Bapepam to stop accounting scams

Dadan Wijaksana, The Jakarta Post, Jakarta

Learning the lessons from a string of financial scandals in the U.S., the Capital Market Supervisory Agency (Bapepam) is drafting new regulations for accounting firms.

Bapepam chairman Herwidayatmo said the new rules would provide clearer guidelines for accounting companies in maintaining relations with their corporate clients without harming the interests of public investors.

"It's now under intense deliberation ... Hopefully, the regulations will be effective in the middle of October," he told reporters on the sidelines of the 25th anniversary of the country's capital market.

Only recently, the world was stunned by a series of major bookkeeping scams, especially conducted by publicly-listed companies in the U.S.

Pharmaceutical giant Merck, for example, posted US$12.4 billion in revenue from its pharmacy-benefits unit over the past three years that the subsidiary had actually never collected.

The cases have proven contagious, not only did it rock U.S. markets but it also shook the world business community and shattered investor confidence around the world, including in Indonesia.

Calls for tighter regulations on accounting firms in the country has been mounting ever since. They are considered crucial in providing investors here with more protection.

Some experts have even warned that if such fraud could take place in the U.S., whose regulations and control mechanisms are already quite sound, there is no reason that similar cases would not happen in Indonesia.

Therefore, tighter regulations are badly needed to prevent possible fraud.

The regulations should also provide stiff punishment for accountants found guilty of committing fraud, to deter other accountants from deceiving the public in the future.

Addressing these calls, Herwidayatmo said that was exactly why the capital market watchdog came up with the idea to draft the regulations in the first place.

In the new regulations, a company would not be allowed to keep using one accounting firm to audit its financial reports, a move which would help prevent collusive deals between the two sides at the expense of investors.

The existing regulations did not provide for such restrictions, Herwidayatmo added.