of the Commercial Act, or a person who falls under any subparagraph of Article 401-2 (1) of the same Act;
7. The term "auditor" means any of the following persons:
(a) An accounting corporation under Article 23 of the Certified Public Accountant Act (hereinafter referred to as "accounting corporation");
(b) An audit team registered with the Korean Institute of Certified Public Accountants established under Article 41 of the Certified Public Accountant Act (hereinafter referred to as the "Korean Institute of Certified Public Accountants"), as prescribed by Ordinance of the Prime Minister (hereinafter referred to as "audit team");
8. The term "audit report" means a report prepared by an auditor in which he/she states an auditor's opinion after auditing the financial statements prepared by a company pursuant to Article 5 (3) (in cases of a company that prepares consolidated financial statements, including such consolidated financial statements; hereinafter the same shall apply) in accordance with the standards for accounting audit referred to in Article 16.
 Article 3 (Relationship with other Acts)
(1) Any enactment or amendment of other Acts related to the external audit of a company shall conform to the purpose and the basic principles of this Act.
(2) If the provisions of the Financial Investment Services and Capital Markets Act concerning an audit conducted by a certified public accountant differ from those of this Act, the former shall apply: Provided, That the same shall not apply to any matters concerning the accounting standards of a company.
CHAPTER II COMPANIES AND AUDITORS
 Article 4 (Companies Subject to External Audit)
(1) Each of the following companies shall prepare financial statements and undergo an audit performed by an external auditor who is independent of the company (the auditor of the financial statements and the auditor of the consolidated financial statements shall be the same person; hereinafter the same shall apply):
1. A stock-listed corporation;
2. A company that intends to be a stock-listed corporation in the relevant business year or the following business year;
3. Any other company that meets the standards prescribed by Presidential Decree in terms of assets, liabilities, number of employees or sales, as at the end of the immediately preceding business year: Provided, That, if the relevant company is a private limited company, this requirement shall be limited to a private limited company that meets the standards prescribed by Presidential Decree in consideration of the number of employees and the period after the organization was converted to a limited company, etc., in addition to the requirements prescribed in the main sentence.
(2) Notwithstanding paragraph (1), any of the following companies need not undergo an audit conducted by an external auditor:
1. Any company other than a stock-listed corporation among the companies designated as a public corporation or a quasi-government agency under the Act on the Management of Public Institutions;
2. Any other company prescribed by Presidential Decree.
 Article 5 (Standards for Accounting)
(1) The Financial Services Commission shall determine the accounting standards for a company classified as follows, after deliberation by the Securities and Futures Commission established under the Act on the Establishment, etc. of Financial Services Commission (hereinafter referred to as the "Securities and Futures Commission"):
1. Accounting standards determined by adopting the International Financial Reporting Standards of the International Accounting Standards Board;
2. Other standards for accounting determined in accordance with this Act.
(2) Accounting standards under paragraph (1) shall be made to ensure the uniformity and objectivity of accounting of a company and of an audit by an auditor.
(3) Each company shall prepare financial statements in accordance with any of the accounting standards stipulated in any subparagraph of paragraph (1). In such cases, the scope of companies subject to the accounting standards referred to in paragraph (1) 1 and the methods of applying the accounting standards shall be prescribed by Presidential Decree.
(4) The Financial Services Commission may entrust tasks prescribed in paragraph (1) to any private corporation or organization that has expertise in such tasks, as prescribed by Presidential Decree.
(5) When it is deemed necessary to protect interested persons, to conform to the international standards, etc., the Financial Services Commission may request the private corporation or organization entrusted with such tasks under paragraph (4) (hereinafter referred to as "institution for setting standards for accounting") to revise the details of the accounting standards after deliberation by the Securities and Futures Commission. In such cases, the institutions for setting standards for accounting shall comply with such request, except in extenuating circumstances.
(6) The Financial Supervisory Service established under the Act on the Establishment, etc. of Financial Services Commission (hereinafter referred to as the "Financial Supervisory Service") may subsidize the institution for setting standards for accounting, as prescribed by Presidential Decree, within the limit of 8/100 of the alloted charge collected by the Financial Supervisory Service under Article 442 (1) of the Financial Investment Services and Capital Markets Act.
(7) The institution for setting standards for accounting shall compile a budget for the total revenue and the total expenditure for each business year and report it to the Financial Services Commission at least one month before the start of the relevant business year.
 Article 6 (Responsibility for Preparation, and Submission, of Financial Statements)
(1) The representative director and the executive officer for accounting (in the absence of the executive officer for accounting, referring to an employee responsible for performing accounting affairs; hereinafter the same shall apply) of a company shall be responsible for the preparation of the company’s financial statements.
(2) Each company shall prepare financial statements for a relevant business year and submit them to an auditor within the period prescribed by Presidential Decree.
(3) If a company which is a corporation subject to submitting a business report under Article 159 (1) of the Financial Investment Services and Capital Markets Act fails to submit financial statements to its auditor within the fixed period as prescribed in paragraph (2), it shall publicly announce the grounds therefor within 14 days after the public announcement of the business report.
(4) A company which is a stock-listed corporation or prescribed by Presidential Decree shall submit matters prescribed by Presidential Decree to the Securities and Futures Commission, among the financial statements submitted to the auditor under paragraph (2). In such cases, matters necessary for the submission, such as the deadline, methods, procedures, etc. therefor, shall be prescribed by Presidential Decree.
(5) If a company which is a stock-listed corporation fails to meet the deadline for submission referred to in paragraph (4), it shall submit the reasons therefor not later than the day following the expiration date of the period for submission. In such cases, the Securities and Futures Commission shall publicly announce the relevant reasons therefor in accordance with the method prescribed in Article 163 of the Financial Investment Services and Capital Markets Act.
(6) No auditor of a company or any certified public accountant employed by the auditor shall prepare the company’s financial statements on behalf of the representative director and the executive officer for accounting of the company, nor engage in any conduct prescribed by Presidential Decree, such as advising on accounting related to preparation of the financial statements; and the relevant company shall not request the auditor and a certified public accountant employed by the auditor to engage in such conduct.
 Article 7 (Authority of Parent Company)
(1) A parent company may inspect or copy the books and documents concerning the accounting of its subsidiary company (referring to a company subordinate to the other, among those in a parent-subsidiary relationship under subparagraph 3 of Article 2; hereinafter the same shall apply); or may request it to submit data on accounting, within the extent necessary for preparing consolidated financial statements.
(2) When a parent company fails to obtain data necessary for preparing consolidated financial statements even though it complies with paragraph (1); or when it is required to verify details of such data, the parent company may investigate business operation and financial status of its subsidiary company.
 Article 8 (Operation, etc. of Internal Accounting Control System)
(1) Each company shall have internal accounting control regulations which include the following matters and shall have a system to manage and operate them (hereinafter referred to as "internal accounting control system") for preparing and publicly announcing reliable accounting information: Provided, That the same shall not apply to a company other than a stock-listed corporation with total assets of less than 100 billion won as at the end of the immediately preceding business year and a company prescribed by Presidential Decree:
1. Matters concerning the method of identification, measurement, classification, documentation and reporting of accounting information (including transaction-related information which forms the basis for accounting information; hereafter the same shall apply in this Article);
2. Matters concerning the method of controlling in errors of accounting information and correcting them;
3. Matters concerning the internal verification, such as regular inspections and adjustment, etc. of accounting information;
4. Matters concerning the method of managing books of accounting information (including magnetic tapes, diskettes and other information storage devices) and the controls to prevent forgery, alteration, damage, or destruction;
5. Matters concerning the segregation of duties and responsibilities of the executive officers and employees related to preparing and publicly announcing accounting information;
6. Other matters prescribed by Presidential Decree which are necessary to prepare and publicly announce reliable accounting information.
(2) No company shall prepare accounting information contrary to the internal accounting control system, or forge, alter, damage or destroy the accounting information which has been prepared under the internal accounting control system.
(3) The representative of a company shall assume the responsibility for controlling and operating the internal accounting control system and shall designate one of the full-time directors to be in charge of the system (referring to any person who performs the duties of a relevant director, where no director is in charge) as an internal accounting manager (hereinafter referred to as "internal accounting manager").
