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ENFORCEMENT RULE OF THE ACT ON EXTERNAL AUDIT OF STOCK COMPANIES

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ENFORCEMENT RULE OF THE ACT ON EXTERNAL AUDIT OF STOCK

COMPANIES

Ordinance of the Ministry of Finance No. 1814, Mar. 21, 1990 Ordinance of the Prime Minister No. 627, Apr. 10, 1997 Ordinance of the Ministry of Finance and Economy No. 27, Jun. 20, 1998 Ordinance of the Ministry of Finance and Economy No. 100, Jul. 2, 1999 Ordinance of the Ministry of Finance and Economy No. 154, Jul. 28, 2000 Ordinance of the Ministry of Finance and Economy No. 221, Aug. 28, 2001 Ordinance of the Ministry of Finance and Economy No. 316, Jun. 30, 2003 Ordinance of the Ministry of Finance and Economy No. 372, Apr. 1, 2004 Ordinance of the Ministry of Finance and Economy No. 495, Mar. 10, 2006 Ordinance of the Prime Minister No. 875, Mar. 3, 2008 Article 1 (Purpose)

The purpose of this Rule is to provide matters delegated by the Act on External Audit of Stock Companies and the Enforcement Decree of the Act on External Audit of Stock Companies and necessary matters for the enforcement thereof. Article 2 (Registration of Audit Team)

(1) The audit team under Article 3 (1) 3 of the Act on External Audit of Stock Companies (hereinafter referred to as the "Act") (hereinafter referred to as an "audit team") shall satisfy the requirements in each of the following subparagraphs:

1. It is required to be comprised of persons who have received practical training under Article 3 (7) and (8) of the Decree as a certified public accountant registered under Article 7 of the Certified Public Accountant Act;

2. It is required to have three or more members;

3. It is required not to have a member who falls into subparagraph 2 or 3 of Article 26 (1) of the Certified Public Accountant Act; and ENFORCEMENT RULE OF THE ACT ON EXTERNAL AUDIT OF

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4. It is required not to have a member who belongs to an accounting corporation under Article 23 of the Certified Public Accountant Act (hereinafter referred to as an "accounting corporation") or other audit team;

(2) The audit team shall, when it intends to commence the business of accounting audit with respect to a stock company which is required to be subjected to an accounting audit under Article 2 of the Act (hereinafter referred to as a "company"), be registered with the Korean Institute of Certified Public Accountants established under Article 41 of the Certified Public Accountant Act (hereinafter referred to as the "Institute").

(3) A person who intends to apply for the registration under paragraph (2) shall submit an audit team registration application to the Institute, attaching thereto documents in each of the following subparagraphs:

1. Operational rules of the audit team;

2. Written consent to the composition of the audit team; and

3. Other documents as determined by the Institute. (4) The Institute shall, upon receipt of an audit team registration application under paragraph (2), shall enter matters in each of the following subparagraphs in the audit team register and deliver an audit team registration card to the applicant:

1. Registration number of the audit team;

2. Name and address of members;

3. Location of the office of members; and

4. Principal office of the audit team; and

5. Other matters as determined by the Institute. (5) An audit team registered under paragraph (2) shall, when there is any change in the matters provided in each subparagraph of paragraph (4) or it has made a resolution on the dissolution of the concerned audit team, notify such fact to the Institute without delay. (6) The Institute may, when an audit team falls into any of the following subparagraphs, cancel the registration concerned:

1. Where the audit team is registered by falsehood or other undue means; ENFORCEMENT RULE OF THE ACT ON EXTERNAL AUDIT OF

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2. Where the audit team has made a resolution on its dissolution;

3. Where the audit team which failed to meet the requirements provided in paragraph (1) fails to supplement it within three months;

4. Where the audit team violated the provisions of Article 2-3 of the Act, proviso to paragraph (1) with the exception of its subparagraphs, and paragraphs (3) and (6) of Article 3 of the Act, Article 5 (1) of the Act, Article 6 (2) of the Act, Article 7-2 of the Act, Article 8 (1) of the Act, Article 9 of the Act, Article 10 (1) and (2) of the Act, Article 11 of the Act, Article 14-2 of the Act, Article 15-2 (1) of the Act or Article 17 (6) of the Act; and

5. Where the audit team violated the provision of Article 3. (7) Deleted. Article 3 (Ways of Conducting Business by Audit Team, etc.) (1) In the case where an audit team conducts the business of external audit under Article 2 of the Act, three or more members of the concerned audit team shall participate in it.

(2) In the case where an audit team has prepared an audit report under Article 8 of the Act, it shall be signed and sealed by all members who participated in the external audit of the company concerned under paragraph (1). (3) An audit team shall submit to the Institute a report on the results of its business of the previous year by June 30 each year. Article 4 Deleted.

