Indonesia

Member Organizations

Member Organization Associate Other PAOs

  Ikatan Akuntan Indonesia
  Institut Akuntan Publik Indonesia

Legal and Regulatory Environment

  • Overview of Statuatory Framework for Accounting and Auditing

    Accounting, auditing, and financial reporting requirements in Indonesia are stipulated by the following laws and regulations:

    • The Limited Liability Company Law No. 40 of 2007 requires corporate entities to prepare financial statements in accordance with accounting standards issued by the Dewan Standar Akuntansi Keuangan/Indonesian Financial Accounting Standard Board (DSAK) of the Ikatan Akuntan Indonesia/Institute of Indonesia Chartered Accountants (IAI). The DSAK issues Tier-1 SAK for domestic and foreign listed companies, as well as entities with public accountability, and Tier-2 SAK ETAP for entities with no public accountability. Tier-2 SAK ETAP was developed with IFRS for SMEs as a point of reference.
    • The same law mandates audits for Indonesian companies that collect or manage public funds, issue debt-acknowledgements to the public, public companies, state-owned enterprises, companies with assets exceeding RP 50 billion, and other companies obliged by certain legislative regulations. The auditors of state-owned enterprises are required by law to perform both compliance audits and financial statement audits.
    • Under Article 43 of the Public Accountants Act No. 5 of 2011, the Institut Akuntan Publik Indonesia/Indonesian Institute of Certified Public Accountants (IAPI) is responsible for adopting auditing standards—the Indonesian Public Accountant Professional Standards—set by the Audit Standards Committee of the IAPI.
    • Under the Capital Market Law No. 8 of 1995 and the Banking Law, the Otoritas Jasa Keuangan/Financial Service Authority (OJK) establishes financial reporting requirements for entities under its supervision (banking, capital markets, and non-bank financial industries sectors) and mandates the use of DSAK-issued accounting standards. In addition, entities supervised by the OJK are required to be audited by a Certified Public Accountant. The OJK also registers and oversees auditors who provide audit services for the entities under its supervision.
  • Regulation of Accountancy Profession

    In Indonesia, both the audit and accountancy professions are regulated.

    To practice the accountancy profession in Indonesia, individuals have to be members of the Ikatan Akuntan Indonesia/Institute of Indonesia Chartered Accountants (IAI) (for accountants) or Institut Akuntan Publik Indonesia/Indonesian Institute of Certified Public Accountants (IAPI) (for public accountants). Under the Ministry of Higher Education Decree No. 153 of 2014 on the Professional Accountancy Education Program, the successful completion of the Pendidikan Profesi Akuntan/The Professional Accounting Education Program (PPAk) is a prerequisite for membership in either of the accountancy bodies. Individuals who pass the PPAk are issued the Register Negara Akuntan/State Registered Accountant title (Ak) by the Pusat Pembinaan Profesi Keuangan/Center for Supervision of the Financial Service Profession (PPPK). Both the IAI and IAPI establish requirements for their respective membership, including qualifying exams, practical experience, and continuing professional development (CPD).

    The Minister of Finance Decree No. 263 of 2014 (KMK) authorizes the IAI to regulate professional accountants. On February 4, 2014, the Indonesian Government issued Minister of Finance Decree No. 25 of 2014 (PMK) concerning State Registered Accountants (Ak). The PMK was issued to establish the pathways to becoming a professional accountant and to encourage the development of the accounting profession in Indonesia. This decree gives the Ministry of Finance (MoF) the responsibility to regulate all Aks in Indonesia. The decree mandates that Aks (1) become competent by going through a process of professional education that includes taking the Chartered Accountant examination and obtaining relevant practical experience; (2) maintain competence by meeting CPD requirements; (3) be members of the IAI; and (4) comply with professional standards and the code of conduct.

    The Public Accountants Act No.5 of 2011 (PAA) authorizes the IAPI to regulate public accountants and legally empowers it to set auditing and ethical standards for them. The legal foundation for the regulation of auditors is laid down in the PAA. The PAA establishes (1) the framework for regulating the audit profession and licensing auditors; (2) the framework and institutional arrangements for ethics and auditing standard setting; (3) an oversight body with a mandate to monitor and enforce accounting and auditing standards; (4) a disciplinary mechanisms for investigating and disciplining accountants in public practice for misconduct and breach of professional and ethics standards; (5) legal authority for the public accounting professional association; and (6) requirements for obtaining and maintaining membership in the professional accountancy organization for practicing auditors. In addition to the PAA, the government issued Decree No. 20 of 2015 on the Practice of Public Accountants, which details the requirements for becoming a public accountant and specifies the services that they can provide.

