Bapepam Plans to Boost Oversight of Accounting at Listed Companies

Jakarta Globe, Yohanes Obor, April 08, 2010

In a bid to boost the integrity of the country’s markets, the Capital Market and Financial Institutions Supervisory Agency plans to create an inspection team to regulate the accountancy firms that audit the financial reports of listed companies.

“We’ll set up an oversight committee and also revise existing regulations on accounting practices,” said Anis Baridwan, head of surveillance for real sector firms at the market regulator, also known as Bapepam-LK. “With the inspection, we hope the quality and credibility of financial reports will improve and then increase investors’ confidence toward investing their funds in Indonesia.”

He said it was important to have inspections because some auditors had breached accounting standards, either intentionally or out of ignorance.

Anis said Bapepam-LK was ready to adjust its accounting rulings in line with the new standards, which will ensure that companies follow international best practices.

The central bank has insisted that banks begin adopting the new standards this year, with full implementation by 2012. Anis said the new oversight unit will monitor and inspect public accounting firms to ensure they implement the new standards properly.

Lily Widjaja, president director of PT Merrill Lynch Indonesia, said she welcomed Bapepam-LK’s plan, saying other countries have such oversight boards.

She noted that the United States has its Public Company Accounting Oversight Board and the United Kingdom has its Financial Reporting Council. Hong Kong and Australia also have oversight boards.

Laksmi Prasvita, marketing manager at French accounting firm Mazars Indonesia, said her firm also welcomed Bapepam’s initiative to create an independent oversight team, saying the quality of financial reports must be improved.

She said that unlike the United States and the United Kingdom, France has no independent oversight board, but since 1966 has insisted on joint auditing for listed companies.

“With joint audits, the competition between accounting firms in France becomes healthy and more attractive and it benefits companies because of the lower fees,” Laksmi said.

The so-called Big Four accounting firms dominate the auditing market for listed companies in Indonesia, as they do in many countries. They are Ernst & Young, PricewaterhouseCoopers, KPMG and Deloitte.

An independent research report in the United Kingdom, published by trade magazine Accountancy Age in February, found that smaller firms offer the best audit services in England, with the Big Four lagging far behind.

Mazars ranked first, with Horwath Clark Whitehill and Grant Thornton coming in second and third, respectively.

Anis said that as a member of the Group of 20, Indonesia has undertaken the financial sector assessment program, which looked into the observance of accountancy standards and codes to anticipate the future challenges that will be faced by public accountants and the capital market regulator.