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ENFORCEMENT RULE OF THE ACT ON EXTERNAL AUDIT OF STOCK COMPANIES

Ordinance of the Prime Minister No. 1814, Mar. 21, 1990

Amended by Ordinance of the Prime Minister No. 627, Apr. 10, 1997

Ordinance of the Prime Minister No. 27, jun. 20, 1998

Ordinance of the Prime Minister No. 100, Jul. 2, 1999

Ordinance of the Prime Minister No. 154, Jul. 28, 2000

Ordinance of the Prime Minister No. 221, Aug. 28, 2001

Ordinance of the Prime Minister No. 316, jun. 30, 2003

Ordinance of the Prime Minister No. 372, Apr. 1, 2004

Ordinance of the Prime Minister No. 495, Mar. 10, 2006

Ordinance of the Prime Minister No. 875, Mar. 3, 2008

 Article 1 (Purpose)
The purpose of this Rule is to provide for matters delegated by the Act on External Audit of Stock Companies and the Enforcement Decree of the Act on External Audit of Stock Companies and necessary matters for the enforcement thereof. <Amended by Ordinance of the Prime Minister No. 627, Apr. 10, 1997; Ordinance of the Ministry of Finance and Economy No. 495, Mar. 10, 2006>
 Article 2 (Registration of Audit Team)
(1) The audit team under Article 3 (1) 3 of the Act on External Audit of Stock Companies (hereinafter referred to as the "Act") (hereinafter referred to as "audit team") shall satisfy the requirements in each of the following subparagraphs: <Amended by Ordinance of the Prime Minister No. 627, Apr. 10, 1997; Ordinance of the Ministry of Finance and Economy No. 372, Apr. 1, 2004; Ordinance of the Ministry of Finance and Economy No. 495, Mar. 10, 2006>
1. It is required to be comprised of persons who have received practical training under Article 3 (7) and (8) of the Decree as a certified public accountant registered under Article 7 of the Certified Public Accountant Act;
2. It is required to have three or more members;
3. It is required not to have a member who falls into subparagraph 2 or 3 of Article 26 (1) of the Certified Public Accountant Act;
4. It is required not to have a member who belongs to an accounting firm under Article 23 of the Certified Public Accountant Act (hereinafter referred to as "accounting firm") or other audit team.
(2) The audit team shall, when it intends to commence the business of accounting audit with respect to a stock company which is required to be subjected to an audit under Article 2 of the Act (hereinafter referred to as "company"), be registered with the Korean Institute of Certified Public Accountants established under Article 41 of the Certified Public Accountant Act (hereinafter referred to as the "Institute of Certified Public Accountants"). <Amended by Ordinance of the Prime Minister No. 627; Ordinance of the Ministry of Finance and Economy No. 495, Mar. 10, 2006>
(3) Any person who intends to apply for the registration under paragraph (2) shall submit an audit team registration application to the Institute of Certified Public Accountants, along with the documents in each of the following subparagraphs:
1. Operational rules of the audit team;
2. Written consent to the composition of the audit team;
3. Other documents as determined by the Institute of Certified Public Accountants.
(4) The Institute of Certified Public Accountants shall, upon receipt of an audit team registration application under paragraph (2), shall enter matters in each of the following subparagraphs in the audit team register and deliver an audit team registration card to the applicant:
1. Registration number of the audit team;
2. Name and address of members;
3. Location of the office of members;
4. Principal office of the audit team;
5. Other matters as determined by the Institute of Certified Public Accountants.
(5) An audit team registered under paragraph (2) shall, when there is any change in the matters provided for in each subparagraph of paragraph (4) or it has made a resolution on the dissolution of the concerned audit team, notify such fact to the Institute of Certified Public Accountants without delay.
(6) The Institute of Certified Public Accountants may, when an audit team falls into any of the following subparagraphs, cancel the registration concerned: <Amended by Ordinance of the Prime Minister No. 627; Apr. 10, 1997; Ordinance of the Ministry of Finance and Economy No. 27, Jun. 20, 1998; Ordinance of the Ministry of Finance and Economy No. 495, Mar. 10, 2006>
1. Where the audit team is registered by falsehood or other undue means;
2. Where the audit team has made a resolution on its dissolution;
3. Where the audit team which failed to meet the requirements provided for in paragraph (1) fails to supplement it within three months;
