Administrative Law

Corporate Accounting & Financial Advisory Lawyer

Corporate Accounting & Financial Advisory Lawyer | Advisory for accounting compliance, disclosure, and audit exposure

Summary

Corporate accounting matters sit at the intersection of the Act on External Audit of Stock Companies (주식회사 등의 외부감사에 관한 법률), the Financial Investment Services and Capital Markets Act (자본시장과 금융투자업에 관한 법률), and internal company governance. Problems rarely start as criminal fraud — they usually begin as a restatement, a late disclosure, a disagreement with an external auditor, or a finding in a Financial Supervisory Service accounting review. Legal advisory at this stage is about managing regulatory and civil exposure before it escalates into enforcement or litigation, and about building the internal control and disclosure processes that keep a company out of that position in the first place.

Administrative · Corporate Act on External Audit of Stock Companies Capital Markets Act Internal Accounting Control

Corporate Accounting & Financial Advisory | Financial Statement Disclosure Duties and Restatement Risk

A listed or externally audited company's periodic and material disclosures carry independent legal exposure, separate from whether any underlying accounting treatment was ultimately correct.

Periodic report obligations

Companies subject to the Capital Markets Act must file business, semi-annual, and quarterly reports containing audited or reviewed financial statements (자본시장과 금융투자업에 관한 법률 제159조, 제160조). Errors discovered after filing can trigger a duty to correct or restate, which itself becomes a disclosure event.

Material disclosure vs. accounting error

Not every accounting adjustment rises to the level of a material disclosure event, but a restatement affecting net income or equity beyond internal materiality thresholds usually does. Legal review at this stage focuses on how the disclosure is characterized and timed relative to the underlying accounting fact.

Coordination with auditors and the board

Because disclosure decisions sit between the accounting team, the external auditor, and the board or audit committee, advisory work often involves drafting the disclosure narrative and confirming the internal approval chain, not just checking legal thresholds.

⚠ Restatement disclosure timing

Once a company or its auditor identifies an error requiring restatement, disclosure must generally be made without delay under exchange disclosure rules; deferring disclosure to manage market reaction is itself a separate compliance risk.

Corporate Accounting & Financial Advisory | Internal Accounting Control System (ICFR) Design and Assessment

Since the amended Act on External Audit expanded internal accounting control requirements, more companies must design, operate, and have management assess a formal internal accounting control system, with the external auditor separately reviewing that assessment.

Who is covered and what is required

Companies meeting the size or listing thresholds under the Act on External Audit must establish an internal accounting control system and have management report annually on its operation (주식회사 등의 외부감사에 관한 법률 제8조). The external auditor must review, and for larger companies eventually audit, that management assessment.

Legal gaps behind a 'non-effective' finding

When an auditor flags a material weakness, the root cause is often not the accounting entries themselves but unclear authorization rules, missing documentation, or IT access controls that were never formalized. Advisory work maps these gaps to concrete policy and delegation-of-authority documents.

Consequences of control failure

A documented material weakness can affect audit opinion, disclosure obligations, and — if it later intersects with an accounting error — the company's defense that the error was an isolated mistake rather than a systemic control failure.

Corporate Accounting & Financial Advisory | Responding to an FSS or Securities & Futures Commission Accounting Review

The Financial Supervisory Service and the Securities and Futures Commission can review a company's financial statements and audit reports for compliance with accounting standards, separately from any market-driven restatement.

How a review typically starts

A review may begin from a routine sampling process, a whistleblower report, an auditor's own referral, or media coverage. The company usually first receives a request for materials and an explanation of a specific accounting treatment, well before any formal finding is made.

Possible outcomes and sanctions

Findings can range from a request for correction with no sanction, to administrative sanctions such as restriction on external audit designation, corporate fines, or referral for criminal investigation under the Act on External Audit for cases involving intentional false statements (주식회사 등의 외부감사에 관한 법률 제39조). The severity typically turns on whether the error is treated as intentional, negligent, or a reasonable judgment call.

