`Overlook of Accounting Auditing` Will Disappear

There is a large change in a business auditing custom.

Minor Shareholders filed a lawsuit against a negligence of the auditing of the accounting firms, and Korea Deposit Insurance Corporation (KDIC), the government agency filed the lawsuit on a compensation claim against the large accounting firm.

If the accounting firms connive at fraudulent accounting of the company or don’t audit properly to get the auditing contract, they will be hard up for a bankruptcy. Sandong Accounting Firm was closed 2 years ago owing to the fraudulent accounting of Daewoo Group. Also, Arthur Andersen the auditor of Enron, was bankrupted due to the accounting irregularity of Enron.

Choi, Jin-Yeong, the head of Accounting System Section, Financial Supervisory Service (FSS) said “Accounting firms will reduce a risk through reviewing an internal control system, a quality of the management and the past financial statements from a phase of the auditing contract. The customs on a dumping ordering and an overlooking of the fraudulent accounting will be vanished.”

Accordingly, it is forecasted that a trouble between the accounting firm and the company will be severe for the settlement auditing as a legal responsibility of the accounting firm has been heavy. The accounting firms must apply the strict standard and reflect the substances of the past fraudulent accounting of the companies, but a net income of the company will decrease.

Experiencing the more serious accounting irregularity than Korea, US passed a bill of the accounting reform including an establishment of ‘Accounting Supervisory Organization’.

Lee Keun-Young, the chairman of Financial Supervisory Commission (FSC) said “We are reviewing various ways including the establishment an independent accounting supervisory organization.”

Besides, Korea Institute of Certified Public Accountants (KICPA) rebels “Only the accounting auditing based on the willful negligence or heavy mistake must be investigated. If the lawsuit is overfilled, a market of the accounting auditing will be paralyzed.”

Do-Young Kim nirvana1@donga.com kyle@donga.com