Effectiveness of internal audit on organisational performance
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Effectiveness of Public Sector Audit Reports in
Indonesia
(Preceding and Following Audit Reform)
By Septiana Dwiputrianti
The Thesis Submitted for the Degree of Doctor of Philosophy Crawford School of Economics and Government
College of Asia and the Pacific Canberra, Australia
March, 2011
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Statement of Originality
This thesis is duly my own work and it contains no material which has
previously been accepted in the award of any other degree in any other university.
The thesis contains no material written by any other person, except where due
reference is made in the text.
Septiana Dwiputrianti
March 2011
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Publications
Journals:
Dwiputrianti, S 2011 (Submitted on March), ’How Effective is the Indonesian External Public Sector Auditing Reports Before and After the Audit Reform for Enhancing the Performance of Public Adminsitration?’, The International Review of Public Administration (IRPA), the Korean Association for Public Administration (KAPA) (ISSN 12294659).
Dwiputrianti, S 2011, ‘Inequality of Resources for Future Perspective of Indonesia’s Fiscal Transparency and Public Accountability’, Journal of Administration and Development, Special Edition, January (ISSN 1410-5101).
Dwiputrianti, S 2011, ‘Analyzing the Reforms of Performance Auditing to Achieve Public Accountability and Transparency in the Indonesian Public Administration’,Journal of Administration and Development, Special Edition, January (ISSN 1410-5101).
Dwiputrianti, S 2009, ‘Understanding Indonesia’s Corruption Eradication Strategy’, Journal of Administrative Sciences, Vol 6, No. 3, (ISSN 1829-8974).
Dwiputrianti, S 2008, ‘Effectiveness of Audit Reports in Establishing the Fiscal Transparency and Acountability Public Sector in Indonesia (Post Reformation 2001-2008)’, Journal of Administrative Sciences, Vol. 5, No. 4, 2008 (ISSN 1829-8974).
Dwiputrianti, S 2004, ‘Good Governance in Supporting Public Services and Social Economic Development of Nations to Increase the National Tourism Sector’, Journal of Tourism, School of Economics and Tourism,Yapari Aktripa, Vol. 5, No. 1, (ISSN 1411-3236).
Book Chapters:
Dwiputrianti, S 2009, ‘The Concept of Weber’s Bureucracy and Practice of Bureuacracy in Indonesia: Actualization Concept of Max Weber Bureaucracy’, in ‘Response to Challenges Bureaucracy Reform in Indonesia’, School of Public Administration-National Institute of Public Administration (STIA LAN) Bandung Press, Bandung (ISBN 978-979-97385-3-0)..
Dwiputrianti, S 2009, ‘Understanding External Government Auditing in Indonesia’, in ‘Capita Selekta of Indonesian Economics’, Prenada Media Group-Kencana Press, Jakarta(ISBN 978-979-1486-59-0).
Conferences (Papers Presented):
Dwiputrianti, S 2011 (Accepted and will be presented on 31stMay – 3rd June ), ‘Role of Indonesian Supreme Audit Institution (BPK) in Financial Transparency and Performance Accountability’, in Innaugural International Workshop for Young Scholars in Public Policy and Administration Researchin Xiamen, China, organised by the Asian Society for Institutional Analysis (ASIASIA), the American Society for Public Administration (ASPA) and Xiamen Unviersity.
Dwiputrianti, S 2011, ‘How Effective is the Indonesian External Public Sector Auditing Reports before and after the Audit Reform for Enhancing the
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Performance of Public Administration?’, in Plenary Session of the First International Conference in Public Organisation (ICONPO), 21st-22nd January, Muhammadyah University, Yogjakarta, Indonesia, (Published in Conference Proceedings, ISBN 979-1707-99-5).
Dwiputrianti, S 2010,‘Inequality of Resources for Future Perspective of Indonesia’s Fiscal Transparency and Public Accountability’, International Association of Schools and Institutes of Administration (IASIA) Conference, 12th-17th July, Nusa Dua-Bali, Indonesia.
Dwiputrianti, S 2010,‘Analyzing the Reforms of Performance Auditing to Achieve Public Accountability and Transparency in the Indonesian Public Administration’, International Institute of Administrative Sciences (IIAS) Conference 12th-17th July, Nusa Dua-Bali, Indonesia.
Dwiputrianti, S 2010, ‘Analysis of Financial Auditing Reform to Improve Transparency and Accountability in Public Sector’, Public Administration National Conference III, 6th-8th July, University of Padjadjaran, Jatinangor, Indonesia..