4. Where the audit team violated the provisions of Article 2-3 of the Act, proviso to paragraph (1) with the exception of its subparagraphs, and paragraphs (3) and (6) of Article 3 of the Act, Article 5 (1) of the Act, Article 6 (2) of the Act, Article 7-2 of the Act, Article 8 (1) of the Act, Article 9 of the Act, Article 10 (1) and (2) of the Act, Article 11 of the Act, Article 14-2 of the Act, Article 15-2 (1) of the Act or Article 17 (6) of the Act;
5. Where the audit team violated the provision of Article 3.
(7) Deleted. <by Ordinance of the Prime Minster No. 627, Apr. 10, 1997>
 Article 3 (Ways of Conducting Business by Audit Team, etc.)
(1) In the case where an audit team conducts the business of external audit under Article 2 of the Act, three or more members of the concerned audit team shall participate in it. <Amended by Ordinance of the Prime Minister No. 627, Apr. 10, 1997>
(2) In the case where an audit team has prepared an audit report under Article 8 of the Act, it shall be signed and sealed by all members who participated in the external audit of the company concerned under paragraph (1). <Amended by Ordinance of the Prime Minister No. 627, Apr. 10, 1997>
(3) An audit team shall submit to the Institute of Certified Public Accountants a report on the results of its business of the previous year by June 30 each year.
 Article 4 Deleted. <by Ordinance of the Ministry of Finance and Economy No. 495, Mar. 10, 2006>
 Article 5 (Matters to be entered in and Submission of Business Report)
(1) Matters to be entered in the business report under Article 3-2 (2) of the Act are as mentioned in each of the following subparagraphs: <Amended by Ordinance of the Ministry of Finance and Economy No. 316, Aug. 28, 2001; Ordinance of the Ministry of Finance and Economy No. 372, Apr. 1, 2004; Ordinance of the Ministry of Finance and Economy No. 495, Mar. 10, 2006; Ordinance of the Prime Minister No. 875, Mar. 3, 2008>
1. Outline of an auditing corporation such as address and trade name;
2. Current conditions of directors, employees and certified public accountants belonging thereto;
3. Financial statements and annexed documents;
4. Total amount of remunerations by major services such as accounting audit, vicarious execution of tax affairs and business management consulting for the last three business years;
5. Current conditions of the reserves for damage compensation under Article 28 (1) of the Certified Public Accountant Act, and accumulation of the joint fund for damages and subscription to a liability insurance for compensation under Article 17-2 (1) of the Act;
6. From among the results of supervision of the supervisory report for the last three years, matters meeting the standards that the Financial Services Commission established under the Act on the Establishment, etc. of Financial Services Commission establishes, taking into account the gravity of acts of violation;
7. Results of lawsuits related to the business of an accounting firm (including directors and certified public accountants belonging thereto) for the last three years.
(2) The business report under paragraph (1) shall be prepared in forms as determined by the Securities and Futures Commission established under the Act on the Establishment, etc. of Financial Services Commission. <Amended by Ordinance of the Ministry of Finance and Economy No. 27, Jun. 20, 1998; Ordinance of the Ministry of Finance and Economy No. 495, Mar. 10, 2006; Ordinance of the Prime Minister No. 875, Mar. 3, 2008>
(3) An accounting firm may submit the business report under paragraph (1) in digitally recorded documents. <Newly Inserted by Ordinance of the Ministry of Finance and Economy No. 372, Apr. 1, 2004>
[This Article Newly Inserted by Ordinance of the Prime Minister No. 627, Apr. 10, 1997]
 Article 6 (Supervisory Business Fee)
(1) The supervisory business fee collected by the Institute of Certified Public Accountants under the latter part of Article 15 (5) of the Act shall be charged within 1/100 of the remunerations for auditing which are paid to an auditor by a company under each subparagraph of Article 3 (1) of the Act. <Amended by Ordinance of the Ministry of Finance and Economy No. 221, Aug. 28, 2001>
(2) Necessary matters concerning the criteria, time, method, etc. of collection of supervisory business fee under paragraph (1) shall be determined by the Institute of Certified Public Accountants. <Amended by Ordinance of the Ministry of Finance and Economy No. 221, Aug. 28, 2001>
[This Article Newly Inserted by Ordinance of the Prime Minister No. 627, Apr. 10, 1997]
 Article 7 (Operation of the Joint Fund for Damages, etc.)
(1) The Joint Fund Operation Commission (hereinafter referred to as the "Fund Operation Commission") shall be established in the Institute of Certified Public Accountants to review and make resolutions on the basic directions for the operation and management of the joint fund for damages accumulated under Article 17-2 (1) of the Act (hereinafter referred to as "joint fund").