(4) The representative of a company shall report the operational status of the internal accounting control system of the relevant company to the general meeting of shareholders, the board of directors and the statutory auditor (if an audit committee has been established, referring to the audit committee; hereafter the same shall apply in this Article) each business year: Provided, That where the representative of a company deems it necessary, he/she may assign the internal accounting manager to report the same to the board of directors and the statutory auditor.
(5) The statutory auditor of a company shall evaluate the operational status of the internal accounting control system; shall report the status to the board of directors in each business year; and shall keep such evaluation report at the head office of the relevant company for five years. In such cases, if he/she has any corrective opinions on controlling and operating the internal accounting control system, he/she shall include them in the report.
(6) In conducting an audit, an auditor shall examine whether the relevant company has complied with the matters prescribed in this Article and the details of the report on the operational status of the internal accounting control system referred to in paragraph (4): Provided, That the auditor of a stock-listed corporation shall audit to ascertain whether the matters prescribed in this Article have been complied with and the details of the report on the operational status of the internal accounting control system referred to in paragraph (4).
(7) An auditor who has conducted an examination or audit pursuant to paragraph (6) shall state his/her overall opinion on the findings of the examination or of the audit in the audit report.
(8) Except as otherwise expressly provided for in paragraphs (1) through (7), matters necessary for operating, etc. the internal accounting control system shall be prescribed by Presidential Decree.
 Article 9 (Restriction, etc. on Qualification of Auditors)
(1) Auditing the financial statements of any of the following companies shall be conducted by an auditor who is an accounting corporation:
1. A stock-listed corporation: Provided, That stock-listed corporations prescribed by Presidential Decree shall be excluded herefrom;
2. A large unlisted stock company;
3. A financial institution defined in subparagraph 1 of Article 2 of the Act on the Structural Improvement of the Financial Industry, the NongHyup Bank established under the Agricultural Cooperatives Act or the SuHyup Bank established under the Fisheries Cooperatives Act (hereinafter referred to as "financial company").
(2) The Financial Services Commission may impose restrictions on the scale, etc. of a company that an auditor may audit, based on the type of the auditor and the number of certified public accountants employed by the auditor, as prescribed by Ordinance of the Prime Minister.
(3) An auditor who is an accounting corporation shall not be qualified to be an auditor of a company with which such auditor has a relationship referred to in any subparagraph of Article 33 (1) of the Certified Public Accountant Act; and an auditor who is an audit team shall be disqualified from auditing a company with which one or more certified public accountants employed by the auditor have a relationship referred to in any subparagraph of Article 21 (1) of the Certified Public Accountant Act.
(4) A certified public accountant employed by an auditor and qualified to perform an audit shall be limited to a person trained in actual business, etc. prescribed by Presidential Decree.
(5) An auditor who is an accounting corporation shall not allow the same director (referring to a director referred to in Article 26 (1) of the Certified Public Accountant Act; hereafter the same shall apply in this Article) to perform an audit for six consecutive business years of a company (for four consecutive business years in cases of a stock-listed corporation, large unlisted stock company or financial company): Provided, That in cases of a stock-listed corporation, large unlisted stock company or financial company, an auditor who is an accounting corporation shall not allow a director who has performed auditing affairs for three consecutive business years, to audit the relevant company for the entire period of the next three consecutive business years.
(6) Where an auditor who is an accounting corporation has had certified public accountants employed by such accounting corporation (referring to certificated public accountants employed by an accounting corporation under Article 26 (3) of the Certified Public Accountant Act) perform the audit of a company that is a stock-listed corporation as his/her assistants for three consecutive business years, such auditor shall replace at least 2/3 of such assistants in the next business year.
(7) Where an auditor who is an audit team has audited a company that is a stock-listed corporation prescribed by Presidential Decree for three consecutive business years, such auditor shall replace at least 2/3 of certified public accountants participating in such audit in the next business year.
 Article 9-2 (Registration of Auditors of Stock-Listed Corporations and Revocation thereof)
(1) Notwithstanding Article 9, a person who intends to become the auditor of a stock-listed corporation shall register with the Financial Services Commission after fulfilling all of the following requirements:
1. It shall be an accounting corporation registered with the Financial Services Commission under Article 24 of the Certified Public Accountant Act;
2. It shall have sufficient personnel, budget and other physical facilities determined by the Financial Services Commission to ensure the quality of audit;
3. It shall have an ex post facto examination system to manage the quality of audit, compensation system, working methods, and fulfill other requirements determined by the Financial Services Commission.
(2) Necessary details concerning the procedures for examining whether all the requirements prescribed in the subparagraphs of paragraph (1) are fulfilled, shall be prescribed by Presidential Decree.
(3) If the Financial Services Commission determines to register the auditor of a stock-listed corporation pursuant to paragraph (1), it shall publicize in the Official Gazette and the website the matters it has decided to register.
(4) A person registered as the auditor of a stock-listed corporation pursuant to paragraphs (1) and (2) shall continue to maintain the requirements for registration prescribed in the subparagraphs of paragraph (1) after registration.
(5) If an auditor registered pursuant to paragraph (1) ceases to fulfill the requirements prescribed in the same paragraph or receives from the Securities and Futures Commission a disposition prescribed by Presidential Decree which is severer than suspension of business, the Financial Services Commission may revoke the relevant auditor's registration as the auditor of the stock-listed corporation.
 Article 10 (Appointment of Auditors)
(1) Each company shall appoint an auditor for the relevant business year within 45 days from the start date of each business year (Provided, That in cases of a company required to establish an audit committee under Article 542-11 of the Commercial Act or Article 16 of the Act on Corporate Governance of Financial Companies, before the start date of each business year): Provided, That where the company fails to meet the standards referred to in Article 4 (1) 3 after appointing the auditor and is excluded from the subject-matter of external audit, it may terminate the audit contract within four months from the start date of the relevant business year.
(2) Notwithstanding the main sentence of paragraph (1), a company unaudited in the immediate preceding business year shall appoint an auditor within four months from the start date of the relevant business year.
(3) A stock-listed corporation, large unlisted stock company or financial company shall appoint the same auditor for three consecutive business years: Provided, That where a stock-listed corporation, large unlisted stock company or financial company appoints an auditor for any reason stipulated in the subparagraphs of paragraph (7), it shall appoint the same auditor for three consecutive business years from the business year following the relevant business year.
(4) The Company shall appoint an accounting corporation or audit team selected as follows as the auditor of the relevant company:
1. A stock-listed corporation, large unlisted stock company or financial company:
(a) Where an audit committee has been established: The accounting corporation or audit team selected by the audit committee;
(b) Where no audit committee has been established: The accounting corporation or audit team selected by the statutory auditor with approval from the auditor appointment committee organized as prescribed by Presidential Decree to appoint an auditor (hereinafter referred to as the "auditor appointment committee");
2. Any other company: The accounting corporation or audit team selected by the statutory auditor or audit committee: Provided, That in any of the following cases, it shall be selected as prescribed in the relevant item:
(a) Where an auditor for the immediately preceding year is reappointed: The relevant auditor;
(b) In cases of a private limited company which has no statutory auditor and whose size is at least that prescribed by Presidential Decree: An accounting corporation or audit team approved by a general meeting of employees;
(c) In cases of a private limited company which has no statutory auditor, other than that referred to in item (b): An accounting corporation or audit team selected by the company.
(5) A statutory auditor or audit committee (in cases of a company that has appointed an auditor pursuant to the proviso to paragraph (4) 2, referring to the director representing the company; hereafter the same shall apply in this Article) shall determine, in writing, auditor's remuneration, audit hours, and personnel required for the audit. In such cases, the statutory auditor of a stock-listed corporation, large unlisted stock company or financial company without an audit committee shall obtain approval from the auditor appointment committee.
(6) A statutory auditor or the audit committee in receipt of an audit report under Article 23 (1) shall verify whether the matters determined under paragraph (5) have been complied with. In such cases, the statutory auditor of a stock-listed corporation, large unlisted stock company or financial company without an audit committee shall submit a document that verifies the compliance of the matters determined under paragraph (5) to the auditor appointment committee.