Dwiputrianti, S 2007, ‘The State Audit Policy for Effective Government Auditing to Enhance Transparency and Public Accountability in Indonesia’, 8th APRU Doctoral Conference, 30th August, Conference Proceedings (digital), Keio University, Tokyo, Japan.
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Acknowledgements
Firstly, I would like to thank my main supervisor, Professor Richard Mulgan. I
do not have enough words to express my gratitude for his continuous support and
encouragement during my work on this thesis. I owe him deep gratitude for giving me
encouraging comments and continuous guidance during my thesis writing, and
insightful feedback on the drafts. He also showed great patience and forbearance in
regard to my family and study matters. My sincere thanks also go to my second
supervisor, Dr. Sharon Bessell, and my adviser, Pat Barrett, MD, for their genuine
support, important inputs and comments.
My grateful appreciation goes to my family; Achmad Haris, my husband;
Hana Eka Hidayati and Hasna Ghina Ishmahyati, my beautiful daughters; and to
Harsa Ilman Prakoso, my brave son; for their love, patience and support. My special
thanks go to my parents for their continuing prayers for the completion of my study,
and for taking care of my baby Hasna while I did fieldwork.
This research was made possible by a scholarship provided by the Australian
Agency for International Development (AusAID). I appreciate the efforts of Billie
Headon as the AusAID Liason Officer at Crawford School. My grateful thanks also
go to all academic and administrative staff at Crawford School and to all the
Australian-Indonesian community who always gave me support to complete this
thesis and to help my family and I during my study in Canberra. I wish you all the
best and may God bless us all.
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Abstract
This research aims to enrich the existing literature on public administration, public accountability and public sector auditing. The research was undertaken through a comprehensive examination of the quality of information in the audit reports of the Indonesian State Audit Institution (Badan Pemeriksa Keuangan or BPK) with comparisons made between pre audit reform (1945-2000) and post audit reform (2001-2009). The study also evaluates the factors influencing the effectiveness and ineffectiveness of BPK audit information. To achieve these purposes, two main research questions were the focus of the study: How is the quality of information in BPK audit reports before and after audit reform? What are the key factors influencing the effectiveness and ineffectiveness of information in BPK audit reports?
Data were collected through triangulation of observations, documentation, questionnaires and personal interviews. Purposive sampling and snowball techniques were applied in this study. The respondents and key informants engaged in this study were:(i) BPK auditors, Board members and managers;(ii) members of both central and regional Parliaments;(iii) public sector officials (auditees) at both the central and local level; and (iv)academics, researchers, and non government organisations (NGO).
The study revealed that the Indonesia’s Executive (the President, Governors, Regents and Mayors)has historically neglected the roles and functions of BPK. Since the third amendment of the 1945 Constitution in 2001, the Indonesian government has reformed laws and regulations related to public sector auditing, including setting new rules for strengthening and improving BPK’s roles and functions. In situation where the Indonesian government needs immediate reform, BPK has been attempting to improve its professionalism and independence to provide better quality audit reports.
Independence, professionalism and integrity are among the most important factors that influence public sector audits. However, in the past, BPK auditors lacked independence as the Executive influenced its administration and finances.Auditors also lackedopportunities to increase their professionalism by undertaking additional education and training. Since there was little incentive for auditors not to accept audit fees from auditees, the objectivity and integrity of auditors were reduced significantly.
Fortunately, in response to the audit reform in 2001, the roles and functions of BPK have been strengthened. BPK has been able to give much more attention to education, training and the development of other skills and knowledge. BPK has also implemented improved remuneration and applied a rewards and sanctions system to strengthen auditor professionalism and integrity. This study revealed a significant improvement in the quantity and quality of BPK’s audit resources, including increases in the number of qualified auditors, representative offices, modern
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equipment, and in the use of Information Technology (IT). However, the improvement inaudit resources have not quite matched with the increasing number of auditees and the authority given to the BPK. In terms of the quality of auditors, BPK has many new auditors, but they lack experience. To execute performance audits, BPK requires more auditors with diverse educational backgrounds in addition to accounting and finance.
The research also showed that many factors have impeded the ‘followup’on information and recommendations in BPK audit reports.For example, Parliament’s lack of willingness to politically oversee the Executive, insufficient serious ‘buy-in’ by government to implement audit recommendations, and an unintegrated approach by authorised investigators to follow up on audit findings that indicate criminality and corruption. To what degree these factors influence the ineffectiveness of public sector auditsremains an open question and an areafor further research.
It is clear from the research that there is further space for improvement of BPK’s functions to enhance the quality of public administration and accountability. Towards this, the study suggests recommendations to the BPK relating to four different aspects, namely: legal basis, institutional and resources, effectiveness of audit reports, human resources development.
