BPK slams accountants for poor handling of SOE audit

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.