Building the response record

Because these reviews develop over months through written exchanges, how the company frames its accounting judgment in its first response often shapes the entire outcome. Legal advisory at this stage focuses on consistency between the company's explanation, its internal control documentation, and the auditor's own workpapers.

Corporate Accounting & Financial Advisory | External Auditor Selection, Disputes, and Liability Exposure

Companies increasingly face questions not only about their own accounting but about their relationship with the external auditor — from mandatory auditor designation to disputes over audit scope and potential claims if an audit failure later comes to light.

Free selection vs. designation

Most companies freely select their external auditor, but certain companies are subject to mandatory auditor designation by the Securities and Futures Commission under specified trigger conditions, including after a change of auditor within a short cycle or following certain regulatory findings (주식회사 등의 외부감사에 관한 법률 제11조).

Disputes over audit scope and opinion

Disagreements between a company and its auditor over the classification of a transaction, an impairment estimate, or a qualified opinion can have direct market and disclosure consequences, so companies often need an independent legal read on the technical dispute before it is escalated.

Third-party claims against auditors and companies

If investors or creditors later allege they relied on defective financial statements, both the company and the auditor can face separate claims for damages under the Act on External Audit (주식회사 등의 외부감사에 관한 법률 제31조), and the allocation of liability between company insiders and the auditor becomes a central issue.

Corporate Accounting & Financial Advisory | From initial consultation to resolution

Initial fact review
We review the underlying accounting issue, relevant disclosures already made, and any communication already exchanged with auditors or regulators, to identify what is actually at stake legally.

Risk classification
We assess whether the matter is best framed as an accounting judgment dispute, a disclosure timing issue, an internal control gap, or a matter with potential regulatory exposure, since each track calls for a different response strategy.

Coordination with accountants and auditors
Legal advisory does not replace the company's accounting team or external auditor; we work alongside them to align the legal characterization of an issue with the accounting treatment being proposed.

Drafting and documentation
Where needed, we draft or review disclosure language, internal control policies, board or audit committee resolutions, and responses to regulator inquiries.

Regulatory or dispute follow-through
If the matter proceeds to an FSS review, SFC sanction proceeding, or civil claim, we represent the company or executives through that process, building on the documentation and positions established earlier.

Corporate Accounting & Financial Advisory | How advisory fees are typically structured

Advisory retainer
Ongoing accounting and disclosure advisory is often structured as a periodic retainer covering a defined scope of recurring questions, sized to the complexity and frequency of the company's disclosure obligations rather than a flat market rate.

Project-based fee
A discrete task — reviewing a specific disclosure, drafting an internal control policy, or responding to a single regulator inquiry — is typically quoted as a fixed project fee once the scope is defined.

Regulatory response or dispute fee
Representation in an FSS or SFC review, or in a dispute with an auditor, is generally billed based on the anticipated number of response rounds and the complexity of the accounting issue, and is discussed once the scope of the matter is known.

Disbursements
Separate costs such as expert accounting opinions, translation of financial statements, or court/administrative filing fees are billed separately as incurred.

※ Costs vary depending on case complexity and specific circumstances; exact fees will be provided during consultation. No specific outcome is guaranteed.

Corporate Accounting & Financial Advisory | Self-Check Before You Reach Out

1️⃣ For companies facing a restatement

Has the auditor confirmed in writing that a restatement is required, or is this still an internal proposal?
Do you know whether the affected periods are already reflected in filed periodic reports?
Has the board or audit committee formally reviewed the proposed correction?
Have you drafted disclosure language, or are you still deciding whether disclosure is even required?

2️⃣ For companies building an internal control system

Do you know whether your company currently meets the size/listing threshold requiring a formal ICFR system?
Has management ever formally documented and signed an annual internal control assessment?
Do you have written delegation-of-authority and IT access control policies, or only informal practice?
Has your external auditor flagged any control deficiency in a prior year's review?