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Table of Contents
PUBLICATIONS ......................................................................................................................... II
ACKNOWLEDGEMENTS ........................................................................................................ IV
ABSTRACT .................................................................................................................................. V
TABLE OF CONTENTS .......................................................................................................... VII
LIST OF TABLES ...................................................................................................................... XI
LIST OF FIGURES ................................................................................................................. XIII
LIST OF ACRONYMS, ABBREVIATIONS AND GLOSSARY ......................................... XV
CHAPTER 1 STATEMENT AND RATIONALE FOR THE RESEARCH ON THE
INDONESIAN PUBLIC SECTOR AUDITING......................................................................... 1
1.1 DEFINING PUBLIC SECTOR AUDIT ..................................................................................... 1 1.1.1 Financial (and Compliance) Auditing ............................................................................ 1 1.1.2 Performance Auditing .................................................................................................... 3 1.1.3 Difference between Financial and Performance Audits ................................................. 5
1.2 DEVELOPMENT OF PUBLIC SECTOR AUDITING AND ACCOUNTABILITY ............................ 7 1.3 THE IMPORTANCE OF PUBLIC SECTOR AUDITING .............................................................. 9
1.3.1 The Role of Auditing in Public Accountability ............................................................... 9 1.3.2 Audit for Effectiveness and Efficiencyin Public Administration................................... 11 1.3.3 Auditing for Good Governance .................................................................................... 12
1.4 STATEMENT OF RESEARCH PROBLEM .............................................................................. 13 1.5 SIGNIFICANCE AND OBJECTIVES OF THE STUDY .............................................................. 16 1.6 RESEARCH QUESTIONS .................................................................................................... 17 1.7 RESEARCH DESIGN AND METHOD ................................................................................... 17 1.8 LIMITATIONS OF THE STUDY ............................................................................................ 22 1.9 STRUCTURE OF THE THESIS.............................................................................................. 23
CHAPTER 2 LITERATURE REVIEW ON CRITERIA AND FACTORS FOR
QUALITY OF INFORMATION IN PUBLIC SECTOR AUDIT REPORTS ...................... 25
2.1 THE QUALITY OF INFORMATION IN PUBLIC SECTOR AUDIT REPORTS ............................ 26 2.1.1 The Content of Information in the Audit Reports ......................................................... 26
Scope and Objectives of Auditing ..................................................................................................................... 26 Access for Reliable Audit Evidence .................................................................................................................. 30 Objectivity and Credibility of Information ........................................................................................................ 31
2.1.2 Communication of Information in Audit Reports ......................................................... 32 Understandable Information with Precise and Informative Formatting ............................................................. 33 Timely Reporting of Information ....................................................................................................................... 34
2.1.3 Acting on Information in Audit Reports ....................................................................... 35 Publication of Audit Reports ............................................................................................................................. 35 Realistic Audit Recommendations ..................................................................................................................... 37 Followup of Audit Report Findings and Recommendations .............................................................................. 38
2.1.4 Summary ....................................................................................................................... 39 2.2 FACTORS INFLUENCING THE QUALITY OF INFORMATION IN AUDIT REPORTS ................ 42
2.2.1 Factors Influencing Content and Communication of Information ............................... 43 Independence of Audit Institution and Auditors ................................................................................................ 43
The Importance of an Audit Institution and Auditor‘s Independence ............................................................ 44
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Aspects of Audit Independence ..................................................................................................................... 47 Integrity and Professionalism of Auditors ......................................................................................................... 54
Professionalism and Audit Standards ............................................................................................................ 55 Auditors‘ Proficiency and Experience ........................................................................................................... 56
Internal and External Quality Assurance ........................................................................................................... 60 Resources of the Audit Institution ..................................................................................................................... 61
Budget and Human Resources ....................................................................................................................... 62 Offices and Information Technology (IT) Resources .................................................................................... 62
2.2.2 Factors Influencing Acting on Information .................................................................. 64 Political Support from the Legislative ............................................................................................................... 65 Support from the Executive ............................................................................................................................... 67 Law Enforcement Support ................................................................................................................................. 69 Public and Media Support .................................................................................................................................. 71
2.3 ANALYTICAL FRAMEWORK OF REPORTING INFORMATION IN PUBLIC SECTOR AUDITING
