BPK slams accountants for poor handling of SOE audit

Rendi A. Witular, The Jakarta Post, Jakarta

The Supreme Audit Agency (BPK) has criticized public accountants for their inattention to possible financial irregularities in state-owned enterprises (SOEs) while auditing their financial reports.

BPK chairman Satrio B. Judono said the recent financial scam involving state-owned Bank Negara Indonesia (BNI) could have been avoided if accountants had also audited the bank's compliance with existing financial regulations.

"Public accountants are obliged to carry out compliance checks for irregularities when auditing SOEs, but most of them have ignored this. They should be doing more than merely arranging a financial report," he said on Friday at a press briefing.

The Indonesian Accountants Association (IAI) has a regulation that obliges public accountants to check the compliance of SOEs toward existing regulations, such as those on the tender process, dividend allocation and payment, and goods procurement.

However, Satrio said that most public accountants ignored the regulations, putting many SOEs at the risk of becoming victim to corruption and collusion, as in the case of BNI.

"What makes me sad is that the IAI has not tried to enforce the regulation, and instead has decided to annul it," he said, but did not explain the reasons behind their move.

Satrio also voiced concerns in regards the government's moves in systematically trying to prohibit BPK involvement in auditing SOEs, especially publicly listed SOEs.

The government, along with the House of Representatives, has issued laws that undermine and limit the function of the BPK, such as the Capital Market Law, which prevents the BPK from auditing listed SOEs, he said.

He also said that because of these obstacles the BPK is facing, the agency is anticipating the new finance bill, which would allow the agency to audit all SOEs -- those under the central government as well as those under regional administrations. The BPK is expected to start the audit in 2006, after all SOEs have submitted their financial reports to the agency at the end of the 2005. However, this will require that the Capital Market Law be amended.

The BPK audit is to focus on uncovering financial irregularities at the SOEs, which for many years have been treated as cash-cows by politically connected people.

The BPK has thus far audited SOEs only by special request.

In accordance with Chapter VIII of the state finance bill, all SOEs belonging to the central government must attach their financial reports to the state budget accountability report, which would then be submitted to the House.

In regards the BNI financial scam, Satrio said possible state losses may result from the fraud.

"We heard that the House would call us for a special audit on BNI. We are still awaiting their official request," he said.

The BNI scandal involves the disbursement of Rp 1.7 trillion in export credit to a number of local companies backed by fictitious export documents and letters of credit. A branch of the bank channeled the money without any proper assessment.