    In 2008, the Ministry of Finance (MoF) issued Decree No. 100 of 2008 (PMK), which makes the Pusat Pembinaan Akuntan dan Jasa Penilai/Center for Supervision of Accountants and Appraiser Services (PPAJP) responsible for the supervision of the accountancy profession, including monitoring the professional activity of statutory auditors. One of the functions of the PPAJP, among others, was to facilitate and formulate strategic policies for the accountancy profession. In 2014, the MoF issued Decree No. 206 of 2014 on the Organization and Working Procedures of the Ministry of Finance. Under this Decree, the PPAJP was re-established as the Pusat Pembinaan Profesi Keuangan/Center for Supervision of the Financial Service Profession (PPPK), maintaining the PPAJP’s functions.

    The PMK decree allows State Registered Accountants to establish accounting services firms, called Kantor Jasa Akuntansi/Accountancy Services Firm (KJA). KJA firms can offer services such as bookkeeping, accounting system services, consulting, taxation and financial reporting services but are not permitted to provide assurance services. The PAA regulates and approves the establishment of Kantor Akuntan Publik/Public Accountancy Firms (KAP) that provide assurance services. The PPPK is responsible for registering all KJA and KAP firms in Indonesia.

    Under the Capital Market Law No.8 of 1995, the Otoritas Jasa Keuangan/Financial Service Authority (OJK) registers and oversees auditors who provide audit services for the entities under its supervision (banking, capital markets, and non-bank financial industries sectors). In addition, under State Finance Law No. 17 of 2003 and BPK Regulation No. 1 of 2008, the Badan Pemeriksa Keuangan/Supreme Audit Board (BPK) is given the authority to review audit engagement work conducted by IAPI members on public sector entities.

  • Audit Oversight Arrangements

    The Pusat Pembinaan Profesi Keuangan/Center for Supervision of Financial Service (PPPK) is responsible for the supervision of the accountancy profession in Indonesia, including monitoring the professional activity of statutory auditors.

    Established under Ministry of Finance Decree No. 100 of 2008 (PMK), the PPPK’s responsibilities are set out in the Public Accountants Act No.5 of 2011. They include issuing practicing licenses to individual auditors and audit firms; establishing the requirements to obtain and maintain the practicing license; setting continuing professional development requirements for auditors; setting rules on auditor rotation; and the investigation and discipline of individual auditors and audit firms. The Public Accountants Act also authorizes the PPPK to conduct inspections of the audit work of all auditors and audit firms. The scope of inspection includes ensuring licensing requirements are fulfilled and that firms maintain relevant quality control systems.

    The PPPK is a member of the International Forum of Independent Audit Regulators.

  • Professional Accountancy Organizations

    There are three national professional accountancy organizations operating in Indonesia:

    Ikatan Akuntan Indonesia/Institute of Indonesia Chartered Accountants (IAI)

    The IAI is responsible for the regulation of professional accountants, including setting accounting standards in the private sector, administering the Chartered Accountant Indonesia exam, providing continuing professional education, establishing a code of ethics, adopting professional standards, and maintaining a disciplinary system for members. IAI membership comprises accountants from all accounting backgrounds, including public accountants/auditors, management accountants, tax accountants, internal auditors, academics and public sector accountants. Prior to 2014, membership in the IAI was voluntary; however, in 2014, the Minister of Finance Decree No. 25 of 2014 (PMK) on State Registered Accountants introduced the requirement for accountants to become a member of a professional organization prior to their registration with the Minister of Finance. This requirement has strengthened the standing of the IAI in the profession. In addition to being a member of IFAC, IAI is a member of the ASEAN Federation of Accountants.

    Institut Akuntan Manajemen Indonesia/Indonesian Institute of Management Accountants (IAMI)

    The IAMI is a professional organization of management accountants uniting 200 accountants employed as executives in the public and private sectors. Previously, the IAMI was a part of the IAI, until it elected to be an independent organization in 2007.

    Institut Akuntan Publik Indonesia/Indonesian Institute of Certified Public Accountants (IAPI)

    The IAPI regulates public accountants and is legally empowered to set auditing and ethical standards for the public accountancy profession. The IAPI is also responsible for administering the Certified Public Accountants exam and for setting ethical requirements for public accountants. Membership with the IAPI is mandatory for all public accountants. The IAPI was once a part of the IAI, first as a department, then as an association member between 2007 and 2012. In 2012, the IAI eliminated association membership and, as consequence, the IAPI’s membership with the IAI ended and the IAPI became an independent organization. The IAPI is an IFAC Associate.

