By: Taufiequrachman Ruki, Member of BPK (Supreme Audit Agency) in 2009 – 2014

In recent news of the media there is the question (or statement) that the financial statements of several ministries obtain unqualified opinion (WTP) of the BPK, but there are indications of corruption / bribery in those ministry officials. Two officials at the Directorate General of Taxation, TH and AS, caught red-handed by the Commission of Eradication Corruption (KPK) at the Ministry of Financial Statements Financial Year 2011 obtain the opinion of WTP. This paper reviews the correlation between the opinion on the fairness of presentation of financial statements and the occurrence of corruption.

BPK’s examination of the financial statements of ministries / agencies (LKKL) is only one type of examination conducted by the BPK which is financial audits. Article 6 paragraph (3) of Act No. 15 of 2004 on the Audit of the Management and Financial Responsibility of the State explained that the BPK perform three types of financial audit of the state: (1) Financial Audit, (2) Examination Performance, and (3) Examination on specific purposes. The three types of investigation have the purpose, procedures and types of different conclusions.

Audit aimed to assess the fairness of financial statements that the conclusion was stated in the form of BPK’s Opinion. The examination of performance is the examination on state financial management which consists of the examination of economic aspects and the efficiency and effectiveness aspects of the examination. The main result of the examination of performance is in the form of recommendations to improve the activity or program to be more effective, efficient, and economical. Meanwhile, the examination with a specific purpose is an examination conducted by a special purpose, outside of the financial audit and examination performance. Examination with a specific objective has made a conclusion in accordance with the specific purpose of the examination itself. Including the specific purpose of this examination is the investigative examination which is more specific and profound “advanced” examination, that leads to the disclosure of irregularities. With different goals and results that will be reported, therefore all three types have different depth of investigation procedures adjusted to their intended destination.

Differences in objectives, conclusions, and procedures between each type of examination above indicates that there is none of the examination types that can become the report cards or guarantee certificates from the BPK that a ministry / agency that has been fully inspected manage its finances more accountable and transparent without any cases of corruption. Each of the BPK’s report should be read clearly on what purpose and scope of its examination.

Similar to the audit of financial statements of the state ministries / institutions, Examination of the financial statements of the state ministries / institutions is the type of financial Audit. In international terms, this type of examination is known as the “general audit”. The term refers to the examination that was conducted by a broad scope, covering the entire financial posts with the procedure that was reported but relatively not so deep. As an analog, in the world of health this type of checks can be synchronized with the “general check-up”.

As the output of the audit, BPK will issue 3 (three) types of Examination Report to the Financial Statements (which contain BPK’s opinion), the Report on Internal Control System Examination and Examination Report on Compliance Rule Legislation. Opinion given by the BPK shows the fairness of presentation of financial statements in particular compliance with accounting standards set by the Government. Accounting standards can be said as the statement of quality standards that ensure that the information presented is reasonable. This standard is needed so that users of statement generally will not experiencing bias when he took the decision base on the information presented in those statements. Accounting standards generally governing when a transaction is recorded, with the value of what is recorded and what information related to the transaction that must be disclosed.

There are four kinds of opinions to be given by BPK, namely:
1. Equitable with no exception (unqualified), which means that all material information in the financial statements are presented fairly;
2. Equitable with the exception of (qualified), which means that all material information in the financial statements are presented fairly, except for certain parts that are excluded by the BPK;
3. Not fair (adverse), which means there is material information that is not fairly presented that would interfere with the fairness of financial statements, and
4. No opinion (disclaimer), which means the BPK can not be sure whether material information presented in the financial statements are reasonable or not. This opinion can be given because of the limitation of the scope or the weaknesses of system that do not allow the BPK to obtain sufficient data and evidence to assess the fairness of financial statements.

If we look at the description on the type of opinion above, BPK considers materiality in determining the level of opinion to be provided. Materiality can be said as the minimum of value to declare whether an issue will influence the decision taken by the report users or not. For example, a state ministries / institutions report its revenues of Rp 1,000 trillion. In its audits, BPK found that the state ministries / institutions are not able to show proof of payment to the state treasury in the form of Rp 5 billion alone. To these problems the BPK would not conclude that the total revenue reported by those ministries/agencies (KL) (Rp 1,000 trillion) that can not be believed for its equitablity. Inspection standards that should be applied by all the BPK’s examiners to set the materiality figure in the range 0.5% – 5% of certain accounts (eg. receipt or expenditure account).

As part of obtaining reasonable assurance on the fairness of presentation of financial statements, BPK will test (1) reliability of the internal control systems primarily system used by state ministries / agencies to prepare the reasonable financial statements, and (2) compliance with laws and regulations that affect directly against equity figures presented in the financial statements.

