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This chapter explores the relationship between bureaucracy and the ­democratization of the Republic of Korea by analyzing the roles and responsibilities of the Board of Audit and Inspection of Korea (BAI) and how Korea’s unique type of supreme audit institution (SAI) have been involved throughout the democratization process of Korea over the last two decades. Unlike western supreme audit institutions which mainly functioned for financial and performance auditing, Korea’s SAI, BAI bureaucracy, has functioned to reduce corruption, in cooperation with citizen’s participation which gives unique cases for the context of developing countries. The most important finding of this study is that bureaucracy can be an effective vehicle in a country’s political trajectory towards democratization given that the public institutions and agencies have specific traits such as having clear and comprehensive mandates, retaining high ­sensitivity to external needs, and maintaining well-qualified staff with active utilization of Information Technology. The main targets of the analysis are the conditions under which BAI bureaucracy could effectively exert its mandates and successfully fulfill its duties; also the question of how the BAI bureaucracy has facilitated democratization as being the locus of participatory democracy will be addressed.

Mandatory auditor firm rotation (mandatory rotation) has been a controversial issue in the United States for many decades. Mandatory rotation has been considered at various times as a means of improving auditor independence. For example, in the United States, the Public Company Accounting Oversight Board (PCAOB) has considered mandatory rotation as a solution to the independence problem (PCAOB, 2011) and the European Parliament approved legislation that will require mandatory rotation in the near future (Council of European Union, 2014). The concept of implementing a mandatory rotation policy has been encouraged by some constituents of audited financial statements and rejected by other constituents of audited financial statements. Although there are apparent pros and cons of such a policy, the developmental process of such a policy in this country has not necessarily been an open-democratic, objective process. Universal mandatory rotation may or may not be the ideal solution; however, an open-democratic, objective process is needed to facilitate the development of a solution that considers the needs of all major stakeholders of audited financial statements – not simply accounting firms and public companies, but also investors. The purpose of this paper is to critically examine key issues relating to mandatory rotation and to encourage and stimulate future research and ongoing dialogue regarding this issue, in spite of efforts by certain constituents to silence the issue. This paper provides an overview of the various reasons, including practical, theoretical, political, and self-motivated reasons, why a mandatory rotation policy has not been implemented in the United States in order to address the potential conflict of interest between the auditor and client. This paper will also discuss how some deliberations of mandatory rotation have been flawed. The paper concludes with a summary of key issues along with two approaches for regulators, policy makers, and academics to consider as ways to improve the process and address auditor independence. The authors are not advocating for any specific solution; however, we are advocating for a more objective, unified approach and for the dialogue regarding auditor rotation to continue.

The South Korean government launched the proactive administration initiative in mid-2017, which has been widely implemented throughout the public sector. Accordingly, the purpose of this paper is to review a behavioral approach to promote proactive administration in the South Korean government.

The research questions are as follows: (1) How did the South Korean government initiate a behavioral approach to administrative reform by promoting proactive administration? (2) What systems or mechanisms has the South Korean government utilized to promote proactive administration? (3) What kind of constraints did the government face in the process of administrative reform and how did it resolve them? (4) What was the preliminary reaction to or evaluation of such reforms in public administration communities?

Although it is still too early to evaluate the overall impact of administrative reform to promote proactive administration on civil servants’ behavior, it has nonetheless contributed greatly to the substantial change in perception that public officials in the administrative field should pursue their work as actively as they can.

This study is meaningful because while many countries have promoted administrative reforms such as structural reorganization, downsizing of human resources, cutback management and fiscal innovation, privatization, regulatory reform and promotion of digital government, cases of behavioral innovation, such as proactive administration, have been relatively scarce. Since a behavioral approach to administrative reform would be essential in many countries, this paper will serve as a useful reference for the consideration of their governments.

The purpose of this paper is to examine whether a negative outcome (i.e. a sanction) of an inspection by Korea’s Financial Supervisory Service for an industry-leading company affects the accounting quality of other companies in the same industry. The premise is that when peer companies observe the negative results of such an inspection on a leader in their industry, they will be more concerned about their own risk during a future inspection and more likely to increase their accounting quality.

The authors conduct a mutivariate Oridnary Least Squares (OLS) regression using 11,476 South Korean samples from 2002 to 2016. The study uses ordinary least square regressions to test the hypotheses using discretionary accruals as a proxy for accounting quality.

The authors find that peer companies reduced their discretionary accruals in the next period and that this reduction is amplified according to the severity of the disciplinary action on the industry leader and the materiality of errors in that leader’s financial statements.

This finding contributes to the literature by providing the first evidence of a spillover effect of regulatory inspection on accounting quality that financial reporting sanctions not only affect the overall accounting quality of the sanctioned company but also that of its peers in the same industry. The authors expect this study to lead to future research on the effect of other regulations on industry-wide accounting quality.

The Foreign Corrupt Practices Act (FCPA) of 1977 and its amendment – the Trade and Competitive Act of 1988 – are unique not only in the history of the accounting and auditing profession, but also in international law. The Acts raised awareness of the need for efficient and adequate internal control systems to prevent illegal acts such as the bribery of foreign officials, political parties and governments to secure or maintain contracts overseas. Its uniqueness is also due to the fact that the USA is the first country to pioneer such a legislation that impacted foreign trade, international law and codes of ethics. The research traces the history of the FCPA before and after its enactment, the role played by the various branches of the United States Government – Congress, Department of Justice, Securities Exchange commission (SEC), Central Intelligence Agency (CIA) and the Internal Revenue Service (IRS); the contributions made by professional associations such as the American Institute of Certified Public Accountants (AICFA), the Institute of Internal Auditors (IIA), the American Bar Association (ABA); and, finally, the role played by various international organizations such as the United Nations (UN), the Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO) and the International Federation of Accountants (IFAC). A cultural, ethical and legalistic background will give a better understanding of the FCPA as wll as the rationale for its controversy.

This paper aims to review the auditing procedures and structure in an emerging economy's public sector by explaining the recent changes and developments in the auditing process, its structure and the responsibilities of its underlying actors.

This paper traces the development of Iran's public sector financial monitoring by examining the country's legal and governmental documents as well as the auditing standards and procedures.

The Supreme Audit Court of Iran (SACI) is the main actor in public auditing and uses various tools and involves several organizations to cover diverse scopes of public auditing; this paper also discusses the structure and the financial (in)dependence of the SACI.

This is the first piece of work that explains the public auditing procedures and structure in Iran's public sector by focusing on recent changes and developments in its objectives and scopes.

The Hanbo (meaning Korean treasure) scandal or “Hanbogate” occurred on January 23, 1997, with the bankruptcy of Hanbo Iron and Steel Company, the second largest steel company and 14th largest conglomerate in South Korea, as its debt had accumulated to US$5.6 billion. Hanbo's bankruptcy triggered an investigation by the Public Prosecutor's Office that resulted in the imprisonment for 15 years of Hanbo's founder, Chung Tae-Soo, for bribing politicians and bankers to pressure banks to extend hugh bank loans to Hanbo. Nine other persons were also convicted including Chung's son, who was jailed for three years for bribery and embezzlement, and Kim Hyun-Chol, the second son of President Kim Young-Sam, who was sentenced to three years jail and fined US$1.5 million (New York Times, 1997).