The South Korea Financial Services Commission has opened a consultation on amendments to the Regulation on External Audit and Accounting as a follow-up to its February 2026 plan to improve accounting and audit quality. The package is designed to push accounting firms to compete more on audit quality by strengthening rewards for high-performing firms, requiring large firms to install independent audit quality oversight bodies, and tightening experience requirements for senior executives at auditors of listed companies. The proposal would reshape the auditor designation system, under which accounting firms are currently grouped by factors including number of accountants and damages compensation capacity, with large listed companies restricted to Group A firms. It would double the required damages compensation capacity across the board and introduce an upward-classification exception so that strong mid-tier firms can take on larger listed company audits if they score near the top in audit quality assessments and hold additional compensation capacity. For example, a qualifying Group B firm could be treated as Group A for designation to companies with assets of KRW 2 trillion to KRW 5 trillion if it scores at least 95% of the average Group A quality score, ranks in the top 20% of Group B firms, and maintains at least 150% of the Group B damages compensation standard. The Financial Services Commission would also widen score differentiation by adding deductions of up to 10% to the current quality-based bonus of up to 10% and by introducing relative evaluation within each group. Separately, Group A firms would be required to establish an independent Audit Quality Supervisory Committee with a majority of independent external experts, including the chair, to monitor whether management decisions are undermining audit quality and to review key decisions in advance. For listed-company auditors, chief executive officers would need at least seven years of external audit experience and directors responsible for quality control at least five years. The consultation runs from July 24 to Sept. 2. The amendment is then expected to go through the Securities and Futures Commission and the Financial Services Commission before being finalized and implemented.
South Korea Financial Services Commission2026-07-24
South Korea Financial Services Commission proposes audit quality reforms, mandates external expert oversight committees at large accounting firms
The South Korea Financial Services Commission has proposed amendments to raise audit quality at accounting firms, following up on its February 2026 reform plan. The package would reward high-quality mid-tier firms with access to larger listed company audits, require large firms to install audit quality oversight committees led by external experts, and tighten external audit experience requirements for senior leaders at listed-company auditors. The consultation runs through Sept. 2 before further approval and implementation.