Date of Award
Master of Laws (LLM)
The concept of internal control began in accounting professional groups, gradually expanded to the administrative control and the risk management from accounting control, and became an important area that cannot be excluded from the operation of the public companies in the U.S.
When the Enron scandal struck the credibility of the stock market in the U.S. in 2001, the authorities implemented reformative measures including the SOX enactment to protect investors. Although there has been a controversy over this legislation since the enactment of the SOX, it appears that the U.S. capital market has been restoring confidence with the efforts of regulators.
Also, when the foreign exchange crisis and large-scale corporate accounting frauds occurred in Korea, there were demands that companies should establish internal control systems through legislations. However, the authorities in Korea tried to solve the problem by importing internal control system mainly from the U.S. and Japan since there was no various discussions of internal control for a long time. As a result, Korea individual legislations separately imported the internal control provisions from the U.S. and Japan, and they have contained illogical and cost increase problems. The most fundamental problem is that it is difficult to apply extensive concept of internal control like risk management to public companies that are not financial companies, because there is no general provision related the internal control in the Commercial Act, a general act for public companies. Next, cost problem companies are neglected to establish the internal control. Last, that is a conflict problem of internal control provisions in Korea legislations.
To solve these legislative problems, a general provision on internal control should be created in the Commercial Act. Second, it is necessary to approach companies with indirect regulation method like the U.S. and Japan to minimize the cost of establishment. Finally, it is required to integrate and operate internal control agencies that possibly cause confusion. Also, it is necessary to encourage companies to participate in establishing internal control system by implementing proper incentive systems rather than only imposing regulation.
Kwon, Sungbum, "A Legal Study on the Internal Control System for Direction of Legislation in Korea" (2017). Maurer Theses and Dissertations. 50.