(2) The joint fund shall be operated by methods in each of the following subparagraphs: <Amended by Ordinance of the Ministry of Finance and Economy No. 27, Jun. 20, 1998; Ordinance of the Prime Minister No. 875, Mar. 3, 2008>
1. Purchase of national bonds, public bonds and other securities as determined by the Fund Operation Commission;
2. Deposit in financial institutions as determined by the Fund Operation Commission;
3. Other methods as determined by the Financial Services Commission.
(3) Necessary matters concerning the composition and operation of the Fund Operation Commission and management of the joint fund under paragraph (1) shall be determined by the Institute of Certified Public Accountants upon the approval of the Financial Services Commission. <Amended by Ordinance of the Ministry of Finance and Economy No. 27, Jun. 20, 1998; Ordinance of the Prime Minister No. 875, Mar. 3, 2008>
[This Article Newly Inserted by Ordinance of the Prime Minister No. 627, Apr. 10, 1997]
 Article 8 (Errors in Operation of Joint Fund)
(1) The Institute of Certified Public Accountants shall, when any error is committed in the course of operating the joint fund, include such error in the principal of the Joint Fund immediately.
(2) The Institute of Certified Public Accountants shall divide and add the amount obtained by excluding the expenses spent in the operation of the joint fund the errors under paragraph (1) in proportion to the accumulation rate of each accounting firm every business year.
[This Article Newly Inserted by Ordinance of the Prime Minister No. 627, Apr. 10, 1997]
 Article 9 (Disbursement of Joint Fund)
In the case where a person who is rendered a final and conclusive judgement on the liability for damages under Article 17-3 of the Act applies for the disbursement of the joint fund, attaching a copy of the final and conclusive judgement, the Institute of Certified Public Accountants shall disburse the joint fund to the concerned applicant by the end of the month following the month in which such application is received.
[This Article Newly Inserted by Ordinance of the Prime Minister No. 627, Apr. 10, 1997]
 Article 10 (Return of Joint Fund)
(1) In the case where an accounting firm which contributed to the accumulation of the joint fund dissolves by the causes in each subparagraph of Article 37 (1) of the Certified Public Account Act (excluding the case of a merger), the Institute of Certified Public Accountants shall return to the partners at the time of the dissolution of the concerned accounting firm the balance after the deduction of the amount spent under Article 17-7 of the Enforcement Decree of the Act on External Audit of Stock Companies from the joint fund accumulated by the concerned accounting firm. <Amended by Ordinance of the Ministry of Finance and Economy No. 221, Aug. 28, 2001; Ordinance of the Ministry of Finance and Economy No. 495, Mar. 10, 2006>
(2) When returning the balance to the partners at the time of the dissolution of the concerned accounting firm under paragraph (1), it shall be returned after the lapse of three years from the date of occurrence of the cause thereof (the date of approval in the case where an approval is required) (hereinafter referred to as the "returnable date"): Provided, That in the case where a lawsuit related to the liability for compensation of the concerned accounting firm under Article 17 of the Act is under way as of the returnable date, it may be returned from the date on which the disbursement of the joint fund pursuant to the final and conclusive judgment of the concerned lawsuit has completed. <Amended by Ordinance of the Ministry of Finance and Economy No. 27, Jun. 20, 1998; Ordinance of the Ministry of Finance and Economy No. 221, Aug. 28, 2001>
[This Article Newly Inserted by Ordinance of the Prime Minister No. 627, Apr. 10, 1997]
 Article 11 (Report on Current State of Accumulation of Joint Fund, etc.)
(1) The Institute of Certified Public Accountants shall report to the Financial Services Commission on the current state of the accumulation of the joint fund and the results of operation thereof by the end of July every year. <Amended by Ordinance of the Ministry of Finance and Economy No. 27, Jun. 20, 1998; Ordinance of the Prime Minister No. 875, Mar. 3, 2008>
(2) The Institute of Certified Public Accountants shall, when it has disbursed the joint fund under Article 9, report such fact to the Financial Services Commission. <Amended by Ordinance of the Ministry of Finance and Economy No. 27, Jun. 20, 1998; Ordinance of the Prime Minister No. 875, Mar. 3, 2008>
[This Article Newly Inserted by Ordinance of the Prime Minister No. 627, Apr. 10, 1997]
 Article 12 (Procedure of Collection of Fine for Negligence)
