Financial Statement Audit
Legislation in Indonesia Regarding Financial Report Audits
Audit of financial reports for business entities (Indonesian limited liability companies and other forms of business entities) in Indonesia, is regulated in:
- Limited Liability Company Law (UU No. 40 of 2008)
- Minister of Trade Regulation Number 25 of 2020
In the Indonesian Limited Liability Company Law, the following are certain conditions where a company’s financial statements must be audited, namely:
- The Company’s business activities are related to the collection and/or use of public funds;
- The Company issues debt securities to the public;
- The Company is a Public Company (Public Listed Companies);
- The Company is a state-owned enterprise (Persero);
- The Company’s assets and/or total business turnover reach a minimum value of IDR 50,000,000,000.00 (fifty billion Rupiah); or
- Required by applicable laws and regulations.
Regulation of the Minister of Trade of the Republic of Indonesia (Permendag No. 25 of 2020) also requires audits of financial reports for certain conditions as follows:
- Limited Liability Companies have met one of the following criteria:Classified as a public or listed company;
– Having a business line in managing public funds;
– Issue debt securities;
– Have total assets of at least IDR 25 billion; or
– Become a debtor whose annual financial report must be audited; - Foreign companies domiciled and conducting business in the territory of the Republic of Indonesia, including branch offices, subsidiaries, etc.; or
- State-Owned Enterprises (PERSERO), Public Service Agencies (PERUM), and Regional-Owned Enterprises.
The Importance of Audit Services for Companies
Audit services play an important role in maintaining credibility in the world of business and finance, compliance with regulations and laws, discovery of fraud, protection for related parties, and risk control. After carrying out a proper audit, positive audit results will be displayed to increase continuity and establish relationships between the components being audited and the parties who depend on the financial information. Companies that rely on audit services can be sure that financial reports can be trusted, risks are controlled well, and company operations are carried out appropriately.
Financial Report Audit
A company requires an independent financial audit process carried out by an auditor or audit partner to audit financial statements. Financial report audits are an important factor in determining the credibility and transparency of financial information. Financial report audits provide certainty to stakeholders that financial reports can be trusted as a key in decision making.
Audit Regulations and Standards We Follow
Kapsaya and Partners carry out practices in accordance with the provisions regulated by the Public Accounting Law (UU No. 11 of 2011) and the Indonesian Capital Markets Law (UU No. 8 of 1995). Based on the Public Accounting Law, Public Accountants perform audit services in Indonesia in accordance with the Audit Standards set by the Indonesian Association of Public Accountants. Audit standards in Indonesia adopt the International Standards on Auditing published by the International Auditing and Assurance Standards Board.
Auditor’s Responsibility for Financial Reports
The objective of our audit services is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
In the context of an audit, reasonable assurance is a high level of confidence, but is not a guarantee that an audit conducted in accordance with Auditing Standards will always detect material misstatements when they exist. Misstatements can be caused by fraud or error and are considered material if, individually or in the aggregate, they can be reasonably expected to affect the economic decisions taken by users based on those financial statements.
As part of an audit based on Indonesian Auditing Standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement in the financial statements, whether caused by fraud or error, design and implement audit procedures that are responsive to these risks, and obtain sufficient and appropriate audit evidence to provide a basis for our opinion. The risk of not detecting material misstatements caused by fraud is higher than that caused by error, because fraud can involve collusion, forgery, intentional omissions, false statements, or bypassing internal controls.
- Obtain an understanding of internal control relevant to the audit in order to design appropriate audit procedures in accordance with the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
Evaluate the appropriateness of the accounting policies used as well as the reasonableness of accounting estimates and related disclosures made by management. - Conclude the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether there is a material uncertainty related to events or conditions that may cause significant doubt as to the Company’s ability to continue as a going concern. When we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the relevant disclosures in the financial statements or, if such disclosures are inadequate, to determine whether it is necessary to modify our opinion. Our conclusions are based on audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to be unable to maintain business continuity.
Evaluate the overall presentation, structure and content of the financial statements, including disclosures, and whether the financial statements reflect the underlying transactions and events in a manner that achieves fair presentation. - We communicate to those charged with governance regarding, among other things, the planned scope and timing of the audit, as well as significant audit findings, including any significant deficiencies in internal control identified by us during the financial statement audit.
- We also provide a statement to those charged with governance that we have complied with the relevant ethical requirements regarding independence, and communicate all relationships, as well as other matters reasonably considered to affect our independence, and, where relevant, related safeguards. .
- From the matters communicated to those charged with governance, we determined those matters to be the most significant in the audit of the current period’s financial statements and therefore to be the primary audit matters. We describe key audit matters in our auditor’s report, unless laws and regulations prohibit public disclosure of the matter or when, in very rare circumstances, we determine that an matter should not be communicated in our report because of the adverse consequences of communicating it. reasonably expected to outweigh the public interest benefits of the communication.
Experience of Our Audit Services in Indonesia
Our audit service experience in Indonesia includes audits of company financial statements in stages for going public or initial public offerings in Indonesia, audits of subsidiaries or associated companies of multinational corporate groups, raising funds from investors, obtaining funds from banks, or for performance issues and funding from donors in Indonesia and internationally.
Industry Audit Services that Have Been Performed
Our Audit Services in Indonesia have experience with many sectors, including: aviation, cargo, consumer goods, cryptocurrency, engineering, procurement and construction, energy & electricity, education, food and beverage, forestry and plantations, government, health, information technology , manufacturing, marine industry, mining, non-profit, property and real estate, retail, sports and entertainment, trade, shipping, service and professional.