(7) Where a company selects an auditor as follows, no provisions referred to in the relevant subparagraph shall apply:
1. Where the company appoints a person designated by the Securities and Futures Commission as an auditor or substitute for its auditor pursuant to Article 11 (1) or (2): Main sentence of paragraph (1), paragraph (2), main sentence of paragraph (3), and paragraph (4);
2. Where an audit contract is terminated pursuant to Article 15 (1) or (2): Main sentence of paragraph (1), paragraph (2), and main sentence of paragraph (3);
3. Where it is impossible for an appointed auditor to audit, on the grounds prescribed by Presidential Decree, such as the dissolution of the company during the relevant business year: Main sentence of paragraph (1), paragraph (2), and main sentence of paragraph (3).
(8) Where a company appoints an auditor on the grounds prescribed in any subparagraph of paragraph (7), it shall appoint an auditor within two months from the date such grounds arise.
(9) Except as otherwise expressly provided for in paragraphs (1) through (8), matters necessary for the procedures and methods of appointing an auditor, operating an audit appointment committee, and other relevant matters shall be prescribed by Presidential Decree.
 Article 11 (Designation, etc. of Auditors by Securities and Futures Commission)
(1) The Securities and Futures Commission may request any of the following companies to appoint the accounting corporation designated by the Securities and Futures Commission as an auditor or substitute for its auditor for a period not exceeding three business years:
1. A company that has requested the Securities and Futures Commission to designate an auditor within the period for appointing an auditor under Article 10, after obtaining approval from the statutory auditor or the audit committee (in cases of a stock-listed corporation, large unlisted stock company or financial company which has not established an audit committee, referring to the auditor appointment committee; hereafter the same shall apply in this Article);
2. A company that has failed to appoint an auditor within the period for appointing an auditor under Article 10;
3. A company which has appointed an auditor in violation of Article 10 (3) or (4) or a company in whose case the Securities and Futures Commission has recognized that the company has wrongfully substituted the auditor;
4. A company found by the Securities and Futures Commission to have prepared financial statements in violation of the accounting standards referred to in Article 5 as a result of supervision by the Securities and Futures Commission: Provided, That the same shall not apply to companies found to have committed a negligible violation determined by the Securities and Futures Commission;
5. A company whose financial statements have been prepared by an auditor on behalf of the representative director and the executive officer of the company in violation of Article 6 (6), or a company which has requested or received counseling on accounting relating to preparing financial statements;
6. Any of the following companies among stock-listed corporations:
(a) A company with a negative operating profit during three consecutive business years;
(b) A company with a negative operating cash flow during three consecutive business years;
(c) A company with a negative interest coverage ratio less than one during three consecutive business years;
(d) Any other company that falls under the financial standards prescribed by Presidential Decree;
7. A stock-listed corporation recognized and designated by the Securities and Futures Commission as requiring a fair audit, as prescribed by Presidential Decree;
8. A relevant company where the principal creditor bank defined in subparagraph 5 of Article 2 of the Corporate Restructuring Promotion Act or a shareholder prescribed by Presidential Decree requests the Securities and Futures Commission to designate an auditor, in the manner prescribed by Presidential Decree;
9. A company which fails to terminate an audit contract, to dismiss an auditor, or to appoint a new auditor, in violation of Article 13 (1) or (2);
10. A company in whose case the Securities and Futures Commission recognizes that auditor's audit hours are significantly less than the standard audit hours prescribed in Article 16-2 (1);
11. A stock-listed corporation at which the largest shareholder has been changed at least twice or its representative director has been replaced at least three times during the past three years including the immediately preceding business year;
12. Any other company prescribed by Presidential Decree, of which a fair audit is deemed particularly necessary.
(2) Where any of the following companies has appointed an auditor pursuant to Article 10 (1) for six consecutive business years, the Securities and Futures Commission may request it to appoint an accounting corporation or substitute the auditor in accordance with the standards and procedures prescribed by Presidential Decree:
1. A stock-listed corporation: Provided, That any stock-listed corporation prescribed by Presidential Decree shall be excluded herefrom;
2. A company whose total amount of assets is at least the amount prescribed by Presidential Decree and at least 50/100 of whose total issued shares (excluding non-voting shares; hereinafter the same shall apply) are owned by the large shareholder and his/her related persons prescribed by Presidential Decree, and whose representative director is the large shareholder or his/her related person, among the companies not falling under subparagraphs 1.
(3) Notwithstanding paragraph (2), any of the following companies may appoint an auditor pursuant to Article 10 (1):
1. A company supervised by the Securities and Futures Commission pursuant to Article 26 within the past six years from the base date set by the Securities and Futures Commission, and against which no violation of the accounting standards referred to in Article 5 is discovered during supervision;
2. Any other company prescribed by Presidential Decree due to having a trustworthy accounting process.
(4) Where the Securities and Futures Commission requests a company to appoint or substitute an auditor pursuant to paragraph (1) or (2), the company shall comply with such request, except in extenuating circumstances: Provided, That the relevant company or the person designated as an auditor may request the Securities and Futures Commission to re-designate an auditor if any ground prescribed by Presidential Decree exists.
(5) Where a company requests the Securities and Futures Commission to re-designate an auditor pursuant to the proviso to paragraph (4), it shall obtain prior approval from the statutory auditor or the audit committee.
(6) No company shall appoint an auditor designated by the Securities and Futures Commission pursuant to paragraph (1) or (2) as the auditor for the first business year following the designated business year.
(7) Article 10 (5) and (6) shall also apply where a company appoints an auditor at the request of the Securities and Futures Commission to appoint or substitute an auditor.
 Article 12 (Reporting on Appointment, etc. of Auditor)
(1) Where a company appoints or substitutes an auditor, it shall report such fact at an ordinary general meeting under the Commercial Act convened after appointing the auditor, or shall notify or publicly announce such fact to shareholders or employees (hereinafter referred to as "shareholders, etc."), as prescribed by Presidential Decree.
(2) Where a company appoints or substitutes an auditor, the relevant company and the auditor shall report such fact to the Securities and Futures Commission, as prescribed by Presidential Decree: Provided, That in any of the following cases, such report may be omitted:
1. Where a person designated by the Securities and Futures Commission as requested by the company is appointed as an auditor;
2. Where an auditor is appointed or substituted at the request of the Securities and Futures Commission;
3. Where a company, other than a stock-listed corporation, large unlisted stock company or financial company, reappoints the auditor who has served during the immediately preceding business year.
 Article 13 (Dismissal of Auditors)
(1) Where an auditor violates Article 21 or 33 of the Certified Public Accountant Act, the relevant company shall, without delay, terminate the audit contract concluded with the auditor, and shall appoint a new auditor within two months of the termination of the audit contract.
(2) Notwithstanding Article 10 (3), where a person appointed as the same auditor for three consecutive business years falls under any ground prescribed by Presidential Decree, such as breach of duty, the relevant stock-listed corporation, large unlisted stock company or financial company shall dismiss the auditor requested to be dismissed as follows, within three months from the end of each business year, even during the period of the three consecutive business years. In such cases, the company shall appoint a new auditor within two months after the dismissal of the auditor:
1. Where an audit committee has been established: The auditor requested by the audit committee to be dismissed;
2. Where no audit committee is established: The auditor requested by the statutory auditor to be dismissed, with the approval from the auditor appointment committee.
(3) When a stock-listed corporation, large unlisted stock company or financial company terminates its audit contract or dismisses an auditor pursuant to paragraph (1) or (2), it shall report such fact to the Securities and Futures Commission without delay.
 Article 14 (Former Auditor’s Right to State Opinion)
(1) If a company intends to appoint an auditor other than the auditor who audited the company in the immediately preceding business year (hereinafter referred to as the "former auditor") or to dismiss the former auditor under Article 13 (2), it shall provide the relevant former auditor with an opportunity to state his/her opinion to the statutory auditor or the audit committee (referring to the auditor appointment committee in cases of a stock-listed corporation, large unlisted stock company or financial company which has not established an audit committee).
(2) Where an auditor to be dismissed under Article 13 (2) states his/her opinion pursuant to paragraph (1), the company shall report his/her opinion to the Securities and Futures Commission.
(3) Necessary matters concerning the method of stating opinions and procedures for reporting such stated opinions, etc. under paragraphs (1) and (2) shall be prescribed by Presidential Decree.
