Financial statements are indeed essential in a company. To make the financial statements valid and reliable, they must comply with the applicable accounting standards and undergo thorough examination, commonly known as the audit of financial statements. So, why do company financial statements need to be audited, and what are the criteria for companies required to conduct a financial statement audit?

Companies that Needs  Financial Statement Audits

Based on Minister of Trade Regulation No. 25 of 2020, companies required to conduct a financial statement audit are those that meet the following criteria:

  1. Limited Liability Companies (Perseroan Terbatas) that have fulfilled one of the following criteria:

  • Publicly Listed Companies;

  • Engaged in fund-raising from the public;

  • Issue debt acknowledgement;

  • Possess assets or wealth of at least IDR 25,000,000,000.00 (twenty-five billion Indonesian Rupiah); or

  • Are debtors whose financial statements are required by banks to be audited.

  1. Foreign companies that are domiciled and operate within the territory of the Republic of Indonesia according to the prevailing laws and regulations, including branch offices, representative offices, subsidiaries, as well as agents and representatives authorized to make agreements; or,

  2. State-Owned Enterprises (BUMN), State-Owned General Companies (Perum), and Regional-Owned Enterprises (BUMD).

 

If your company meets the criteria above, you are required to conduct a financial statement audit. The submission of audited financial statements must be made no later than 6 (six) months after the end of the fiscal year. You can report the audited financial statements to the Ministry of Trade through the following steps:

  1. The company submits the Audited Annual Company Financial Statements (LKTP) to the Director online by uploading the LKTP through the website portal http://sipt.kemendag.go.id in the original Portable Document Format (PDF) form.

  2. In submitting the LKTP as mentioned in point 1, the company must also submit the company profile online by filling in the required format on the website portal http://sipt.kemendag.go.id.

  3. In case of the Integrated Licensing Information System (SIPT) experiencing damage (force majeure) and the non-functioning of SIPT's supporting facilities and infrastructure for more than 24 (twenty-four) hours, the service will be carried out manually.

  4. The manual service as mentioned in point 3 will be conducted at the Directorate of Business Development and Distribution.

 

The process of financial statement audit must be carried out systematically in accordance with the prevailing regulations. If a company violates the provisions during the audit process, it may be subject to administrative sanctions such as:

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  1. Revocation of the Letter of Submission (STP) - LKTP;

  2. Revocation of trading permits; and/or

  3. Revocation of other technical permits by the relevant authorities or officers in accordance with the prevailing laws and regulations.

Objectives of Financial Statement Audits

Auditing financial statements is necessary as a form of accountability for companies to their stakeholders. Without an audit, potential errors may go unnoticed, resulting in less credible financial statements and stakeholders being unable to hold the company accountable for its actions.

 

The execution of financial statement audit aims to assess the fairness or appropriateness of the presentation of financial statements prepared by the company. This fairness and appropriateness are based on generally accepted accounting principles. As a result, the company can assure stakeholders that its financial statements have been prepared following the principles and accounting standards applicable in Indonesia.

Reasons for Conducting Financial Statement Audits

Considering its objectives, one can understand that financial statement audit is a beneficial activity for a company's sustainability. So, why is every company that meets the criteria required to conduct a financial statement audit?

Fulfilling Obligations

Based on Law No. 40 of 2007, companies are required to conduct an audit. In essence, not all companies are mandated to undergo an audit. However, for clarification, here is an excerpt from the Limited Liability Company Law:

 

Article 68 of Law No. 40 of 2007:

  1. The Board of Directors shall submit the company's financial statements to a public accountant for an audit as if: 

  • the company's activities include collecting or managing public funds; 

  • the company is a publicly listed company; 

  • the company issues debt acknowledgements to the public; 

  • the company is a state-owned enterprise (Persero);

  • the company has assets and business turnover with a value of at least IDR 50,000,000,000.00 (fifty billion Indonesian Rupiah); or

  • required by laws and regulations. 

  1. If the obligation in paragraph 1 is not fulfilled, the financial statements will not be approved by the GMS (General Meeting of Shareholders). 

  2. The results of the audit by the public accountant in accordance with paragraph 1 shall be submitted in writing to the GMS through the Board of Directors.

Examining the Company's Financial Condition

The financial condition is a critical indicator determining the success of a company. Therefore, it is not surprising that many companies are willing to do whatever it takes to maintain stable financial conditions. One of the activities carried out to ensure or examine the company's financial condition is through the financial statement audit.

Acquiring Information about the Company

Not only does an audit allow you to know the company's financial condition, but the audited financial statements also provide information about the company. Essentially, an audit is the process of translating the company's financial statements. Through the audit opinion provided by the auditor, you can gain insights into the explanation of the company's financial statements to meet the information needs of various parties.

Conclusion

In conclusion, financial statement audit is crucial to ensure that the financial statements are prepared following the applicable principles and accounting standards. The audit is not only conducted to fulfill obligations but also serves as a means to obtain information about the company's financial condition. Essentially, not all companies are required to conduct an audit. Therefore, you need to pay attention to the criteria for companies mandated to conduct a financial statement audit based on the prevailing laws and regulations.

 

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