Bappepam tightens up accountancy rules

Bappepam tightens up accountancy rules

The Jakarta Post
Jakarta

The Capital Market Supervisory Agency (Bapepam) has issued a
new regulation that bars a listed company from using the same
public accountant or accounting firm for more than five years in
order to help ensure the continued objectivity of audits.

Under the new ruling, set out in Bapepam Regulation No.
VIII.A.2. on the independence of accountants, audit services
provided by an accountant or an accounting firm in respect of a
client's financial statements should be limited to three and five
years respectively, the agency said in a release.

"The new ruling is aimed at making accounting firms and
accountants more independent, which will eventually increase the
quality of the financial statements issued by listed companies so
that they become more transparent and trustworthy," the release
said.

As for those affected by the regulation but already bound
under a contract, Bapepam would allow the present arrangements to
continue until the next fiscal year.

The ruling also forbids auditors from providing other
consultancy services to the same client during the audit period.
During this period, auditors would also be banned from having a
business relationship, directly or indirectly, with clients, key
officers of clients, or the main shareholders of clients.

The ruling comes amid mounting calls for tighter supervision
of accountancy practices in the country as a way of ensuring that
the lessons from a string of financial frauds in the U.S are
learned.

The world was recently stunned by a series of high-profile
bookkeeping scams, especially in the U.S. Major financial frauds
in giant firms Merck, WorldCom and Enron were only a few of the
more prominent examples.

These cases have proven contagious and have shattered investor
confidence around the world, including in Indonesia.

Experts have warned that if such frauds could take place in a
country like the U.S., whose control mechanisms were already
quite sound, it was quite frightening to think what might be
happening in Indonesia.

Therefore, tighter regulations were badly needed to prevent
similar frauds from occurring here and to provide investors with
better protection.