In Korea, companies that meet the legal standards are required to hire an external auditor, typically an accounting firm, to conduct audits of their financial statements. The external audit process is crucial as it can significantly impact your company's trustworthiness and reliability, albeit it also incurs both time and expenses.
However, as I mentioned, not all companies are subject to external auditing. There are specific criteria for determining whether a company should undergo external auditing, and if your company does not meet these standards, it is not obligated to undergo the process. Nonetheless, it's important to note that you can still opt for an external audit voluntarily, even if your company doesn't meet the criteria.
Today, I will explain the criteria that determine whether a company should undergo an external audit.
1. Criteria
To determine whether a company should undergo an external audit in Korea, the following criteria are considered:
① Companies whose total assets exceed 50,000,000,000 KRW in the previous year.
② Companies whose revenue exceeds 50,000,000,000 KRW in the previous year.
*If the company started its business during the year, and its total business months are less than 12 months, the revenue should be converted to a 12-month equivalent.
③ Companies that meet at least two of the following standards in the previous year:
Total assets exceeding 12,000,000,000 KRW.
Total liabilities exceeding 7,000,000,000 KRW.
Revenue amounts exceeding 10,000,000,000 KRW.
Employee numbers exceeding 100 people.
2.Example
*A company
| -Total assets : 51,000,000,000 KRW |
| -Total liaibilities : 1,000,000,000 KRW |
| -Revenue amounts : 5,000,000,000KRW |
| -Employees numbers 50 people |
External audit is necessary because the total asset amount exceeds 50,000,000,000 KRW.
*B company
| -Total assets : 8,000,000,000 KRW |
| -Total liaibilities : 7,100,000,000 KRW |
| -Revenue amounts : 12,000,000,000KRW |
| -Employees numbers : 50 people |
->External audit is necessary because it's total liability amounts exceed 7,000,000,000 KRW and the revenue amounts exceed 10,000,000,000KRW
*C company
| -Total assets : 13,000,000,000 KRW |
| -Total liaibilities 6,000,000,000 KRW |
| -Revenue amounts : 9,000,000,000KRW |
| -Employees numbers : 110 people |
->External audit is necessary audit cause it's total asset amounts exceed 120,000,000,000 KRW and the employees number exceed 100 person
Thank you for read my article! I hope it helps.
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