A Comparative Study on the External Accounting Audit System of Korean and Japanese Companies

Purpose: This study seeks to find ways to improve the external accounting audit system in Japan through the comparative analysis of the accounting audit system in Korea and Japan. Research design, data, and methodology: The external accounting audit system in Korea and Japan is understood through literature studies and prior research on accounting audit. In addition, by comparing and analyzing the laws, acts and systems related to external auditing in Korea and Japan, it is intended to suggest a direction to improve the accounting audit system in Japan. Results: First, Japan s audit system has undergone drastic changes with the enactment of the New Company Act in 2005, but due to the resistance of vested interests against the reform of the accounting audit system, IFRS is not yet mandatory. However, it is a format that follows IFRS principles in a large framework. In order for Japan to raise its confidence in accounting transparency to the international level, it is urgent to introduce IFRS. Second, the Japanese Financial Services Agency has been considering whether to introduce the mandatory replacement designation system for accounting firms, but declared withholding in 2020 due to strong opposition from Gay Danren, the largest vested economic group. In order to ensure the transparency of accounting information in Japan and the quality of accounting audits, it is necessary to introduce a mandatory replacement system for auditors. Third, in order to manage the insufficient number of CPAs in Japan, it is necessary to implement a policy to expand the supply of CPAs by introducing a pre-determined system for the minimum number of expected CPAs in Korea, in which the government decides and announces the minimum number of CPAs in advance. Conclusions: While Japan is slightly lagging behind the global trend, Korea is securing transparency in accounting information through the introduction of IFRS and reform of the external accounting audit system. Therefore, Japan is urgently required to introduce IFRS like Korea. In addition, it is necessary to improve accounting transparency in Japan through drastic external accounting audit system reform