Article
On the journey from understanding to complying with Korea Sarbanes Oxley
The article covers key information about Korea Sarbanes-Oxley (K-SOX) such as: what K-SOX is, who should be prepared for K-SOX, the need to establish K-SOX along with US-SOX, lessons from US-SOX, a good approach to K-SOX compliance and finally how it is relevant to Korean subsidiaries in Vietnam.
In response to an increase in number and impact of accounting and corporate scandals, Korean regulatory bodies have take actions to reform and regain public trust. Among which are the revisions to the Act on External Audit and the developement of Korea Sarbanes-Oxley or K-SOX based on the U.S.' Sarbanes-Oxley Act signed into law in 2002. K-SOX's ultimate goal is to protect investors from fraudulent financial informtaion by mandating stringent requirements on Internal controls over Financial reporting or ICFR, while placing more responsibilities on the Board of Management, Audit committee and External auditors of companies.
K-SOX is applied to both listed and unlisted entities operating in the Republic of Korea. K-SOX for separate financial statements have been effective since the fiscal year 2019, while K-SOX for consolidated financial statements will come into effect from the fiscal year 2023. Nevertheless, the compliance requirements of K-SOX at consolidation level will start first in the fiscal year 2023 with listed entities with total asset value of 2 trillion won and more, then in 2024 listed entities with total assets value over 500 billion won, and finally after 2025 the entire listed entities. The requirements will affect both Parent company located in Korea and their subsidiaries located inside or outside Korea.
As K-SOX for consolidated financial statements emphasizes on ICFR at the consolidated level, in which the parent companies and their subsidiaries are considered as a single economic entity, subsidiaries of Korean groups in Vietnam should also pay closer attention to this Act. Their participation will affect the Group's full compliance with K-SOX, so now is the time to take action and get prepared!