I am curious about the level of punishment for violating the External Audit Act and how to respond.

In the case of criminal punishment for violating the External Audit Act, depending on the degree of the act and the amount changed in the financial statements, both imprisonment and a fine may be imposed.

In general, where a company, despite being subject to external audit, violates accounting standards and prepares or discloses false financial statements, under Article 39 of the Act on External Audit of Stock Companies, etc., imprisonment of up to 10 years, and a fine of not less than 2 times and not more than 5 times the profit gained or the loss avoided through the violation, may be imposed.

In particular, where the change in the profit or loss or in the equity amount on the financial statements exceeds a certain proportion of the total assets, the level of punishment rises significantly.

Where the total assets are 5% or more but less than 10%, imprisonment for a definite term of at least 3 years may be imposed, and where the total assets are 10% or more, life imprisonment or imprisonment of at least 5 years may be imposed.

However, such aggravated punishment is limited to cases where the total assets are 50 billion won or more.

Therefore, if you are involved in a case of violating the External Audit Act, it is very important to establish an active response strategy from the early stage of the case through an accurate organization of the facts, a review of the financial statements, and the securing of relevant evidence.

Analyzing the case records, objectively proving whether there was an intent to violate and the scale of the loss and profit, and, where necessary, preparing reasonable grounds for mitigation are the core methods of response for minimizing the level of punishment.

For detailed matters related to violations of the External Audit Act, we recommend that you confirm them through a consultation with an attorney specializing in accounting.