 Article 15 (Termination of Audit Contract by Auditor)
(1) Where a ground prescribed by Presidential Decree exists, such as where the independence determined by the standards for accounting audit under Article 16 is impaired, an auditor may terminate the audit contract even during the business year.
(2) Notwithstanding Article 10 (3), in cases with a cause prescribed by Presidential Decree, such as where an auditor of a stock-listed corporation, large unlisted stock company or financial company has received an unreasonable demand or undue influence concerning his/her audit opinion, he/she may terminate the audit contract for the remaining business years within three months after the end of the relevant business year, even during three consecutive business years.
(3) When an auditor terminates an audit contract under paragraph (1) or (2), he/she shall report such fact to the Securities and Futures Commission without delay.
 Article 16 (Standards for Accounting Audit)
(1) An auditor shall audit in compliance with the standards for accounting audit generally accepted as fair and reasonable.
(2) The standards for accounting audit referred to in paragraph (1) shall be determined by the Korean Institute of Certified Public Accountants including matters necessary for maintaining the independence of an auditor and the reliability of financial statements, as prescribed by Presidential Decree, with prior approval from the Financial Services Commission.
 Article 16-2 (Standard Audit Hours)
(1) The Korean Institute of Certified Public Accountants may determine the standard audit hours an auditor should spend to improve the audit quality and to protect interested persons, including investors. In such cases, it shall hear and reflect opinions of interested persons prescribed by Presidential Decree, including the Financial Supervisory Service, as prescribed by Presidential Decree.
(2) The Korean Institute of Certified Public Accountants shall examine the appropriateness of the standard audit hours determined pursuant to paragraph (1) in consideration of the changes, etc. of audit environment every three years, and shall reflect and disclose the result thereof.
 Article 17 (Quality Control Standards)
(1) An auditor shall comply with the standards for designing and conducting an audit (hereinafter referred to as the "quality control standards") to ensure the audit quality.
(2) The quality control standards shall be determined by the Korean Institute of Certified Public Accountants including matters necessary for the quality assurance of audit, such as the procedures for quality control of audit and internal control for maintaining an auditor’s independence, as prescribed by Presidential Decree, with prior approval from the Financial Services Commission.
(3) The representative of an auditor shall be responsible for designing and operating an audit in accordance with the quality control standards, and shall designate one director to be in charge of such duties.
 Article 18 (Preparation of Audit Report)
(1) An auditor shall prepare an audit report stating the result of auditing.
(2) An audit report referred to in paragraph (1) shall include the scope of audit, audit opinions, and useful information for a reasonable decision-making of the interested persons.
(3) An auditor shall attach to an audit report, the financial statements prepared by the relevant company and documents stating details of the external audit conducted, such as the number of persons who have participated in the external audit, the details of the audit, and the required time, as prescribed by Presidential Decree.
 Article 19 (Audit Working Papers)
(1) Where an auditor has performed an audit and provided his/her audit opinions, he/she shall prepare documents (including magnetic tapes, diskettes, and other information storage devices; hereinafter referred to as "audit working papers") that include the details of audit procedures applied to prepare the audit report from the accounting records of the company, the information obtained in such process, the findings from analyzing information, etc.
(2) An auditor shall retain audit working papers for eight years from the completion of the audit.
(3) An auditor (including the persons employed by him/her and his/her employees) shall not forge, alter, damage or destroy the audit working papers.
 Article 20 (Confidentiality)
None of the following persons shall disclose any confidential information he/she has become aware of in the course of performing his/her duties, nor use it for any wrongful purpose: Provided, That the same shall not apply where there exist special provisions in other Acts, or the Securities and Futures Commission deems it necessary for exchanging information with foreign supervisory agencies which perform the business corresponding to Article 26 (1) or for cooperating in the supervision and examination conducted by such foreign supervisory agencies:
1. Auditors;
2. Certified public accountants employed by an auditor;
3. Members of the Securities and Futures Commission;
4. Any person who assists or supports any of the persons referred to in subparagraphs 1 through 3 with regard to auditing or supervising duties;
5. Any relevant person in the Korean Institute of Certified Public Accountants, who is entrusted with and performs the duties of the Securities and Futures Commission.
 Article 21 (Authority, etc. of Auditor)
(1) At any time, an auditor may inspect or copy the accounting books and documents of a company and another company which has relations prescribed by Presidential Decree with the relevant company, such as possessing its stocks or shares in a certain ratio or more (hereinafter referred to as "related company") or may request the companies to submit data on accounting, and may investigate their affairs and financial status if especially necessary for performing his/her duties. In such cases, the company or related company shall comply with the auditor's request to submit the data, without delay.
(2) If necessary for performing his/her duties, an auditor who audits consolidated financial statements may request cooperation from the auditors of the company or its related company, such as the submission of data concerning the audit. In such cases, the auditors of the company or its related company shall comply with such request without delay.
 Article 22 (Reporting of Wrongful Acts, etc.)
(1) If an auditor finds, in performing his/her duties, any wrongful act or any grave fact in violation of statutes or the articles of incorporation concerning a director’s performance of duties, the auditor shall inform the statutory auditor or the audit committee thereof; and shall report it at a general meeting of shareholders or general meeting of employees (hereinafter referred to as "general meeting of shareholders, etc.").
(2) If an auditor finds that the company has violated the accounting standards in connection with its accounting and other matters, he/she shall inform the statutory auditor or the audit committee thereof.
(3) The statutory auditor or the audit committee in receipt of a notice of a violation of the accounting standards pursuant to paragraph (2) shall appoint an external expert at the company’s expenses and assign him/her to inspect the fact of the violation; and shall request the representative of the company for correction, etc. depending on the findings thereof.
(4) The statutory auditor or the audit committee shall immediately submit the findings of the investigation conducted pursuant to paragraph (3), the outcomes of the company taking corrective actions, etc. to the Securities and Futures Commission and the auditor.
(5) The statutory auditor or the audit committee may request the representatives of the company to provide necessary data, information and expenses incurred in performing the duties prescribed in paragraphs (3) and (4). In such cases, the representative of the company shall comply therewith except in extenuating circumstances.
(6) If the statutory auditor or the audit committee finds any misconduct or any substantial fact in violation of statutes or the articles of incorporation concerning a director’s performance of duties, the statutory auditor or the audit committee shall inform the auditor thereof.
(7) The auditor shall report to the Securities and Futures Commission when he/she finds any misconduct or any serious facts that are in violation of any statute, or is informed of such fact by the statutory auditor or the audit committee, with respect to a director's performance of duties under paragraph (1) or (6).
 Article 23 (Submission, etc. of Audit Report)
(1) An auditor shall submit an audit report to the company concerned (including the statutory auditor or the audit committee), the Securities and Futures Commission, and the Korean Institute of Certified Public Accountants within the period prescribed by Presidential Decree: Provided, That if a company that is subject to submitting a business report under Article 159 (1) of the Financial Investment Services and Capital Markets Act files the business report with the audit report attached thereto with the Financial Services Commission and the exchange which obtained permission as an exchange pursuant to the same Act, it shall be deemed that an auditor has submitted the audit report to the Securities and Futures Commission and the Korean Institute of Certified Public Accountants.
(2) The Securities and Futures Commission and the Korean Institute of Certified Public Accountants shall make the business report from an auditor under paragraph (1), available for the public inspection as prescribed by Presidential Decree for the period prescribed by Presidential Decree: Provided, That in cases of a private limited company, the scope of companies subject to inspection and the scope of audit reports may be prescribed differently by Presidential Decree based on the sales turnover, the scope of interested persons, the number of employees, etc.
(3) Each company shall submit the financial statements approved at an ordinary general meeting or by the board of directors under the Commercial Act, to the Securities and Futures Commission, as prescribed by Presidential Decree: Provided, That if the financial statements approved at an ordinary general meeting or by the board of directors are identical to the financial statements attached to the audit report submitted by an auditor to the Securities and Futures Commission and other institutions under the main sentence of paragraph (1) or as those stated in the business report submitted by the company to the Financial Services Commission and an exchange under the proviso to the same paragraph, the company may choose not to submit the approved financial statements.
