InvestKorea | What Investors Need to Know | Operational Issues

Financial & Accounting System

The Korean financial market consists of a financial market in the traditional sense, in which short- and long-term financial products are traded in relation to the procurement and operation of funds, a foreign exchange market, and a derivatives market. Korean Financial Accounting Standards (KFAS) comply with International Accounting Standards (IAS), as Korea has announced the adoption of the Korean International Financial Reporting Standards (K-IFRS).

Korea’s financial structure

Financial
Market

Traditional
Financial
Market
- Money
  Market
  - Call
    RP
    CD
    CP
    Cover Bill
    Currency
    Stabilization Bond
- Capital
  Market
  - Bond Market
    - Government Bond
      Municipal Bond
      Corporate Bond
      Financial Bond
      Special Bond
  - Asset-Backed
    Securities Market
  - Stock Market
Foreign
Exchange
Market
Derivatives
Market
- Securities-Related
  Market
  - Forward
    Futures
    Option
    Swap
- Interest Rate Related
  Market
- Currency Related
  Market
- Credit Derivatives
  Market
- Derivatives Linked
  Securities Market

Business accounting standards & audit policy

Business accounting standards

The Korean Accounting Institute publishes new or revised business accounting standards with a designated serial number through the Statements of Korea Accounting Standards. The Statements of Korea Accounting Standards apply when corporations under the Act on the External Auditing of Stock Companies prepare financial statements for external users, and when external auditors conduct audits.

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. 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.

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).