The provisions of the Enforcement Rule of the Management of the National Funds Act shall apply mutatis mutandis to the procedure of collection of fines for negligence under Article 18 (5) of the Enforcement Decree of the Act on External Audit of Stock Companies. In this case, the method, period, etc. of raising an objection shall be also stated in the notice of payment. <Amended by Ordinance of the Ministry of Finance and Economy No. 316, Jun. 30, 2003; Ordinance of the Ministry of Finance and Economy No. 495, Mar. 10, 2006>
[This Article Newly Inserted by Ordinance of the Prime Minister No. 627, Apr. 10, 1997]
ADDENDUM
This Rule shall enter into force on the date of its promulgation.
ADDENDA <Ordinance of the Prime Minister No. 627, Apr. 10, 1997>
Article 1 (Enforcement Date)
This Rule shall enter into force on the date of its promulgation.
Article 2 (Applicability to Restrictions on Size of Companies That Auditor is Allowed to Audit)
The amended provision of Article 4 shall apply, starting from the accounting audit of the business year of a company, in which this Rule enters into force.
Article 3 (Transitional Measures concerning Restrictions on Size of Companies That Auditor is Allowed to Audit)
(1) An accounting firm established under Article 5 (3) of the Addenda of the Certified Public Accountant Act (Act No. 5255), which fails to meet the requirements under the amended provisions of Articles 24 through 26 and Article 27 (1) of the same Act shall be allowed to audit companies of which total asset amount at the end of the immediately preceding business year is 200 billion won by December 31, 1999, notwithstanding the amended provision of Article 4: Provided, That with respect to the business years in each of the following subparagraphs, such accounting firm may audit a company even when its total asset amount exceeds 200 billion won:
1. In cases of auditing a company which is a listed stock company under Article 4-2 (1) of the Act, three consecutive business years; and
2. In cases where an auditor nominated by the Securities and Futures Commission under Article 4-3 (1) of the Act audits a company, the business year in which such auditor is nominated.
(2) In cases of an audit team registered under the amended provision of Article 2, of which number of members is ten or more and all members are working in the same office, the size of a company which it is allowed to audit shall be less than 50 billion won of total asset amount at the end of the immediately preceding business year by December 31, 1998, notwithstanding the amended provisions in the attached table, and in cases of continuously auditing a company it audited in the immediately preceding year, the size of a company which it is allowed to audit shall be than 100 billion won less than the amount of total asset.
ADDENDA <Ordinance of the Ministry of Finance and Economy No. 27, Jun. 20, 1998>
(1) (Enforcement Date) This Rule shall enter into force on the date of its promulgation.
(2) (Applicability) The amended provisions of the attached table shall apply, starting from the first appointment of an auditor after this Rule enters into force.
ADDENDUM <Ordinance of the Ministry of Finance and Economy No. 100, Jul. 2, 1999>
This Rule shall enter into force on the date of its promulgation.
ADDENDUM <Ordinance of the Ministry of Finance and Economy No. 154, Jul. 28, 2000>
This Rule shall enter into force on the date of its promulgation.
ADDENDA <Ordinance of the Ministry of Finance and Economy No. 221, Aug. 28, 2001>
(1) (Enforcement Date) This Rule shall enter into force on the date of its promulgation.
(2) (Applicability to Collection of Supervisory Business Fees) The amended provision of Article 6 shall apply, starting from the remuneration for auditing an audit report submitted by an auditor under Article 8 of the Act after this Rule enters into force.
ADDENDA <Ordinance of the Ministry of Finance and Economy No. 316, Jun. 30, 2003>
(1) (Enforcement Date) This Rule shall enter into force on the date of its promulgation.
(2) (Applicability to Restrictions on Size of Company That Auditor is Allowed to Audit) The amended provision of Article 4 shall apply, starting from auditors appointed after this Rule enters into force.
ADDENDUM <Ordinance of the Ministry of Finance and Economy No. 372, Apr. 1, 2004>
This Rule shall enter into force on the date of its promulgation.
ADDENDA <Ordinance of the Ministry of Finance and Economy No. 495, Mar. 10, 2006>
(1) (Enforcement Date) This Rule shall enter into force on the date of its promulgation.
(2) (Applicability to Matters to be Entered in Business Report) The amended provision of Article 5 (1) shall apply, starting from the business report first submitted since this Rule enters into force.
ADDENDA <Ordinance of the Prime Minister No. 875, Mar. 3, 2008>
Article 1 (Enforcement Date)
This Rule shall enter into force on the date of its promulgation.
Articles 2 through 5 Omitted.