BAPEPAM-LK
BAPEPAM-LK
Etty Retno Wulandari Ph.D
Etty Retno Wulandari Ph.D
16
16
ththAnnual Conference
Annual Conference
Asian Academic Accounting
Asian Academic Accounting
Association
Association
Bandung,16
AGENDA
Accounting Fraud
Accounting Fraud in Capital Market
ACCOUNTING FRAUD
Intentional misstatements or omissions of amounts or
disclosures in financial statements done to deceive
financial statements users (Mulford & Comiskey,
2002)
The intentional misrepresentation or alteration of
accounting records regarding sales, revenues,
expenses and other factors for a profit motive …
(www. businessdictionary.com)
Any act or attempt to falsify an accounting statement
for financial gain
(http://Accounting Fraud
in Capital Market
1. Revenue Recognition
Early recognition In year 201X, company received cash for 3 years sales contract. Such advanced payment is
recognized all as a revenue in 201X .
Fictitious sales At the end of 201X, sales target has not been achieved. Hence, company record fictitious sales hoping that in 201Y will have enough sales to cover such fictitious sales in 201X.
At the beginning of 201Y, company record sales return from the fictitious sales in 201X.
Company’s revenue comes from makloon service (raw materials are provided by the buyer).
However, company record sales transaction as a whole by including the value of raw material.
Acconting Fraud ... Cont’d
2. Expenses
Provision for
bad debt Company has a receivable to a company in the process of bankcruptcy. However, company does not make proper allowances for the possibility of uncollectible accounts.
Allocation of deferred
mining cost
If mining company has several mining sites, the company should record cost for each
mining site. Fraud occurs when company site creating revenue and its cost is not calculated based on amortization of mining cost
occurred from that site (departure from matching cost principle).
Accounting Fraud ... Cont’d
3. Inventories
Overvaluation Due to increasing market price of the
inventories, company increases the value of its inventories based on the market price. Based on PSAK, company should recognize inventories at the lower of costs or net
realizable value. Pseudo
Inventories Company recognizes inventories in the company’s warehouses which is owned by its customers
Regulations to Prevent
Fraud
7
INTERNAL COMPANY ROLE OF PROFESSION ROLE OF REGULATOR
Financial St
Preparation of FS
BoD & BoC Internal Audit Audit Committee
Transactions
Registration Independency
Reporting
Supervision Perioodic review
Inspection Criminal
investigation
Regulations – Internal
Company
Regulation related with Financial
Statements
:
Preparation of Financial Statements:
–
Rule No. VIII.G.7 (Guidance on Presentation and
Disclosures of Issuers’ Financial Statements)
–
Rule No. VIII.G.11 (Director’s Responsibility of
Financial Statements)
•
Issuers’ Directors and Commissioners (
POJK No.
33 /POJK.04/2014
)
Internal Audit (Rule No. IX.I.7)
Internal Company... Cont’d
Preparation of Financial Statements
Rule No. VIII.G.7:
–
provide guidance on structure, content, and
requirements in presentation and disclosure of
financial statements
–
Accommodate all related PSAKs
Rule No. VIII.G.11
–
Statement on Director’s responsibility on financial
statements must be signed by President Director
and Director responsible for accounting and
finance.
–
The statement states, among others, that
Internal Company... Cont’d
.
Issuers’ BoD & BoC
•
Each member of the Board of Directors
jointly and severally liable for the loss of
public company caused by the fault or
negligence of members of the Board of
Directors in conducting its duties.
•
Number of Independent Commissioner at
least 30% of the total number of Board of
Commissioners
Internal Company... Cont’d
.
Internal Audit
Issuers must have Internal Audit Unit
Head of Internal Audit is appointed by President Director
after having approval from BoC
Head of Internal Audit is responsible to President Director Function of Internal Audit, among others:
− Assess and evaluate the implementation of internal control and risk management system;
− Inspect and evaluate the efficiency and effectiveness of financial, accounting, operational, human resources, etc; − Cooperate with Audit Committee;
Internal Company... Cont’d
Audit Committee
Issuers must have audit committee who is responsible to
BoC.
Audit committee (chaired by Independent Commissioner)
at least consists of 3 members come from independent commissioner and other person outside Issuer.
Function of Audit committee, among others:
− Review financial information to be issued by Issuers; − Review issuers’s compliance to rules and regulations; − Provide recommendation to BoC regarding the
appointment of Public Accountant;
Internal Company... Cont’d
Regulation related with Transactions:
Certain Conflict of Interest Transaction (Rule No. IX.E.1) Must have approval from independent shareholders
Material Transactions and Change in Main Business
Activities (Rule No. IX.E.2)
– Transactions between 20% - 50% of equity
do not need approval from Shareholders Meeting Publish circular letter to disclose the necessary
information
– Transactions above 50% of equity and change of main business activities
Regulations – Role of
Profession
Regulation related with Public
Accountant
:
Registration
of Public Accountant
engaged in Capital Market (Rule No. VIII.A.1)
regulates requirement regarding Public
Accountant’s competency
Independency of Accountant
Providing
Service in Capital Market (Rule No. VIII.A.2)
regulates prohibited activities for public
Role of Profession ... Cont’d
Reporting to OJK by Accountant
(Rule No.
X.J.1)
Accountant must report in confidence to OJK
within three working days of discovering the
following:
a)any violation of the Law and or its
implementing regulations; or
b)any matter that may jeopardize the
Regulations – Role of
Regulator
Supervision
In performing its function based on CML Article 5, i.e.
to ensure that the Capital Market is orderly, fair, and
efficient and that the interests of investors and public
are protected, OJK conducts:
•
Periodic Review, based on risk based supervision:
–
Annual and Semiannual FS
Rule No. X.K.2
–
Annual Report
Rule No. X.K.6
•
Inspection (based on CML Article 100)
Regulations - Sanctions
Sanctions for fraud:
Administrative sanction (Government Regulation
No. 45/1995)
–
written admonitions;
–
fines;
–
restrictions on business activity;
–
suspensions of business activity;
–
revocations of business licenses;
–
cancellations of approvals; and
–
cancellations of registrations.