87% of listed companies audited by foreign firms
JAKARTA (JP): About 87 percent of companies listed on Indonesia's stock markets were audited by members of the world's six big accounting firms, says an executive of an international accounting company.
Terry Underwood, an executive of Arthur Anderson in Japan, said that based on these statistics, there is no reason for foreign investors not to rely on financial reports of listed companies in Indonesia.
"In my opinion, you can rely on the work of the Big Six in Indonesia as much as you can in other countries," he told a seminar on the Indonesian capital market held in Tokyo last week.
Underwood did not name the Big Six companies but according to the Association of Indonesian Public Accountants, there are six multi-national accounting firms which have operated in the country through their local partners.
They include Arthur Anderson of the United States, which operates in partnership with Utomo & Co, KPMG of Australia with Hanadi Sujendro & Co, Coopers & Lybrand also of Australia with Siddharta and Siddharta, Deloitte Rouche Tohmatsu (DRT) of the United States with Hans, Tuanakotta & Mustafa, and Binder Dejker Otte (BDO) of the Netherlands with Richard Tanubrata.
Underwood said that those six foreign accounting firms also employ many expatriates such as Americans, Singaporeans, Australians and Filipinos.
Skepticism
Skepticism over the work of the domestic accountants, especially regarding financial reports of listed companies, is not only expressed by foreign but also by domestic investors.
Kwik Kian Gie, an outspoken capital market analyst, is one of those critical about the work of local public accountants.
Kwik charged that accounting firms often collude with share issuers in engineering and making up financial reports of their companies. Such practices, according to Kwik, was the main cause of the sharp price dilution which took place in the period between 1990 and 1992.
Underwood acknowledged that many investors often distrust the work of Indonesian auditors due to misleading reports about their credibility in the last two years.
"I think this occurred because Indonesian auditors do not work hard enough to improve their image," he said
Underwood said public accounting firms, which operate in partnership with foreign auditors, have a larger market share in Indonesia.
"To me, it indicates pressure from foreign investors and international institutions who have a preference for the large accounting firms with international affiliations," he said.
Indonesia's generally accepted accounting principles (GAAP) is, in fact, adopted from the GAAP of the United States. In terms of format and contents, financial statements prepared in accordance with the Indonesian accounting principles look almost like a replica of the U.S. GAAP. (hen)