Indonesia is no stranger to accounting scams: Expert

Indonesia is no stranger to accounting scams: Expert

A'an Suryana, The Jakarta Post, Jakarta

In the wake of accounting scandals in the U.S., an accounting
expert here warned on Wednesday that Indonesia was no stranger to
such scams. In fact, many book-cooking cases have occurred in the
past, and even worse scams could happen in the future unless the
government takes action to curb such practices.

Tight regulations and stiff sentences are needed to prevent
such scams in Indonesia, Professor Wahyudi Prakarsa from the
University of Indonesia said.

"The scams take place in U.S., which has sound financial
institutions and regulations. Indonesia, as a developing country,
might have had and would have worse cases, despite the fact they
have yet to become a subject of public debate," he told The
Jakarta Post.

Wahjudi was commenting on the string of accounting scandals in
the U.S., which has not only had a devastating impact on the U.S.
equity markets, but has also sent tremors through equity markets
throughout the world, including Indonesia.

The latest accounting scandal, following the ones at energy
firm Enron and telecommunication firm WorldCom, occurred at drug
giant Merck.

The company was accused of committing financial fraud, as it
posted US$12.4 billion in revenue from its pharmacy-benefits unit
over the past three years that the subsidiary never collected.

Wahjudi dismissed the statement of Capital Market Supervisory
Agency (Bapepam) chairman Herwidayatmo, who doubted that such
frauds could happen in the country, because Indonesian and U.S.
corporations used different accounting methods.

"Scams have already occurred in Indonesia, and it should serve
as a wake-up call for the Indonesian public and the accounting
community," he said, while pointing at the latest financial fraud
case involving 10 public accountant firms here.

The 10 firms had audited 37 banks before the 1997 financial
crisis, and the audit results revealed that the financial
performance of the banks were sound. However, as the financial
crisis struck the country, the banks collapsed due to poor
financial performance. It was revealed later by a government
investigation that the firms had been involved in accounting
scams.

The firms have been reprimanded by the government, but no
sanctions were given as the government has no right to impose any
sanctions.

The only body that has the right to sentence accounting firms
is a non-governmental agency formed by the Indonesian Accounting
Association, called the Judiciary Body for Public Accountants
(BP2AP).

The agency investigated the case and handed down the
punishment. But, the sanctions were considered too lenient, as
the agency only prohibited the three firms from auditing banking
clients, while the remaining seven firms walked free.

Wahjudi believed that the case is only the tip of the iceberg,
while there are actually many other similar accounting scams
here.

Indonesia is still vulnerable to corruption given its
unfledged social and economic institutions and regulations, he
said.

Therefore, the most important step, he asserted, was for the
government, which is currently drafting an accounting bill, to
create tight regulations to prevent possible fraud.

"For example, the regulations must be able to prevent possible
collusion between public accountants and their clients, which
could bring losses to the people," he said.

In addition, the regulation should mete out stiff sentences
for crooked accountants who commit accounting fraud, to deter
other accountants from deceiving the public in the future, he
said.

10 public accountant firms accused of committing accounting
scams: Hans Tuanakotta & Mustofa (Deloitte Touche Tohmatsu's
affiliate), Johan Malonda & Partners (NEXIA International's
affiliate), Hendrawinata & Partners (Grant Thornton
International's affiliate), Prasetyo Utomo & Partners (Arthur
Andersen's affiliate), RB Tanubrata & Partners, Salaki and Salaki,
Andi Iskandar & Partners, S. Darmawan & Partners, Robert Yogi &
Partners, Hadi Sutanto (declared not guilty).