3️⃣ For companies responding to an FSS/SFC inquiry

Have you received a written request for materials, or only an informal phone inquiry so far?
Do you know which specific accounting treatment or transaction is under review?
Has anyone at the company already sent a written response without legal review?
Are your internal control records for the relevant period complete and consistent with your explanation?

4️⃣ For disputes involving an external auditor

Is the disagreement about a factual accounting judgment, or about the scope/terms of the audit engagement itself?
Has the auditor issued a qualified, adverse, or disclaimer opinion, or is this still pre-opinion?
Is there a risk that changing auditors mid-cycle could itself trigger mandatory designation?
Have investors or creditors raised any claim referencing the disputed financial statements?

Frequently Asked Questions

Q. Does every company need an internal accounting control system?

A. No. The formal requirement under the Act on External Audit applies to companies meeting specified size or listing criteria, though smaller companies can still benefit from adopting similar controls voluntarily (주식회사 등의 외부감사에 관한 법률 제8조). Whether your company is covered depends on asset size, listing status, and other statutory thresholds that should be checked case by case.

Q. What happens if the FSS finds our financial statements were misstated?

A. The outcome depends heavily on whether the misstatement is characterized as intentional, negligent, or a defensible judgment call. Possible results range from a request for correction, to administrative sanctions, to referral for criminal investigation for intentional false statements (주식회사 등의 외부감사에 관한 법률 제39조). Early, well-documented engagement with the review process often affects which category the finding falls into.

Q. Can our company be sued by investors over accounting errors even without a criminal case?

A. Yes. Civil liability for damages caused by false or omitted statements in audited financial statements can arise independently under the Act on External Audit, regardless of whether any criminal referral is made (주식회사 등의 외부감사에 관한 법률 제31조). This is a separate track from any regulatory sanction.

Q. Who is liable when there's a dispute over how a transaction should have been accounted for?

A. Liability can potentially fall on company management for the underlying judgment, the external auditor for its review or audit opinion, or both, depending on how the error arose and what each party knew at the time. This allocation question is often the central issue in accounting-related civil and regulatory disputes.

Q. How is mandatory auditor designation different from choosing our own auditor?

A. Most companies freely select and contract with their external auditor, but the Securities and Futures Commission can designate a specific auditor for companies meeting certain trigger conditions, such as governance concerns or prior audit findings (주식회사 등의 외부감사에 관한 법률 제11조). Designation removes the company's discretion over auditor selection for the designated period.

Q. We disagree with our auditor's proposed treatment — what are our options?

A. Before escalating, it is worth clarifying whether the disagreement is a genuine accounting judgment call, where multiple treatments could be defensible, or a disclosure/scope issue tied to the engagement letter. Legal advisory at this stage typically focuses on documenting the company's position and assessing the consequences of a qualified or adverse opinion if the disagreement is not resolved.

Q. Do we need to disclose an accounting error immediately, or can we wait until the correction is finalized?

A. Once an error affecting filed financial statements is confirmed to require correction, disclosure obligations under exchange rules generally attach without material delay, separate from how long the internal correction process itself takes. Deferring disclosure to avoid market reaction carries its own compliance risk.

Q. Is legal advisory really necessary if we already have accountants and auditors?

A. Accountants and auditors address the technical accounting treatment; legal advisory addresses how that treatment translates into disclosure obligations, regulatory exposure, and civil liability risk. The two roles overlap but are not interchangeable, particularly once a regulator or third party is involved.

Q. What triggers an FSS accounting review in the first place?

A. Triggers include routine periodic sampling, a whistleblower report, the external auditor's own referral of a suspected issue, or media or market attention to a specific transaction. Companies often only learn a review has started when they receive a written request for materials.

Q. How long does an FSS or SFC accounting review typically take?

A. There is no fixed statutory timeline, and reviews can extend over many months depending on the complexity of the accounting issue and the number of response rounds exchanged. Companies should plan for this to be a sustained process rather than a single meeting or letter.

Official References

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