Korea's accounting system was overhauled to meet international standards after the Asian financial crisis in 1997. Korean Financial Accounting Standards (KFAS) comply with International Accounting Standards (IAS), as Korea has released the Korean International Financial Reporting Standards (K-IRFS). Korea's accounting and auditing system includes external audit and internal accounting control system. External audit means an examination of a company's records and reports by an outside party. Under the internal accounting control system, internal standards are established, so that financial statements are drawn and announced in line with accounting standards. One permanent director is designated to be responsible for internal accounting control.

1. Business Accounting Standards

Since the 1997 Asian financial crisis, the Financial Services Commission (FSC) of Korea has accepted the recommendations of the IMF and the World Bank to fully revise Korean business accounting standards to fit international standards. This resulted in a shift from the legal provision-like form of the past to the current business accounting standards that adhere to the global standard. From July 2007, the Korean Accounting Institute (KAI) has been commissioned by the FSC on setting, revising and interpreting the business accounting standards, and has been enacting and declaring the Statements of Korea Accounting Standards whenever enacting new or revising existing business accounting standards by designating a serial number for each issue. The Statements of Korea Accounting Standards apply to corporations under the Act on External Audit of Stock Companies, creating financial statements for external users, as well as for audits by external auditors.

2. Business Accounting Standards and Commercial Act & Tax Law 

In Korea, laws that regulate financial reports resulting from business activities include the Commercial Act, Tax Law, the Financial Investment Services and Capital Markets Act, the Act on External Audit of Stock Companies, the Certified Public Accountant Act, business accounting standards, and the accounting auditing standards. In the Commercial Act, financial statements are listed as the balance sheet, income statement, statement of appropriation of retained earnings and statement of disposition of deficit. However, the business accounting standards add statement of cash flow chart and annotations to the list of financial statements. The Tax Law is based on the major premise of obligation principle and equal taxation. Therefore, its standards differ from the financial reports under the business accounting standards, which are based on principles of accrual and realization. The gap between business accounting and tax accounting has been narrowed in recent legislation.