  • Projects or Other Information

    There is no information on ongoing projects.

Adoption of International Standards

  • Quality Assurance

    Public accountants in Indonesia are subject to a multi-layer system of supervision, with each responsible party conducting quality assurance (QA) reviews of auditors. Under the Public Accountants Act of 2011 (PAA), the Pusat Pembinaan Profesi Keuangan/Center for Supervision of Financial Service Professions of the Ministry of Finance of the Republic of Indonesia (PPPK) is authorized to conduct mandatory QA reviews of public accountants for monitoring and supervisory purposes. The PPPK focuses on the quality review of working papers related to audit engagements to ensure that they support the engagements and comply with professional auditing and accounting standards.

    The PAA also authorizes the Institut Akuntan Publik Indonesia/Indonesian Institute of Certified Public Accountants (IAPI) to conduct mandatory QA of its members to monitor the compliance with professional standards and the IAPI Code of Ethics. The activities performed by the IAPI are focused on the design and implementation of mandatory quality control guidance developed by each member’s firm. The IAPI has also adopted Quality Control Standard 1, which is identical to ISQC 1. The Otoritas Jasa Keuangan/Financial Service Authority (OJK) and Badan Pemeriksa Keuangan/Supreme Audit Board (BPK) also conduct reviews of audit engagements in specific situations. In line with Capital Market Law No. 8 of 1995, the OJK reviews the works of public accountants who are involved in rendering services in capital markets and financial sectors. In addition, State Finance Law No. 17 of 2003 and BPK Regulation No. 1 of 2008 give the BPK the authority to review audit engagements conducted by IAPI members for public sector entities.

    There is an overlap in the respective responsibilities of the regulators, and discussions are underway about the possibility of creating a joint IAPI, OJK, and PPPK QA system.

    Current Status: Partially Adopted

  • International Education Standards

    The Indonesian Ministry of Higher Education, Ministry of Finance (MoF), Ikatan Akuntan Indonesia/Institute of Indonesia Chartered Accountants (IAI), and Institut Akuntan Publik Indonesia/Indonesian Institute of Certified Public Accountants (IAPI) share the responsibility for setting initial and continuing professional development (IPD and CPD, respectively) requirements for professional accountants in Indonesia. Although many IES requirements appear to be in place, the extent of compliance of IPD and CPD requirements with IES requirements needs to be clarified.

    Under MoF Decree No. 25 of 2014, and with the approval of the Ministry of Higher Education, the IAI is responsible for setting IPD requirements for accountants, including developing the Professional Accountancy Education Program (PPAk), a program that is to be completed by all individuals who wish to enter the profession. The IAI is currently revising the PPAk program to ensure that it meets the requirements of the IESs.

    In addition, the IAI has developed the Standar Pendidikan Akuntansi Indonesia/Indonesian Accounting Education Standards, with the support of the World Bank. These standards are to be used when developing accounting education programs.

    The Public Accountants Act of 2011 and MoF Regulation No. 17 of 2008 set forth the requirements for becoming a registered public accountant. This process includes completing the PPAk, and passing the Indonesia CPA examination administered by the IAPI.

    Current Status: Partially Adopted

  • International Standards on Auditing

    Under the Public Accountants Act of 2011, the Institut Akuntan Publik Indonesia/Indonesian Institute of Certified Public Accountants (IAPI) has direct responsibility for setting auditing standards in Indonesia and has adopted the Indonesian Public Accountant Professional Standards (SPAPs). In 2012, ISAs (2010) were adopted as SPAPs effective for periods commencing on January 1, 2013 for application in audits of financial statements of companies that trade on the Indonesian stock exchange. Other companies are required to have their financial statements audited in accordance with the new SPAPs starting January 1, 2014. ISAs are translated into Bahasa Indonesia.

    The IAPI reports that it is in the process of reviewing the latest ISAs and other IAASB pronouncements for adoption in Indonesia. The update is expected to be completed in 2016.

    Current Status: Adopted

  • Code of Ethics for Professional Accountants

    The Ikatan Akuntan Indonesia/Institute of Indonesia Chartered Accountants (IAI) and the Institut Akuntan Publik Indonesia/Indonesian Institute of Certified Public Accountants (IAPI) are responsible for setting ethical requirements for their members (state registered accountants and public accountants, respectively).

