In Korea, certain companies are legally required to prepare financial statements and undergo an external audit by an independent auditor under the Act on External Audit of Stock Companies and its Enforcement Decree.
Below is an overview of who must appoint an external auditor and how to do it properly.
1. Companies Required to have an External Audit
The following types of entities must receive an external audit:
- A stock-listed corporation
- A Company Planning to Go Public ― A company that intends to be a stock-listed corporation in the relevant business year or the following business year
- Non-listed Stock or Private Limited Companies that meet any of following size criteria
2. Companies Eligible for Audit Exemption
Certain companies may be exempt from external audit requirements if they meet specific conditions and properly notify the authorities. Audit exemption generally applies to:
- Newly established companies within the fiscal year (based on the date of incorporation)
- Companies that have been dissolved , liquidated, or inactive for over one year.
- Business that have reported closure to the National Tax Service or are recognized as closed due to discontinued operations or loss of contact.
- Public institutions, quasi-government organizations, and investment entities under the Financial Investment Services and Capital Markets Act may also be exempt.
3. Procedure for Appointing an External Auditor
A company must appoint its external auditor within the statutory deadline prescribed by law, and report this appointment:
- At the first regular shareholders’ meeting of the fiscal year, or
- By public announcement (e.g., company website).
Within two weeks of signing the audit engagement letter, the company must also electronically file a report with the Financial Supervisor Service via the designated online system.
4. Who Appoints the External Auditor?
The appointing body for an external auditor varies depending on factors such as whether the company is listed and its size, as shown in the table above. In this context, the definitions of a company required to establish an Audit committee, and a large-unlisted company are as follows.
5. External Auditor Appointment Deadline
A company must appoint its external auditor within 45 days from the beginning of the fiscal year.
However, companies required to establish an Audit Committee must appoint their auditor before the start of the fiscal year.
In addition, companies that were not subject to external audit in the previous fiscal year must appoint their external auditor within four months from the beginning of the fiscal year.
6. Penalties for Non-Compliance
Companies that fail to:
- appoint an auditor within the deadline,
- follow the proper appointment procedures, or
- report the appointment to the FSS
may face administrative sanctions such as forced auditor designation, and even fines or imprisonment.
External audit obligations in Korea are not just a formality — they are an essential part of maintaining transparency and compliance.
If you’re unsure whether your company requires an audit or how to appoint an auditor correctly, it’s best to seek professional guidance early in the year.
At Zenya advisors, we assist businesses in assessing audit requirements, preparing financial statements, and managing all filing and reporting obligations — ensuring you stay compliant and confident.