If the test results of BPK showed that a KL has many weaknesses systems that caused that KL do not fully reported its revenues or can not guarantee that the spending has really happened, then the BPK will do more testing procedures to ensure the reasonableness of the numbers of receipts and spending that is reported in the Budget Realization Statement. The weakness of this system will not necessarily make the BPK gave bad opinion, a disclaimer for example. If the KL can provide valid and reliable evidence that all reported receipts have been entirely paid to the state coffers, there is no reason for the BPK not to believe in the fairness of acceptance, although it is still found weaknesses in the system. However, if the KL can not prove its revenues has indeed been fully paid into the state treasury, therefore the BPK will express its uncertainty of the fairness of the reported revenue.

What about the findings of noncompliance? If at the time of the LKKL’s Examination, BPK finds non-compliance with laws and regulations, the effect on the opinion will depend on the impact of the issue toward the reasonable reported figures. For example, the BPK found that the procurement should be done by auction, but in practice it is done by direct appointment, then the BPK would have to report the findings. However, whether the issue would necessarily make the BPK provide a bad opinion on those KL’s financial statements? If it turns out the physical checks indicate that the goods purchased are existed, according to the specifications requested, and the price is reasonable, then the reported expenditures to purchase those goods and recorded assets in the balance sheet are considered reasonable. But if the check indicates that the item purchased does not match the quality, cost much more than the market price or even its existence was not found, then the BPK can provide unqulified opinion of spending and / or the value of assets reported.

Then, whether the examination of the financial statements must be able to reveal the corruption committed by officials of the entity being examined? Will it able to reveal TH and AS case that are suspected of accepting bribes from taxpayers? To find out, it can be seen from the type of examination, the purpose and scope of the examination toward the financial statements audit.

First, the alleged kickbacks received by the TH and the AS are associated with the inspection process carried out by officials at the Directorate General of Taxes to Taxpayers. The purpose of bribery was thought as a way for the tax refund requested to be granted or the amount of payable tax is reduced. Taxpayer inspection process is a process undertaken to collect taxes and the last product of the examination is an assessment. Based on the assessment, if it is underpayment then the taxpayer must make deposits to the Bank / Post Perception and subsequently recorded as revenue in the Consolidated Financial State. If it is overpayment, then the taxpayer will get a refund from the government and further revenue is recorded as the Expenditure Finance report. Therefore, the allegations of bribery related to the inspection process occurred before the recording of tax revenue in the financial statements. That is, not included in the scope of the audit of financial statements.

Secondly, the bribery indication can be known if the provisions issued based on the result of the tax does not correspond to actual conditions. As an illustration, an underpayment is determined for Rp100 million, but after being re-examinated, it should be Rp500 million. The question arises why the officer would set a much lower tax than they should. From this, the alleged bribe or a game between tax officials and taxpayers can appear. To identify this, the BPK should conduct checks aimed at testing the “truth” of the tax examination, not the “reasonableness” of tax revenue in the presentation of financial statements. Examination can be done to test the “truth” of the tax is a type of examination with a specific purpose. (Note: this examination can be done if the BPK obtain the consent of the Minister of Finance to access data related to the taxpayer in accordance with Article 34 of UU KUP).

Since 1984, Indonesia has implemented a self-assessment system in which taxpayers are required to calculate their own tax obligations and report to the Directorate General of Taxes. In the case of – a particular case, the Directorate General of Taxation conducted a study / examination to test the truth of its own calculation of the taxpayer. The TH and AS cases occur because the tax officer has the authority to conduct the study / examination, and misuse them (abuse of power). Directorate General of Taxation has established a system of controls to ensure that the authority is used properly. Kitsda Directorate has been established that a provost, has set up a whistle-blower system, has made reform of the bureaucracy (read: improved employee income), etc. But it was not powerful enough to prevent employee abuse of power. Thus, the Board of the Directorate General of Taxation and Finance ministries should increase more control over their employees. BPK as the examiner institution will help the Government to prevent the abuse of power and increase tax revenues to finance the implementation of the State.

From the above review, the case of TH and AS is an event that occurs outside the context of the financial statements. The case is one form of power abuse. Unqualified (WTP) Opinion on Financial Statements Ministry of Finance is not a guarantee that there will be no cases of corruption in the Ministry of Finance, particularly in the Directorate General of Taxes. Unqualified (WTP)  opinion guarantee that there is no error rate in presentation / material information in the financial statements. In other words, a case of corruption does not necessarily prohibit unqualified opinion but certainly Corruption is not unqualified.

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