Vietnam Businesses Need to Prepare for Korea Sarbanes-Oxley Compliance Requirements

Background

In response to an increase in accounting and corporate scandals, Korean regulatory bodies have taken action to reform and regain public trust. One major step is the development of Korea Sarbanes-Oxley (K-SOX) based on the US’ Sarbanes-Oxley Act signed into law in 2002.

Goals of K-Sox

The ultimate goal of K-Sox is to protect investors from fraudulent financial information by mandating stringent requirements on internal controls over financial reporting (ICFR).

Effective Dates and Compliance Requirements

Separate financial statements: K-Sox has been effective since fiscal year 2019.
Consolidated financial statements: Will come into effect from fiscal year 2023.

All listed and unlisted entities operating in the Republic of Korea must comply with K-SoX. Subsidiaries in Vietnam need to pay closer attention to this Act as their participation will affect the group’s full compliance with K-SoX.

Impact on Parent Companies and Subsidiaries

The requirements of K-Sox will have a significant impact on both parent companies located in Korea and their subsidiaries inside or outside Korea. In preparation for the compliance deadline, businesses should:

Establish strong internal controls
Place more responsibilities on the Board of Management, Audit Committee, and External Auditors
Ensure transparency in financial reporting

Preparation is Key

The Vietnamese business community needs to be proactive in addressing these changes and taking steps towards K-Sox compliance. With the effective dates just around the corner, it’s essential for companies to start preparing now to avoid potential penalties and reputational damage.

By starting preparations early, businesses can ensure a smooth transition to K-Sox compliance and maintain investor trust.