(4) Each company (excluding any stock-listed corporation) whose total amount of assets is at least the amount referred to in Article 11 (2) 2 as at the end of the immediately preceding business year shall submit the documents prescribed by Presidential Decree, such as the current status of stock holdings of a large shareholder and a person specially related to the large shareholder referred to in the same subparagraph, to the Securities and Futures Commission within 14 days from the closure of the ordinary general meeting.
(5) Each company shall keep and publicly announce its financial statements and auditor's audit report, as prescribed by Presidential Decree.
(6) When a stock company publicly announces a balance sheet under Article 449 (3) of the Commercial Act, it shall state the name and audit opinion of the auditor thereon.
(7) The shareholders, etc. or creditors of a company may inspect documents kept under paragraph (5) at any time during business hours; and may request for the issuance of certified copies or abridged copies of such documents in return for expenses set by the company.
 Article 24 (Attendance at General Meeting of Shareholders, etc.)
If requested by a general meeting of shareholders, the auditor or a certified public accountant employed by the auditor shall attend the general meeting of shareholders, etc. to state his/her opinions or answer questions of shareholders, etc.
 Article 25 (Submission, Keeping, Public Announcement, etc. of Business Report by Accounting Corporation)
(1) An auditor who is an accounting corporation shall submit a business report to the Securities and Futures Commission and the Korean Institute of Certified Public Accountants within three months after the end of each business year.
(2) The trade name of the accounting corporation, details of its business, financial matters, information on quality control of its audit reports, workforce and time available to input by year, remuneration of directors (limited to where the individual remuneration is at least 500 million won), details of sanctions imposed on directors, and other matters prescribed by Ordinance of the Prime Minister, shall be entered in the business report referred to in paragraph (1).
(3) An auditor who is an accounting corporation shall keep and publicly announce the business report submitted under paragraph (1), as prescribed by Presidential Decree.
(4) The Securities and Futures Commission and the Korean Institute of Certified Public Accountants shall keep the business report submitted by an accounting corporation pursuant to paragraph (1), and shall make it available for public inspection, as prescribed by Presidential Decree, for the period prescribed by Presidential Decree.
(5) Where any matter prescribed by Presidential Decree that significantly affects the management, property, quality control, etc. of the audit report of the relevant accounting corporation occurs, an auditor who is the accounting corporation of a stock-listed corporation, shall submit a report thereon including the relevant facts (hereinafter referred to as "occasional report") to the Securities and Futures Commission without delay.
(6) Matters concerning the procedures and methods of preparing an occasional report pursuant to paragraph (5) shall be prescribed by Ordinance of the Prime Minister.
CHAPTER III SUPERVISION AND DISPOSITIONS
 Article 26 (Supervision, etc. by Securities and Futures Commission)
(1) The Securities and Futures Commission shall perform the following duties to improve the credibility of financial statements and audit reports:
1. Supervising audit reports submitted by auditors under Article 23 (1) on their compliance with the standards for accounting audit referred to in Article 16;
2. Supervising financial statements submitted by companies under Article 23 (3) on their compliance with the accounting standards referred to in Article 5;
3. Supervising compliance with the quality control standards under Article 17 and assessing the level of quality control, with respect to auditors' audit;
4. Other duties prescribed by Presidential Decree.
(2) Matters necessary for performing the duties of the Securities and Futures Commission under this Act shall be determined by the Financial Services Commission after deliberation by the Securities and Futures Commission.
 Article 27 (Request for Submission, etc. of Data)
(1) If necessary for performing duties under Article 26 (1), the Securities and Futures Commission may request a company which has undergone an audit or its related company and an auditor to submit data, state opinions, or make reports; or may have the Governor of the Financial Supervisory Service (hereinafter referred to as the "Governor of FSS") inspect the accounting books and documents of a company or its related company or investigate the affairs and the financial status thereof. In such cases, the investigation of the affairs and the financial status of the company or its related company shall be conducted within the minimum extent required for performing its duties; and shall not be used for any other purpose.
(2) The person who inspects the accounting books and documents of a company or its related company investigates its affairs and financial status under paragraph (1) shall carry a certificate indicating his/her authority and present it to related persons.
(3) If it is necessary for performing its duties referred to in Article 11, the Securities and Futures Commission may request the head of a tax office to submit data prescribed by Presidential Decree. In such cases, the tax office in receipt of such request shall comply therewith, except in extenuating circumstances.
(4) If it is necessary for performing its duties under this Act, the Securities and Futures Commission may request the Korean Institute of Certified Public Accountants or a related institution to submit data. In such cases, the institution in receipt of such request shall comply therewith, except in extenuating circumstances.
 Article 28 (Protection, etc. of Persons who Report Wrongful Acts)
(1) Where any person who has learned any of the following facts concerning the accounting information of a company files a report on such fact with the Securities and Futures Commission as prescribed by Presidential Decree or notifies such fact to the auditor or statutory auditor of the company, the Securities and Futures Commission may mitigate or exempt the measures to be taken pursuant to Article 29 regarding the person who has reported or notified such fact (hereinafter referred to as "reporter, etc."), as prescribed by Presidential Decree:
1. That the accounting information was prepared not in accordance with the internal accounting control system referred to in Article 8 or that the accounting information prepared in accordance with the internal accounting control system was forged, altered, damaged or destroyed;
2. That the company prepared its financial statements in violation of the accounting standards referred to in Article 5;
3. That the company, auditor or a certified public accountant of such auditor violated Article 6 (6);
4. That the auditor failed to conduct an audit in accordance with the standards for accounting audit referred to in Article 16 or prepared a false audit report;
5. Other cases similar to those prescribed in subparagraphs 1 through 4, where false accounting information was prepared or facts were concealed.
(2) Any person in receipt of a report or notice under paragraph (1) shall keep the identity, etc. of the reporter confidential.
(3) Where a reporter, etc. reports or gives notice under paragraph (1), the relevant company (including the executive officers and employees of the relevant company) shall not accord any disadvantageous treatment to the reporter, etc. concerning such report or notice, by direct or indirect means.
(4) Any company and its executive officers and employees that have caused damage to a reporter, etc. by according disadvantageous treatment to him/her in violation of paragraph (3) shall be liable to jointly compensate the reporter, etc. for such damage.
(5) Where the report referred to in paragraph (1) is deemed to have helped to disclose any of the matters falling under the subparagraphs of paragraph (1) concerning the accounting information of a company or to have assisted in taking the measures, etc. under Article 29 or 30, the Securities and Futures Commission may grant a monetary reward to the reporter, as prescribed by Presidential Decree.
 Article 29 (Measures, etc. on Companies, Auditors, etc.)
(1) If a company falls under any of the following cases, the Securities and Futures Commission may recommend the relevant company to dismiss its executive officer or remove him/her from his/her office; to request it to suspend his/her duties for up to six months; to restrict the issuance of the securities for a fixed period; or to rectify violations of the accounting standards; and may take other necessary measures:
1. Where no financial statements are prepared or where financial statements are prepared in violation of the accounting standards referred to in Article 5;
2. Where any of Article 6, 10 (4) through (6), 12 (2), 22 (6), or 23 (3) through (6) is violated;
3. Where the request of the Securities and Futures Commission made under Article 11 (1) or (2) is not fulfilled without any justification;
4. Where the request for submission, etc. of data or the inspection or investigation of data is rejected, interfered with, or evaded without any justification; or where false data is submitted;
5. Other cases where this Act or any order issued under this Act is violated.
(2) Where it is deemed that an executive officer who has retired or resigned would have received measures prescribed in paragraph (1) if he/she was holding his/her office in the relevant company, the Securities and Futures Commission may notify the relevant company of the details of such measures deemed received. In such cases, the company in receipt of such notice shall notify such fact to the relevant executive officer.
