Govt drafts bill on accounting

The Jakarta Post, Jakarta

The Ministry of Finance is currently drafting a new bill on the accountancy profession, which will replace the existing outdated law issued in the 1950s.

The Ministry of Finance said, in a press statement on Sunday, that the new bill would not only provide better protection for both clients and accountants, but also accommodate the complex development in trade liberalization and technology.

The drafting of the new bill comes amid rising financial scandals both at home and overseas, involving huge companies and giving rise to allegations that accountants have often cooked their clients' books.

The statement said that the new bill will prohibit public accountants from doing their jobs if they are not independent.

Individually, public accountants will not be allowed to make a general audit for a particular client for more than three years in a row.

Public accountants will not be allowed to have a side job at another institution -- both state and private -- unless it is a teaching job at a university.

In addition, public accounting firms will not be allowed to do audit work for a client for more than five successive years. And in doing audit work, the firm must be independent, meaning that it must not have a conflict of interests.

Public accounting firms will be banned from providing services outside finance, accounting and management. This will force accounting firms to end additional consultancy services, thus, avoiding a conflict of interests.

It will also be required that working papers must be kept for 10 years, and an accountant's office must be isolated from other activities.

Public accounting firms will be immune from legal charges if disclosing a crime committed by a client.

But, both public accountants and public accounting firms will be held legally responsible for all services they provide.

Sanctions for violating the law range from an administrative sanction to a financial penalty and a jail term of between one year and six years.

Administrative sanctions include freezing the accountant's license and revoking the accountant's license.

A client, or other parties who have suffered losses as a result of misstatements or misrepresentations in audit reports, can file legal charges.

Criminal charges include a penalty of between Rp 50 million and Rp 300 million for an accountant, and between Rp 100 million and Rp 2.5 billion for a public accounting firm.