In 1999 the Korean Commercial Code introduced the audit committee system in the board of directors of stock corporations. The audit committee of the board of directors of stock corporations was established for the purpose of supervising the business of the corporation, and of overseeing the accounting and financial reporting processes of the corporation and audits of the financial statements of the corporation. The audit committee was established to assist the board of directors in fulfilling its supervisory responsibilities not to mention oversight responsibilities by reviewing and reporting to the board of directors on the integrity of the financial reports and other financial information provided by the corporation to its shareholders. According to the revised Commercial Code of 1999, the stock corporation in Korea can choose the newly introduced audit committee system instead of the traditional auditor system, except the large publicly held corporations which are mandated to adopt an audit committee system according to the Securities Exchange Act. The audit committees are required to include at least three board members and at least 2/3 of them must be outside directors for large companies listed in the stock market. None of the Korean corporations have had an audit committee before the revision of Commercial Code in 1999.
This article evaluates the actual operation and function of both auditor system and audit committee system in Korean business practice by means of analysing recent statistics on both systems, focusing on finding truth if they are actually effectively operated or not.
The results of this study are summarized as follows. The the present situation of supervisory system in Korea seems far from satisfaction: Only 115 corporations (19.9%) of 579 listed corporations have adopted audit committee system. Further, the Commercial Code and the Securities Exchange Act have many lacunae and inconsistency in the provisons on requirements, election and dismissal of the auditor and the member of audit committee. Most of auditors (94.03%) are part-time auditors or outsider directors. Most of auditors have no any supporting manpower or institution within their corporations. Under such a circumstances, it would be impossible to supervise and inspect the corporate business properly. One symptom of improvement in Korea is that the number of corporations that adopt the audit committee systems voluntarily are gradually increasing.
The results of this study suggest that the supervisory system in korean corporations should be developed to be an internal control system of corporations. The writer expects that the results of this study are very timely and useful in finding facts and truth for regulators as well as academics and business practitioners.
In 1999 the Korean Commercial Code introduced the audit committee system in the board of directors of stock corporations. The audit committee of the board of directors of stock corporations was established for the purpose of supervising the business of the corporation, and of overseeing the accounting and financial reporting processes of the corporation and audits of the financial statements of the corporation. The audit committee was established to assist the board of directors in fulfilling its supervisory responsibilities not to mention oversight responsibilities by reviewing and reporting to the board of directors on the integrity of the financial reports and other financial information provided by the corporation to its shareholders. According to the revised Commercial Code of 1999, the stock corporation in Korea can choose the newly introduced audit committee system instead of the traditional auditor system, except the large publicly held corporations which are mandated to adopt an audit committee system according to the Securities Exchange Act. The audit committees are required to include at least three board members and at least 2/3 of them must be outside directors for large companies listed in the stock market. None of the Korean corporations have had an audit committee before the revision of Commercial Code in 1999. This article evaluates the actual operation and function of both auditor system and audit committee system in Korean business practice by means of analysing recent statistics on both systems, focusing on finding truth if they are actually effectively operated or not. The results of this study are summarized as follows. The the present situation of supervisory system in Korea seems far from satisfaction: Only 115 corporations (19.9%) of 579 listed corporations have adopted audit committee system. Further, the Commercial Code and the Securities Exchange Act have many lacunae and inconsistency in the provisons on requirements, election and dismissal of the auditor and the member of audit committee. Most of auditors (94.03%) are part-time auditors or outsider directors. Most of auditors have no any supporting manpower or institution within their corporations. Under such a circumstances, it would be impossible to supervise and inspect the corporate business properly. One symptom of improvement in Korea is that the number of corporations that adopt the audit committee systems voluntarily are gradually increasing. The results of this study suggest that the supervisory system in korean corporations should be developed to be an internal control system of corporations. The writer expects that the results of this study are very timely and useful in finding facts and truth for regulators as well as academics and business practitioners.
In 1999 the Korean Commercial Code introduced the audit committee system in the board of directors of stock corporations. The audit committee of the board of directors of stock corporations was established for the purpose of supervising the business of the corporation, and of overseeing the accounting and financial reporting processes of the corporation and audits of the financial statements of the corporation. The audit committee was established to assist the board of directors in fulfilling its supervisory responsibilities not to mention oversight responsibilities by reviewing and reporting to the board of directors on the integrity of the financial reports and other financial information provided by the corporation to its shareholders. According to the revised Commercial Code of 1999, the stock corporation in Korea can choose the newly introduced audit committee system instead of the traditional auditor system, except the large publicly held corporations which are mandated to adopt an audit committee system according to the Securities Exchange Act. The audit committees are required to include at least three board members and at least 2/3 of them must be outside directors for large companies listed in the stock market. None of the Korean corporations have had an audit committee before the revision of Commercial Code in 1999. This article evaluates the actual operation and function of both auditor system and audit committee system in Korean business practice by means of analysing recent statistics on both systems, focusing on finding truth if they are actually effectively operated or not. The results of this study are summarized as follows. The the present situation of supervisory system in Korea seems far from satisfaction: Only 115 corporations (19.9%) of 579 listed corporations have adopted audit committee system. Further, the Commercial Code and the Securities Exchange Act have many lacunae and inconsistency in the provisons on requirements, election and dismissal of the auditor and the member of audit committee. Most of auditors (94.03%) are part-time auditors or outsider directors. Most of auditors have no any supporting manpower or institution within their corporations. Under such a circumstances, it would be impossible to supervise and inspect the corporate business properly. One symptom of improvement in Korea is that the number of corporations that adopt the audit committee systems voluntarily are gradually increasing. The results of this study suggest that the supervisory system in korean corporations should be developed to be an internal control system of corporations. The writer expects that the results of this study are very timely and useful in finding facts and truth for regulators as well as academics and business practitioners.