(3) If an auditor falls under any subparagraph of attached Table 1, the Securities and Futures Commission may take the following measures:
1. Recommending the Financial Services Commission to revoke the registration of the relevant auditor;
2. Recommending the Financial Services Commission to order to suspend him/her from performing all or some of his/her duties for a fixed period;
3. Issuing an order to accumulate further joint funds for damages under Article 32;
4. Restricting the auditing of any of the following companies for a fixed period:
(a) A company for which the Securities and Futures Commission designates an auditor pursuant to Article 11;
(b) Any other specific company designated by the Securities and Futures Commission;
5. Warning;
6. Caution;
7. Other measures necessary to rectify or prevent a violation.
(4) If a certified public accountant (including the representative director under Article 26 (4) of the Certified Public Accountant Act) of an auditor falls under any subparagraph of attached Table 2, the Securities and Futures Commission may take the following measures:
1. Recommending the Financial Services Commission to revoke the registration of the relevant certified public accountant;
2. Recommending the Financial Services Commission to issue an order to fully or partially suspend him/her from his/her duties for a fixed period;
3. Restricting the auditing of any of the following companies for a fixed period:
(a) A stock-listed corporation;
(b) A large unlisted stock company;
(c) A company for which the Securities and Futures Commission designates an auditor pursuant to Article 11;
(d) Any other specific company designated by the Securities and Futures Commission;
4. Warning;
5. Caution;
6. Any other measures necessary to correct or prevent a violation.
(5) Where it is found necessary during supervising an auditor's compliance with the quality control standards under Article 26 (1) 3, the Securities and Futures Commission may recommend the relevant auditor to improve the design and operation of the audit within a fixed period not exceeding one year; and may inspect whether the recommendation is complied with, as prescribed by Presidential Decree.
(6) The Securities and Futures Commission may disclose the recommendation for improvement made under paragraph (5), as prescribed by Presidential Decree.
(7) If an auditor fails to comply with the recommendation for improvement made under paragraph (5) without justification, the Securities and Futures Commission may disclose the noncompliance, as prescribed by Presidential Decree.
 Article 30 (Public Announcement, etc. of Violations)
(1) Where a company or an auditor falls under any of the following cases, the Securities and Futures Commission may publicly announce the relevant violation for a period not exceeding three years from the date such violation is ascertained, as prescribed by the Financial Services Commission:
1. Where the company or the auditor prepares financial statements in violation of the accounting standards referred to in Article 5;
2. Where the company or the auditor fails to state matters required to be entered in an audit report or makes false entries in the audit report;
3. Where the company or the auditor fails to submit financial statements under Article 6 in advance;
4. Any other case where the company or the auditor violates this Act or finance-related statutes prescribed by Presidential Decree, such as the Act on Real Name Financial Transactions and Confidentiality.
(2) The Securities and Futures Commission shall post on its website the results of the supervision conducted pursuant to Article 26 (1) 1 and 2 and the details of measures taken as a result thereof by the Securities and Futures Commission, as prescribed by the Financial Services Commission; and shall notify the exchange (limited to where the relevant company is a stock-listed corporation) and the financial institutions prescribed by Presidential Decree, respectively.
(3) Financial institutions under paragraph (2) may reflect the details notified by the Securities and Futures Commission in examination for credit offering, etc.
 Article 31 (Liability for Damages)
(1) If an auditor causes any loss to a company due to negligence in performing his/her duties, such auditor shall be liable for damages to the company.
(2) If an auditor who has failed to enter important matters or has made a false statement on an audit report and thereby causes damage to a third party who has relied on and used such report, the auditor shall be liable for damages to the third party: Provided, That where the auditor of a subsidiary company or an affiliated company is responsible for the failure to enter important matters or the false statement on an audit report on the consolidated financial statements, the relevant auditor shall be liable for damages to the third party who has relied on and used such a report.
(3) If an auditor who falls under paragraph (1) or (2) is an audit team, the certified public accountants who have participated in the audit of the relevant company shall be jointly liable for damages.
(4) If an auditor is liable for damages to a company or a third party, and the company’s director or statutory auditor (which shall refer to a member of the audit committee, if such committee has been established; hereafter in this paragraph, the same shall apply) is also liable for the damages, such auditor and the company’s director and statutory auditor shall be jointly liable for damages: Provided, That where the person liable for damages caused the relevant damage unintentionally, he/she shall be liable for damages according to the ratio of liability determined by a court based on the contributory negligence.
(5) Notwithstanding the proviso to paragraph (4), if the recognized amount of income (referring to the recognized amount of income under subparagraph 9 of Article 2 of the National Basic Living Security Act) of the person claiming damages, does not exceed the amount prescribed by Presidential Decree, the auditor and the company’s director and statutory auditor shall be jointly liable for damages.
(6) If the amount of damages cannot be fully paid due to incapability for compensation of any person liable for damages under the proviso to paragraph (4), the others shall be liable for an additional amount of damages in accordance with Presidential Decree, up to 50/100 of their respective ratios of liability determined pursuant to the proviso to the same paragraph.
(7) In order to be exempted from the liability for damages under paragraphs (1) through (3), an auditor or a certified public accountant who has participated in an audit shall prove that he/she has not neglected his/her duties: Provided, That in cases where a person falling under any of the following sues for damages against an auditor or a certified public accountant who has participated in the audit, the person shall prove that the auditor or the certified public accountant who has participated in the audit has neglected his/her duties:
1. A company that has appointed an auditor under Article 10;
3. The NongHyup Bank under the Agricultural Cooperatives Act or the SuHyup Bank under the Fisheries Cooperatives Act;
4. An insurance company under the Insurance Business Act;
6. A mutual savings bank under the Mutual Savings Banks Act.
(8) In order to indemnify for damages under paragraphs (1) through (4), an auditor shall take necessary measures, including the accumulation of joint fund for damages or purchase of an insurance policy under Article 32, as prescribed by Ordinance of the Prime Minister.
(9) The liability for damages under paragraphs (1) through (4) shall be extinguished if it is not claimed within one year from the date the claimant becomes aware of the relevant fact or within eight years from the date the audit report was submitted: Provided, That such period may be extended by a contract at the time an auditor is appointed under Article 10.
 Article 32 (Accumulation of Joint Fund for Damages, etc.)
(1) An accounting corporation shall accumulate a joint fund for damages (hereinafter referred to as "joint fund") at the Korean Institute of Certified Public Accountants to compensate a company or a third party for loss referred to in Article 31 (1) and (2): Provided, that where such corporation purchases an indemnity insurance policy prescribed by Presidential Decree, it need not accumulate an annual reserve under paragraph (2) among the joint fund.
(2) The joint fund to be accumulated under paragraph (1) shall consist of a basic reserve and an annual reserve of each business year; and the accumulation limit and the amount thereof shall be determined by Presidential Decree.
(3) No accounting corporation that has accumulated the joint fund under paragraph (1) shall transfer the joint fund accumulated at the Korean Institute of Certified Public Accountants, nor provide it as security unless otherwise determined by Presidential Decree; and no person shall seize or provisionally seize it.
 Article 33 (Payment, Limit, etc. of Joint Fund)
(1) Where an accounting corporation is rendered a final and conclusive judgement on the liability for damages to a company or a third party referred to in Article 31 (1) and (2), the Korean Institute of Certified Public Accountants shall pay the joint fund upon application by the company or the third party.
(2) The limit of the amount that the Korean Institute of Certified Public Accountants pays pursuant to paragraph (1) to each applicant and each accounting corporation shall be prescribed by Presidential Decree.
(3) Where the Korean Institute of Certified Public Accountants makes payment under paragraph (1), the accounting corporation shall bear joint iability within the limit as specified in paragraph (2).
(4) Where the Korean Institute of Certified Public Accountants makes payment under paragraph (1), it shall be entitled to be indemnified by the accounting corporation that has necessitated such payment.
(5) If the actual balance of the joint fund calculated as determined by the Korean Institute of Certified Public Accountants as the result of the payment under paragraph (1) by the Korean Institute of Certified Public Accountants falls short of the basic reserve referred to in Article 32 (2), the Korean Institute of Certified Public Accountants may cause the accounting corporation to accumulate the amount of deficiency, as prescribed by Presidential Decree.
 Article 34 (Management, etc. of Joint Fund)
(1) The Korean Institute of Certified Public Accountants shall manage the joint fund separately by each accounting corporation and shall account it independently of other property of the Korean Institute of Certified Public Accountants.
(2) The operation methods, time and procedures for payment, and return of the joint fund as well as other detailed matters necessary for managing the joint fund shall be determined by Ordinance of the Prime Minister.