Article 5 (Matters to be entered in and Submission of Business Report) (1) Matters to be entered in the business report under Article 3-2 (2) of the Act are as mentioned in each of the following subparagraphs:

1. Outline of an auditing corporation such as address and trade name;

2. Current conditions of directors, employees and certified public accountants belonging thereto;

3. Financial statements and annexed documents;

4. Total amount of remunerations by major services such as accounting ENFORCEMENT RULE OF THE ACT ON EXTERNAL AUDIT OF

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audit, vicarious execution of tax affairs and business management consulting for the last three business years;

5. Current conditions of the reserves for damage compensation under Article 28 (1) of the Certified Public Accountant Act, and accumulation of the joint fund for damages and subscription to a liability insurance for compensation under Article 17-2 (1) of the Act;

6. From among the results of supervision of the supervisory report for the last three years, matters meeting the standards that the Financial Services Commission established under the Act on the Establishment, etc. of Financial Services Commission establishes, taking into account the gravity of acts of violation; and

7. Results of lawsuits related to the business of an accounting corporation (including directors and certified public accountants belonging thereto) for the last three years.

(2) The business report under paragraph (1) shall be prepared in forms as determined by the Securities and Futures Commission established under the Act on the Establishment, etc. of Financial Services Commission.

(3) An accounting corporation may submit the business report under paragraph (1) in digitally recorded documents. [This Article Newly Inserted by Ordinance of the Prime Minister No. 627, Apr. 10, 1997] Article 6 (Supervisory Business Fee)

(1) The supervisory business fee collected by the Institute under the latter part of Article 15 (5) of the Act shall be charged within 1/100 of the remunerations for auditing which are paid to an auditor by a company under each subparagraph of Article 3 (1) of the Act. (2) Necessary matters concerning the criteria, time, method, etc. of collection of supervisory business fee under paragraph (1) shall be determined by the Institute.

[This Article Newly Inserted by Ordinance of the Prime Minister No. 627, Apr. 10, 1997] Article 7 (Operation of the Joint Fund for Damages, etc.) (1) The Joint Fund Operation Commission (hereinafter referred to as the ENFORCEMENT RULE OF THE ACT ON EXTERNAL AUDIT OF

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"Fund Operation Commission") shall be established in the Institute to deliberate and make resolutions on the basic directions for the operation and management of the joint fund for damages accumulated under Article 17-2 (1) of the Act (hereinafter referred to as the "joint fund"). (2) The joint fund shall be operated by methods in each of the following subparagraphs:

1. Purchase of national bonds, public bonds and other securities as determined by the Fund Operation Commission;

2. Deposit in financial institutions as determined by the Fund Operation Commission; and

3. Other methods as determined by the Financial Services Commission. (3) Necessary matters concerning the composition and operation of the Fund Operation Commission and management of the joint fund under paragraph (1) shall be determined by the Institute upon the approval of the Financial Services Commission.

[This Article Newly Inserted by Ordinance of the Prime Minister No. 627, Apr. 10, 1997] Article 8 (Errors in Operation of Joint Fund)

(1) The Institute shall, when any error is committed in the course of operating the joint fund, include such error in the principal of the Joint Fund immediately.

(2) The Institute shall divide and add the amount obtained by excluding the expenses spent in the operation of the joint fund the errors under paragraph (1) in proportion to the accumulation rate of each accounting corporation every business year.

[This Article Newly Inserted by Ordinance of the Prime Minister No. 627, Apr. 10, 1997] Article 9 (Disbursement of Joint Fund)

In the case where a person who is rendered a final and conclusive judgement on the liability for damages under Article 17-3 of the Act applies for the disbursement of the joint fund, attaching a copy of the final and conclusive judgement, the Institute shall disburse the joint fund to the concerned applicant by the end of the month following the month in which such application is received.

[This Article Newly Inserted by Ordinance of the Prime Minister No. 627, Apr. 10, 1997] Article 10 (Return of Joint Fund)

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(1) In the case where an accounting corporation which contributed to the accumulation of the joint fund dissolves by the causes in each subparagraph of Article 37 (1) of the Certified Public Account Act (excluding the case of merger), the Institute shall return to the partners at the time of the dissolution of the concerned accounting corporation the balance after the deduction of the amount spent under Article 17-7 of the Enforcement Decree of the Act on External Audit of Stock Companies from the joint fund accumulated by the concerned accounting corporation.

