[Flashback] Indonesia is no stranger to accounting scams

http://www.thejakartapost.com/news/2002/07/11/indonesia-no-stranger-accounting-scams-expert.html#sthash.OVpSVVr7.dpuf

Posted by Latha Do NADARAJAN , Year 3 undergrad at the School of Accountancy, Singapore Management University

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 – See more at: http://www.thejakartapost.com/news/2002/07/11/indonesia-no-stranger-accounting-scams-expert.html#sthash.OVpSVVr7.dpuf

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