(3) If deemed necessary, the Financial Services Commission may inspect the management, etc. of the joint fund conducted by the Korean Institute of Certified Public Accountants.
 Article 35 (Penalty Surcharges)
(1) If a company has prepared financial statements in violation of the accounting standards referred to in Article 5 by intention or gross negligence, the Financial Services Commission may impose a penalty surcharge on the company of up to 20 percent of the amount prepared differently from the accounting standards. In such cases, a penalty surcharge may be imposed also on a person prescribed in Article 401-2 or 635 (1) of the Commercial Act who has been aware of the violation, or has failed to prevent the violation due to serious failure to perform his/her duty of care, or a person in charge of accounting affairs of the company, up to 10 percent of the penalty surcharge imposed on the company.
(2) If an auditor has prepared an audit report in violation of the auditing standards referred to in Article 16 by intention or gross negligence, the Financial Services Commission may impose a penalty surcharge on him/her within the range not exceeding the remuneration received for the relevant audit.
(3) Penalty surcharges under paragraphs (1) and (2) shall not be imposed after eight years since the time the relevant provisions were violated respectively: Provided, That, the proceedings of the above period shall be suspended if the supervision commences under Article 26.
 Article 36 (Imposition and Collection of Penalty Surcharges)
(1) In imposing a penalty surcharge under Article 35, the Financial Services Commission shall take the following into consideration in accordance with the standards prescribed by Presidential Decree:
1. Whether the company is listed;
2. Details and severity of violations;
3. Period and frequency of violations;
4. Scale of benefits acquired from violations.
(2) If a corporation which has prepared financial statements in violation of the accounting standards referred to in Article 5 intentionally or by gross negligence undergoes a merger, the Financial Services Commission may impose and collect a penalty surcharge deeming that the relevant corporation committed the violation by the corporation surviving the merger or newly incorporated during the merger.
(3) Where a penalty surcharge under Article 429 of the Financial Investment Services and Capital Markets Act is to be imposed on a company or an auditor for the same reason, if the amount of relevant penalty surcharge is less than the amount of penalty surcharge prescribed in Article 35, only the difference shall be imposed.
(4) Articles 431 through 434 and 434-2 through 434-4 of the Financial Investment Services and Capital Markets Act shall apply mutatis mutandis to the imposition and collection of penalty surcharges under Article 35.
(5) Except as otherwise expressly provided for in paragraphs (1) through (4), matters necessary for imposing and collecting penalty surcharges shall be prescribed by Presidential Decree.
CHAPTER IV SUPPLEMENTARY PROVISIONS
 Article 37 (Special Cases concerning Companies without Auditors Appointed)
Matters concerning audit under Article 8, 10, 11, 14, 22, 23, 28, 31 or 40 shall not apply to a company that has not appointed a statutory auditor under any other Act.
 Article 38 (Entrustment of Duties)
(1) The Securities and Futures Commission may delegate or entrust part of its duties under this Act to the Chairperson of the Securities and Futures Commission, the Governor of FSS and an exchange, as prescribed by Presidential Decree.
(2) The Securities and Futures Commission may entrust all or part of its duties under Articles 26 (1), 27 (1), and 29 (3) and (4) to the Korean Institute of Certified Public Accountants, as prescribed by Presidential Decree. In such cases, the Korean Institute of Certified Public Accountants may collect part of an auditor's remuneration as a supervisory fee, as prescribed by Ordinance of the Prime Minister.
CHAPTER V PENALTY PROVISIONS
 Article 39 (Penalty Provisions)
(1) If any person provided for in Articles 401-2 and 635 (1) of the Commercial Act or any other person in charge of accounting affairs of a company prepares and publishes any false financial statements in violation of the accounting standards referred to in Article 5; or if an auditor or a certified public accountant employed by such auditor fails to enter or falsely states matters to be stated in the audit report, he/she shall be punished by imprisonment with prison labor for not more than ten years or by a fine not exceeding two to five times the amount of gains acquired or loss evaded by the relevant violation.
(2) Notwithstanding paragraph (1), if the profit or loss on the financial statements or the amount of equity capital of a company is changed by a certain weight of the total assets by violating the accounting standards referred to in Article 5, the punishment may be aggravated respectively as follows: Provided, That this shall apply only where an amount equivalent to five percent of the total amount of assets is at least 50 billion won:
1. If the amount changed on the financial statements is at least ten percent of the total amount of assets, the punishment shall be imprisonment with prison labor for life or for at least five years;
2. If the amount changed on the financial statement at least five percent of the total amount of assets and does not fall under subparagraph 1, the punishment shall be imprisonment for at least three years.
 Article 40 (Penalty Provisions)
(1) Where any auditor, any certified public accountant of an auditor, any statutory auditor, or any member of the audit committee or of the auditor appointment committee receives an illicit request concerning his/her duties and accepts, demands, or promises money or other goods or benefits, he/she shall be punished by imprisonment with labor for not more than five years, or by a fine not exceeding 50 million won: Provided, That in cases of punishment by a fine, where an amount equivalent to five times the economic benefits obtained in relation to his/her duties exceeds 50 million won, he/she shall be punished by a fine not exceeding the amount equivalent to five times the economic benefits obtained in relation to his/her duties.
(2) The provisions of paragraph (1) shall also apply to any person who gives, promises to give, or expresses an intention to give money or other goods or benefits referred to in paragraph (1).
 Article 41 (Penalty Provisions)
If any person provided for in Articles 401-2 (1) and 635 (1) of the Commercial Act, any person in charge of accounting affairs of a company, any auditor or any certified public accountant employed by such auditor, or any person related to audit affairs referred to in subparagraph 4 of Article 20, commits any of the following acts, he/she shall be punished by imprisonment with prison labor for not more than five years or by a fine not exceeding 50 million won:
1. Where he/she is a person provided for in Articles 401-2 (1) and 635 (1) of the Commercial Act or a person related to operating the internal accounting control system, including the accounting affairs of the company, and forges, alters, damages, or destroys accounting information prepared under the internal accounting control system, in violation of Article 8 (2);
2. Where he/she is an auditor or a certified public accountant employed by such auditor or a person related to audit affairs, and forges, alters, damages, or destroys audit working papers, in violation of Article 19 (3);
3. Where he/she fails to report a director’s wrongful acts, etc., as prescribed in Article 22;
4. Where he/she makes any false statement or conceals any fact at a general meeting of shareholders, etc. as prescribed in Article 24;
5. Where he/she discloses the identity of or other confidential information on a reporter, etc., in violation of Article 28 (2).
 Article 42 (Penalty Provisions)
If any person provided for in Articles 401-2 (1) and 635 (1) of the Commercial Act, any person in charge of accounting affairs of a company, any auditor or any certified public accountant employed by such auditor, or any person related to audit affairs referred to in subparagraph 4 of Article 20, commits any of the following acts, he/she shall be punished by imprisonment with prison labor for not more than three years or by a fine not exceeding 30 million won:
1. Where he/she fails to submit a financial statement or consolidated financial statements, in violation of Article 6 or 23 (3);
2. Where the auditor or certified public accountant employed by such auditor prepares financial statements or the company requests an auditor or a certified public accountant employed by such auditor to prepare financial statements, in violation of Article 6 (6);
3. Where he/she refuses, interferes with, or evades the inspection, copying, request for submission of data, or investigation conducted by the parent company or an auditor pursuant to Article 7 or 21, or submits false data, without any justification;
4. Where he/she fails to appoint an auditor within the period prescribed in Article 10 (1), (2) or (8) without any justification;
5. Where he/she discloses or misappropriates any confidential information, in violation of Article 20;
6. Where he/she refuses, interferes with, or evades the request for submission of data, etc., inspection, or investigation conducted pursuant to Article 27 (1) without any justification, or submits any false data;
7. Where he/she fails to prepare a financial statement;
8. Where he/she presents any false data to an auditor or a certified public accountant employed by such auditor, or fraudulently or otherwise wrongfully interferes with the normal accounting audit of an auditor.
 Article 43 (Penalty Provisions)
Any person who accords any disadvantageous treatment defined in subparagraph 6 of Article 2 of the Protection of Public Interest Reporters Act to a reporter, etc. in violation of Article 28 (3) shall be punished by imprisonment with prison labor for not more than two years or by a fine not exceeding 20 million won.