(2) When returning the balance to the partners at the time of the dissolution of the concerned accounting corporation under paragraph (1), it shall be returned after the lapse of three years from the date of occurrence of the cause thereof (the date of approval in the case where an approval is required) (hereinafter referred to as the "returnable date"): Provided, That in the case where a lawsuit related to the liability for compensation of the concerned accounting corporation under Article 17 of the Act is under way as of the returnable date, it may be returned from the date on which the disbursement of the joint fund pursuant to the final and conclusive judgment of the concerned lawsuit has completed.

[This Article Newly Inserted by Ordinance of the Prime Minister No. 627, Apr. 10, 1997] Article 11 (Report on Current State of Accumulation of Joint Fund, etc.) (1) The Institute shall report to the Financial Services Commission on the current state of the accumulation of the joint fund and the results of operation thereof by the end of July every year.

(2) The Institute shall, when it has disbursed the joint fund under Article 9, report such fact to the Financial Services Commission.

[This Article Newly Inserted by Ordinance of the Prime Minister No. 627, Apr. 10, 1997] Article 12 (Procedure of Collection of Fine for Negligence) The provisions of the Enforcement Rule of the Management of the National Funds Act shall apply mutatis mutandis to the procedure of collection of fines for negligence under Article 18 (5) of the Enforcement Decree of the ENFORCEMENT RULE OF THE ACT ON EXTERNAL AUDIT OF

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Act on External Audit of Stock Companies. In this case, the method, period, etc. of raising an objection shall be also stated in the notice of payment. [This Article Newly Inserted by Ordinance of the Prime Minister No. 627, Apr. 10, 1997] ADDENDUM This Rule shall enter into force on the date of its promulgation. ADDENDA Article 1 (Enforcement Date)

This Rule shall enter into force on the date of its promulgation. Article 2 (Example of Application to Restrictions on Size of Companies That Auditor is Allowed to Audit)

The amended provision of Article 4 shall apply, starting from the accounting audit of the business year of a company, in which this Rule enters into force.

Article 3 (Transitional Measure concerning Restrictions on Size of Companies That Auditor is Allowed to Audit)

(1) An accounting corporation established under Article 5 (3) of the Addenda of the Certified Public Accountant Act (Act No. 5255), which fails to meet the requirements under the amended provisions of Articles 24 through 26 and Article 27 (1) of the same Act shall be allowed to audit companies of which total asset amount at the end of the immediately preceding business year is 200 billion won by December 31, 1999, notwithstanding the amended provision of Article 4: Provided, That with respect to the business years in each of the following subparagraphs, such accounting corporation may audit a company even when its total asset amount exceeds 200 billion won:

1. In case of auditing a company which is a stock-listed corporation under Article 4-2 (1) of the Act, three consecutive business years; and

2. In case where an auditor nominated by the Securities and Futures Commission under Article 4-3 (1) of the Act audits a company, the business year in which such auditor is nominated.

(2) In case of an audit team registered under the amended provision of Article 2, of which number of members is ten or more and all members ENFORCEMENT RULE OF THE ACT ON EXTERNAL AUDIT OF

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are working in the same office, the size of a company which it is allowed to audit shall be less than 50 billion won of total asset amount at the end of the immediately preceding business year by December 31, 1998, notwithstanding the amended provisions in the attached table, and in case of continuously auditing a company it audited in the immediately preceding year, the size of a company which it is allowed to audit shall be less than 100 billion won. of total asset amount.

ADDENDA

(1) (Enforcement Date) This Rule shall enter into force on the date of its promulgation.

(2) (Example of Application) The amended provisions of the attached table shall apply, starting from the first appointment of an auditor since this Rule enters into force.

ADDENDUM

This Rule shall enter into force on the date of its promulgation. ADDENDUM

This Rule shall enter into force on the date of its promulgation. ADDENDA

(1) (Enforcement Date) This Rule shall enter into force on the date of its promulgation.

(2) (Example of Application to Collection of Supervisory Business Fee) The amended provision of Article 6 shall apply, starting from the remuneration for auditing an audit report submitted by an auditor under Article 8 of the Act since this Rule enters into force.

ADDENDA

ENFORCEMENT RULE OF THE ACT ON EXTERNAL AUDIT OF

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(1) (Enforcement Date) This Rule shall enter into force on the date of its promulgation.

(2) (Example of Application to Restrictions on Size of Company That Auditor is Allowed to Audit) The amended provision of Article 4 shall apply, starting from auditors appointed since this Rule enters into force. ADDENDUM

This Rule shall enter into force on the date of its promulgation. ADDENDA

(1) (Enforcement Date) This Rule shall enter into force on the date of its promulgation.

(2) (Example of Application to Matters to be Entered in Business Report) The amended provision of Article 5 (1) shall apply, starting from the business report first submitted since this Rule enters into force. ADDENDA Article 1 (Enforcement Date)

This Rule shall enter into force on the date of its promulgation. Articles 2 through 5 Omitted.