Whether measures taken by the Financial Supervisory Commission against a certified public accountant directly pursuant to Article 54(1)1 and 2 of the former Regulations on External Audit, Accounting, etc. is legitimate (negative)

Article 16(1) of the former Act on External Audit of Stock Companies (Amended by Act No. 6991, Dec. 11, 2003); Article 48 of the Certified Public Accountant Act; Article 54(1) of the former Regulations on External Audit and Accounting, etc. (Amended by Act No. 2005-29, Jun. 29, 2005)

Plaintiff (Attorney Kim Jong-il, Counsel for plaintiff-appellant)

Securities and Futures Commission (Law Firm Hun-Ba, Attorneys Im-soo et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2005Nu3419 delivered on November 15, 2005

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

The main sentence of Article 16(1) of the former Act on External Audit of Stock Companies (amended by Act No. 6991, Dec. 11, 2003; hereinafter referred to as the "former Act") provides that "where an auditor or a certified public accountant belonging to such auditor or certified public accountant falls under any of the following subparagraphs, the Securities and Futures Commission may recommend the Minister of Finance and Economy to order the relevant auditor or certified public accountant to cancel his registration or suspend his business or duties for a specified period, or take other necessary measures, such as restrictions on auditing for a specific company." Article 54(1) of the same Act on External Audit and Accounting, etc. prescribed by the Financial Supervisory Commission (amended by the Financial Supervisory Commission Act No. 2005-29, Jun. 29, 2005; hereinafter referred to as the "former External Audit Regulations"), the Securities and Futures Commission may take the following measures if a certified public accountant commits an offence, such measures as recommending him to suspend his duties or duties for not more than 2 years, cancelling his registration, or demanding the Association-registered for a specific period of not more than 2 years:

In full view of these provisions, the defendant Securities and Futures Commission may directly take measures under Article 54 (1) 3 of the former External Audit Regulations, including restrictions on audit of specific companies under Article 54 (1) 3 of the same Act, but the defendant Securities and Futures Commission may propose such measures as disciplinary action against certified public accountants in the event of revocation of registration under Article 54 (1) 1 of the same Act or suspension of business for a period of not more than two years, which constitutes disciplinary action against certified public accountants by the Minister of Finance and Economy. The defendant Securities and Futures Commission can only request such measures as disciplinary action against certified public accountants by the Minister of Finance and Economy.

In the same purport, the restriction on Defendant Securities and Futures Commission’s participation in audit for the year of the instant one-year period against the Plaintiff is not against a specific company, but against a listed corporation, Association-registered corporation, or company that designated an auditor, and the Defendant should be deemed to have been based on Article 54(1)2 of the former External Audit Regulations. The Defendant is only entitled to demand the Minister of Finance and Economy to take such measures and the Defendant cannot take such measures directly, and the lower court’s decision that the instant disposition was unlawful on the ground that it did not contain any error

As above, as long as the legal principles have been applied, the Defendant’s disposition of “limited to participation in audit for one year by stock-listed corporations, Association-registered corporations, and the Securities Futures Commission, which have long arrived at the end of one year from the date of receipt of a written measure,” and there was no objection thereto, and thus, the Defendant’s disposition cannot be deemed legitimate.

All of the grounds of appeal cannot be accepted.

Therefore, the appeal is dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Park Si-hwan (Presiding Justice)