(1) External Audit System
The external audit system refers to the auditing of a company by external accountants with no vested interests in that company. The system was established to ensure that external auditors conduct audits independently from internal auditors in order to protect interested parties such as shareholders, creditors, employees, etc. and to promote the sound development of companies. According to the Act on the External Auditing of Stock Companies, auditors who are certified public accountants inspect whether the financial statements prepared by businesses when settling their accounts comply with the business accounting standards.
Article 2 of the Enforcement Decree of the Act on the External Auditing of Stock Companies stipulates that companies subject to an external audit are corporations under certain categories as listed below.
Thus, limited companies, etc. are not obligated to undergo an external audit, regardless of their size.
• A corporation whose total amount of assets at the end of the preceding business year comes to KRW 12 billion or more (as of the establishment of a new firm following the split of a corporation or a merger with another firm, if applicable).
• A stock-listed corporation (under the Financial Investment Services and Capital Markets Act) or a corporation planning to be listed in the corresponding or following business year.
• A corporation whose total liabilities come to KRW 7 billion or more at the end of the preceding business year and whose total assets come to KRW 7 billion or more (as of the establishment of a new firm following the split of a corporation or a merger with another firm, if applicable).
• A corporation whose total number of employees comes to 300 or more and whose total amount of assets comes to KRW 7 billion or more at the end of the preceding business year (as of the establishment of a new firm following the split of a corporation or a merger with another firm if applicable).
Companies subject to external audits should elect an auditor within four months of the start of each
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business year. Stock-listed corporations and association-registered corporations should elect the auditor within four months of the start of the first business year, and use the same auditor for three consecutive years. If the company prepares consolidated financial statements, then the same auditor must be used for the financial statement, consolidated financial statement, and combined financial statement. In electing an auditor, the company should obtain the approval of an auditor election committee (or an audit committee stipulated by the Commercial Act) endowed with expertise and independence. In particular, stock-listed corporations, association-registered corporations, and subsidiaries of business groups in which a member company has been notified by the Securities and Futures Commission to prepare a combined financial statement in the previous business year should obtain the approval of the auditor election committee.
When the company elects an auditor under the said regulations, it should be reported at the first general shareholders’ meeting after the election.
(2) Internal Accounting Control System
The internal accounting control system, which is part of the internal control system, is designed and operated to provide rational grounds for determining whether a company’s financial statements have been prepared and disclosed according to the Generally Accepted Accounting Principles (GAAP). The internal control system has three purposes: operation, financial reporting, and compliance. Regarding these purposes, the internal accounting control system has been developed to meet the financial reporting requirements (to secure the reliability of financial statements in particular). Asset protection and corruption prevention programs are included, and when control procedures for operation or compliance are related to securing the reliability of financial statements, the relevant control procedure is included in the scope of the internal accounting control system.
The internal accounting control system provides basic guidelines for companies seeking to streamline their internal accounting management practices, allowing them to improve the reliability of their financial statements and other related materials. The representative of a company is responsible for managing the internal accounting control system, and should designate a full-time director as the internal accounting manager in charge of implementing the system. The internal accounting manager reports the operational status of the internal accounting control system to the board of directors and the auditor (or the audit committee) every six months, and the auditor (or the audit committee) reports its evaluation to the board of directors every year. In addition, review standards for the internal accounting control system is in place to provide clear standards for external auditors to review and report the establishment and operational status of a company’s internal accounting control system.
< Good Practice Guidelines and Review Standards >
Internal Accounting Control System Operating Committee
Good Practice Guideline for Internal Accounting Control System
Korean Institute of Certified Public Accountants
Internal Accounting Control System Review Standards
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1. Regulations on Foreigners’ Real Estate Acquisition
Real estate acquisition by foreigners in Korea is governed by the Act on Report on Real Estate Transactions, Etc. (“foreigner, etc.” under this Act), the Foreign Investment Promotion Act, the Foreign Exchange Transactions Act, etc. With the exception of certain real estates that require government permission for purchase, a foreigner, etc. may acquire land in Korea by following certain procedures and reporting the acquisition to the appropriate authorities. It should be noted that different acquisition procedures apply to land subject to permission and land subject to reporting. The same regulations and restrictions on the acquisition, use and development of real estate apply to both Koreans and foreigners.
•Act on Report on Real Estate Transactions, Etc.
•Foreign Investment Promotion Act
•Foreign Exchange Transactions Act
•Land-Related Regulations
< Laws Related to Foreigners’ Real Estate Acquisition>
Law Act on Report on Real Estate Transactions, Etc.
Foreign Investment Promotion Act
Foreign Exchange Transactions Act
Applicable parties
• Foreigner, etc. (individuals, foreign corporations, domestic corporations with foreign shareholdings of 50% or more)
•Foreigners (individuals, foreign corporations, permanent residents, international organizations for economic cooperation, etc.)
•Non-residents
Key regulations
• Real estate acquisition notification: For notifying the acquisition of domestic real estate by a foreigner, etc.
•Foreign investment notification:
For notifying foreign direct investment as stipulated in the regulations
•Property acquisition notification:
For notifying non-residents’
acquisition of rights related to domestic real estate (right to lease on a deposit basis, mortgage, etc.)
Where to report
• Si/Gun/Gu office having
jurisdiction over the land •Foreign exchange bank, KOTRA •Foreign exchange bank Reporting
period
• Within 60 days of concluding a contract
•Prior to bringing in investment funds
•When withdrawing real estate acquisition funds
Governing authority
• The Ministry of Land,
• Infrastructure &Transport
•The Ministry of Trade, Industry
& Energy
•The Ministry of Economy and Finance
Ⅵ Foreigners’ Real Estate Acquisition
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