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.