Class action suit against urged

Class action suit against urged

Fitri Wulandari, The Jakarta Post, Jakarta

In response to the damaging impact of accounting scams,
lawyers are advising investors and shareholders who suffer losses
due to cooked financial reports that they can file class action
suits against the accountants responsible for the reports.

Daryatmo, a lawyer at the Indonesian Consumers Foundation
(YLKI), and Luhut Pangaribuan, a lawyer at a private firm, said
filing class actions would teach public accountants to be more
responsible and deter them from repeating their indiscretions.

"Class actions can teach them to follow the ethical code of
their profession," Luhut told The Jakarta Post over the weekend.

Daryatmo was of the same opinion, saying "the public has the
right to file a lawsuit against a public accountant who violates
accounting ethics".

Both lawyers made the comments in the wake of the financial
scandals at several major corporations in the United States that
also involve leading accounting firms.

In Indonesia, financial scandals involving public accountants
and listed companies have also occurred, but have thus far failed
to make much of a wave among the public.

One financial scandal involved 10 firms which audited 37 banks
that were closed down by the government during the financial
crisis.

The firms audited the banks before the 1997 financial crisis,
and according to the audit results the banks were supposedly in
good financial condition.

But when the financial crisis hit the country, the banks
collapsed due to their shaky financial standing. A government
investigation found the firms were involved in accounting scams.

However, the firms involved received light punishments, if any
at all, handed down by a tribunal comprising accountants. Three
firms were prohibited from auditing banks, while the remaining
firms walked away unpunished.

Accounting expert Professor Wahyudi Prakarsa of the University
of Indonesia said not all accounting scams could be blamed on
public accountants.

He said that whether a financial report produced by a public
accountant was accurate depended largely on the numbers provided
by a company's management.

"It is difficult to prove a financial report is true because
to do so means tracking down each number and figure, which is
both expensive and time consuming," he said.

Also, it is often impossible to know if the figures submitted
for financial reports are false or not, as it is common practice
among managements to collude with their partners to provide false
figures, he said.

Both Daryatmo and Luhut said that so far there had been no
class action lawsuits filed in Indonesia by investors or
shareholders against public accountants accused of cooking the
books.

According to Daryatmo, many investors, particularly foreign
investors, are reluctant to file class actions because of the
legal uncertainty in the country.

Another reason is that investors and shareholders are not
aware that there are rules that they can use as a legal basis for
the filing of class actions, Daryatmo said.