 Article 44 (Penalty Provisions)
If any person provided for in Articles 401-2 (1) and 635 (1) of the Commercial Act, or any person in charge of accounting affairs of a company, or any auditor or any certified public accountant employed by such auditor, commits any of the following conduct, he/she shall be punished by imprisonment with labor for not more than one year or by a fine not exceeding ten million won:
1. Where he/she fails to comply with a request of the Securities and Futures Commission in violation of Article 11 (4), without any justification;
2. Where he/she appoints an auditor, in violation of Article 11 (6);
3. Where he/she fails to submit an audit report as prescribed in Article 23 (1);
4. Where he/she fails to enter both the name of an auditor and his/her audit opinion, in violation of Article 23 (6).
 Article 45 (Confiscation)
The benefits acquired by violating Article 39 (1) or money, goods or benefits referred to in Article 40 shall be confiscated. In such cases, if all or part of them cannot be confiscated, the value thereof shall be collected.
 Article 46 (Joint Penalty Provisions)
Where the representative of a corporation or an agent, servant, or employee of a corporation or an individual has committed any violation referred to in Articles 39 through 44 in connection with the business of such corporation or individual, not only shall such violator be punished accordingly, but the corporation or individual shall be punished by a fine prescribed in the relevant provisions: Provided, That the same shall not apply where the corporation or individual has not neglected to pay due attention and to exercise supervision for the related business in order to prevent such violation.
 Article 47 (Administrative Fines)
(1) Any of the following persons shall be punished by an administrative fine not exceeding 50 million won:
1. A person who discloses personal information, etc. of a reporter, etc., in violation of Article 28 (2), or a person who informs or discloses to any third person any facts based on which a reporter, etc. can be identified;
2. A person who gives any disadvantageous treatment to a reporter, etc., in violation of Article 28 (3).
(2) Any of the following persons shall be punished by an administrative fine not exceeding 30 million won:
1. A person who fails to establish an internal accounting control system or to designate an internal accounting manager, in violation of Article 8 (1) or (3);
2. A person who fails to report on the operational status of the internal accounting control system, in violation of Article 8 (4); or to make an evaluation report on the operational status or to keep such evaluation report in the main office, in violation of Article 8 (5);
3. A person who fails to examine or audit the details, etc. of a report on the operational status of the internal accounting control system or to state a comprehensive opinion on the audit report, in violation of Article 8 (6) or (7);
4. The representative of a company who fails to comply with a request for providing data, information or expenses necessary to perform the duties of an auditor or the audit committee, in violation of Article 22 (5), without justification.
(3) Where any auditor or any certified public accountant employed by such auditor fails to comply with a request for attendance made at a general meeting of shareholders, etc. pursuant to Article 24, he/she shall be punished by an administrative fine not exceeding ten million won.
(4) Any of the following persons shall be punished by an administrative fine not exceeding five million won:
1. A person who fails to report under Article 12 (2);
2. A person who fails to keep and publicly announce an audit report in violation of Article 23 (5).
(5) The administrative fines under paragraphs (1) through (4) shall be imposed and collected by the Securities and Futures Commission as prescribed by Presidential Decree.
 Article 48 (Concurrent Punishment of Imprisonment and Fines)
Where any person is punished by imprisonment pursuant to Article 39 (1), a fine under Article 39 (1) shall be imposed concurrently.
ADDENDA
Article 1 (Enforcement Date)
This Act shall enter into force one year after the date of its promulgation
Article 2 (Applicability to External Audit of Private Limited Companies)
The provisions of this Act concerning private limited companies shall begin to apply from the business year that commences one year after the date this Act enter into force.
Article 3 (Applicability to Audit of Internal Accounting Control System)
Audit of the internal accounting control system of an auditor under the amended provisions of the proviso to Article 8 (6) shall begin to apply from the audit report for 2019 in cases of a stock-listed corporation whose total assets is at least two trillion won; from the audit report for 2020 in cases of a stock-listed corporation whose total amount of assets is at least 500 billion won; from the audit report for 2022 in cases of a stock-listed corporation whose total amount of assets is at least 100 billion won; and from the audit report for 2023 in cases of all stock-listed corporations, at the end of the year preceding the date of preparation of the audit report.
Article 4 (Applicability, etc. to Restriction, etc. on Qualification of Auditors)
(1) The amended provisions of Article 9 (5) shall begin to apply from the first director who audits the financial statements for the business year that commences after this Act enters into force. In such cases, the counting of consecutive business years include the business years that fall before the amended provisions of Article 9 (5) become applicable.
(2) Notwithstanding the amended provisions of Article 9 (1), an auditor appointed (including an auditor appointed by substitution) before this Act enters into force shall be governed by the former Article 3 (1).
Article 5 (Applicability to System for Registration of Auditors of Stock-Listed Corporations)
The amended provisions of Article 9-2 shall begin to apply from the business year that commences one year after the date this Act enter into force: Provided, That application for the registration of the auditor of a stock-listed corporation may be filed from six months ahead of the time the amended provisions of Article 9-2 begin to apply.
Article 6 (Applicability, etc. to Appointment, etc. of Auditors)
(1) The amended provisions of Articles 10 (1), (5) and (6), 12 (2) and 13 (2) shall begin to apply from the first auditor appointed (including an auditor appointed by substitution) or dismissed after this Act enters into force: Provided, That if the business year to which the enforcement date of this Act belongs commences before this Act enters into force, an auditor may be appointed pursuant to the former Article 4 (1), notwithstanding the amended provisions of Article 10 (1).
(2) An auditor appointed (including an auditor appointed by substitution) under the former Article 4 (2) or (6) before this Act enters into force shall be deemed appointed under the amended provisions of Article 10 (4) during his/her term of office.
Article 7 (Applicability to Large Unlisted Stock Companies and Financial Companies)
The provisions concerning a large unlisted stock company and a financial company among the amended provisions of Articles 10 (3), 11 (1) 1 and 14 (1) shall begin to apply from the business year that commences after this Act enters into force.
Article 8 (Applicability to System for Designation of Auditors of Stock-Listed Corporations)
The amended provisions of Article 11 (2) shall begin to apply from the business year that commences one year after the date this Act enter into force. In such cases, the counting of six consecutive business years shall include the business years that fall before the amended provisions of Article 11 (2) become applicable.
Article 9 (Applicability to Submission, etc. of Business Report by Accounting Corporation)
(1) The amended provisions of Article 25 (2) shall begin to apply from the business year that commences after this Act enters into force.
(2) The amended provisions of Article 25 (5) shall begin to apply from the case where the relevant fact occurs after this Act enters into force.
Article 10 (Applicability to Protection, etc. of Persons who Report Wrongful Acts)
The amended provisions of Article 28 (1) and (5) shall begin to apply from the first person who files a report or gives notice after this Act enters into force.
Article 11 (Applicability to Penalty Surcharges)
The amended provisions of Articles 35 and 36 shall begin to apply from the case where a company or an auditor prepares financial statements in violation of the accounting standards referred to in Article 5 or prepares an audit report in violation of the standard for accounting audit referred to in Article 16 intentionally or by gross negligence.
Article 12 (Transitional Measures concerning Measures on Companies, Auditors, etc.)
Notwithstanding the amended provisions of Article 29, measures to be taken against any violation committed before this Act enters into force shall be governed by the former Article 16.
Article 13 (Transitional Measures concerning Penalty Provisions and Administrative Fines)
Application of penalty provisions and administrative fines for any violation committed before this Act enters into force shall be governed by the former provisions.
Article 14 Omitted.
Article 15 (Relationship to other Acts and Subordinate Statutes)
Where any other statute cites the former Act on External Audit of Stock Companies or the provisions thereof as at the time this Act enters into force, it shall be deemed to cite this Act or the relevant provisions hereof in lieu of the former Act on External Audit of Stock Companies or the provisions thereof, if provisions corresponding thereto exist in this Act.
ADDENDA <Act No. 15040, Nov. 28, 2017>
Article 1 (Enforcement Date)
This Act shall enter into force six months after the date of its promulgation: Provided, That Article 4 of the Addenda shall enter into force on November 1, 2018.
Articles 2 through 4 Omitted.