    The IAI is responsible for adopting a Code of Ethics for its members. According to its responsibilities established under Minister of Finance Decree No. 25 of 2014 and Decree No. 263 of 2014, the IAI has adopted the 2014 IESBA Code of Ethics for application by its members.

    The IAPI sets ethical requirements for public accountants under the Public Accountants Act of 2011. The IAPI currently applies the 2008 IESBA Code of Ethics and reports that it has plans to update its Code to align it with the 2014 IESBA Code of Ethics.

    Current Status: Partially Adopted

  • International Public Sector Accounting Standards

    The Government Accounting Standard Committee (KSAP), established under Minister of Finance Decree No. 379 of 2004, is responsible for setting Public Sector Accounting Standards in Indonesia. The KSAP is an independent committee comprising representatives from the Ikatan Akuntan Indonesia/Institute of Indonesia Chartered Accountants, academia, and government practitioners, among others. The KSAP uses IPSASs as the main reference when drafting national public sector accounting standards; however, modifications are made to allow for the differences in Indonesia’s legal and regulatory environment. As of 2015, Indonesian public sector accounting standards are defined as full accrual standards.

    Current Status: Partially Adopted

  • Investigation and Discipline

    The investigation and discipline (I&D) of accountancy professionals in Indonesia is shared between the Pusat Pembinaan Profesi Keuangan/Center for Supervision of Financial Service Professions of the Ministry of Finance of the Republic of Indonesia (PPPK), Otoritas Jasa Keuangan/Financial Service Authority (OJK), Ikatan Akuntan Indonesia/Institute of Indonesia Chartered Accountants (IAI), and the Institut Akuntan Publik Indonesia/Indonesian Institute of Certified Public Accountants (IAPI).

    Both the PPPK and OJK are authorized to investigate and discipline public accountants in Indonesia, including issuing warnings and imposing fines and penalties. They work with both the IAI and IAPI to minimize the potential overlap in services provided by public accountants who provide both assurance (IAPI members) and non-assurance services (IAI members).

    The IAI’s I&D system for its members is regulated by the IAI’s constitution and bylaws. The IAI reports that its system is being updated and was expected to be finalized by the end of 2015. Under the Public Accountants Act of 2011, the IAPI also established an I&D system for its members. Both systems mostly fulfill the requirements of SMO 6. It is not clear whether the systems operated by the PPPK and OJK are in line with SMO 6 requirements.

    Current Status: Partially Adopted

  • International Financial Reporting Standards

    Under Limited Liability Company Law No. 40 of 2007, the Indonesian Financial Accounting Standard Board (DSAK IAI)—which is part of the Ikatan Akuntan Indonesia/Institute of Indonesia Chartered Accountants (IAI)—issues accounting standards to be applied in the preparation of financial statements in Indonesia. In addition, the Capital Market Law No. 8 of 1995 and the Banking Law authorize the Otoritas Jasa Keuangan/Financial Service Authority (OJK) to establish financial reporting requirements for entities under the OJK’s supervision (banking, capital markets, and non-bank financial industries sectors) and to mandate the use of DSAK-issued accounting standards.

    The DSAK IAI sets two tiers (Tier-1 SAK and Tier-2 SAK ETAP) of Generally Accepted Accounting Principles (GAAP) for use in Indonesia. These accounting principles, called SAKs, are to be applied in the preparation of financial statements of domestic and foreign listed companies, as well as of entities with public accountability. In 2012, as part of the ongoing convergence process, the DSAK IAI substantially aligned SAKs with IFRSs as they existed in 2009. By January 1, 2015, in a second phase of the convergence process, SAKs were expected to be substantially aligned with IFRSs as they existed in 2014. In June 2015, the IAI signed a Memorandum of Understanding with the OJK to collaborate on developing accounting standards in Indonesia, and part of this process is to develop a pathway to fully adopt IFRSs.

    Tier-2 of the Indonesian GAAP—SAK ETAP—is required for entities with no public accountability. SAK ETAP was developed with IFRS for SMEs as a point of reference. The IAI reports that a project is underway to develop accounting for micro entities as a supplement to the Tier-1 and Tier-2 standards.

    Current Status: Partially Adopted

Disclaimer

IFAC bears no responsibility for the information provided in the SMO Action Plans prepared by IFAC member organizations. Please see our full Disclaimer for additional information.

Methodology

Methodology
Last updated: 03/2016
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