73
CHAPTER 3 THE HISTORICAL DEVELOPMENT OF INDONESIAN PUBLIC
SECTOR AUDITING (FROM THE DUTCH COLONIAL PERIOD TO THE
REFORMATION ERA) ............................................................................................................. 75
3.1 PUBLIC SECTOR AUDITING FROM THE DUTCH COLONIAL PERIOD TO THE OLD ORDER
(1945-1965) ................................................................................................................................ 75 3.2 BPK UNDER THE NEW ORDER ERA (1966-1998) ............................................................. 80 3.3 AUDIT REFORM UNDER THE REFORMATION ERA (1999-PRESENT) ................................. 83
3.3.1 Policies in Accountancy and Auditing for Transparency and Accountability .............. 85 Law of Audit (2004) and Law on BPK (2006) .................................................................................................. 87 Regulation on State Finances Audit Standards and Code of Conducts (2007) ................................................... 88
3.3.2 Reforming Audit Institutions in Indonesia .................................................................... 91 Limited and Duplicated BPK Functions Pre Audit Reform (2001).................................................................... 91 Organisational Change of BPK .......................................................................................................................... 94
3.4 CONCLUSION .................................................................................................................... 95
CHAPTER 4 QUALITY OF BPK REPORTS: CONTENT OF INFORMATION ....... 99
4.1 SCOPE OF AUDIT .............................................................................................................. 99 4.1.1 Legal Basis for Audit Scope of BPK ........................................................................... 100 4.1.2 Comparing Different Audit Scopes of BPK before and after Reform ......................... 102
Scope of Audit before Audit Reform ............................................................................................................... 102 BPK Financial AuditingAfter Reform ............................................................................................................. 104 Scope of Financial and Compliance Auditing .................................................................................................. 107 Scope of Performance and Specific Purposes Audits after Audit Reform ....................................................... 110
4.1.3 Survey Results and Comments on Scope of BPK ........................................................ 118 4.2 RELIABILITY OF AUDIT EVIDENCE ................................................................................. 125
4.2.1 Laws and Regulations as the Basis of Strong Audit Evidence ................................... 125 4.2.2 Survey Results and Comments on Strong Audit Evidence .......................................... 127
4.3 OBJECTIVITY AND CREDIBILITY OF AUDIT REPORT INFORMATION .............................. 131 4.3.1 Regulations and Rules for Objectivity and Credibility of Information....................... 131 4.3.2 Survey Results and Comments on the Objectivity and Credibility of Audit Reports .. 133
Positive Results and Comments ....................................................................................................................... 134 Negative Results and Comments ..................................................................................................................... 138
CHAPTER 5 QUALITY OF BPK REPORTS: COMMUNICATION OF AND ACTING
ON INFORMATION ................................................................................................................ 145
5.1 UNDERSTANDABLE INFORMATION ................................................................................ 145 5.1.1 Basic Rules for Clear and Understandable Reports .................................................. 145 5.1.2 Survey Results and Comments on Clear and Understandable Reports ...................... 146
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5.2 PRECISE AND INFORMATIVE FORMATTING .................................................................... 150 5.2.1 Basic Rules for Precise and Informative Audit Report Formatting ........................... 150 5.2.2 Survey Results on Precise and Informative BPK Audit Report Formatting ............... 151
5.3 TIMELY REPORTING ....................................................................................................... 154 5.3.1 Basic Laws and Rules on Timely Reporting of Information ....................................... 154 5.3.2 Survey Results on Timely Reporting ........................................................................... 155
5.4 ACTING ON INFORMATION IN BPK REPORTS ................................................................. 158 5.4.1 Publication of Audit Reports ...................................................................................... 158
Laws and Regulations Related to the Publication of Audit reports .................................................................. 158 Publication of Audit Reports Pre and Post Audit Reform ................................................................................ 160 Publication in Corruption and Irregularity Cases ............................................................................................. 162 Survey Results and Comments on the Publication of Audit Reports ............................................................... 165
5.4.2 Realistic Audit Recommendations .............................................................................. 171 Regulations and Rules for Realistic Audit Recommendations ......................................................................... 172 Survey Results on Realistic Audit Recommendations ..................................................................................... 172
5.4.3 Following up Audit Findings and Recommendations ................................................. 175 Laws and Regulations for Following up Audit Reports ................................................................................... 175 Followup on BPK Reports Before andAfter Audit Reform ............................................................................. 177 Survey Results and Comments on the Following up of BPK Reports ............................................................. 181
5.4.4 Conclusion on the Quality of Information in BPK Reports ........................................ 186
CHAPTER 6 FACTORS INFLUENCING THE CONTENT AND COMMUNICATION
OF INFORMATION IN BPK REPORTS .............................................................................. 193
6.1 INDEPENDENCE AND AUTONOMY OF AN AUDIT INSTITUTION ....................................... 193 6.1.1 The Independence of BPK .......................................................................................... 194
The Independence of the BPK before the Reform ........................................................................................... 194 The Independence of BPK after Audit Reform ................................................................................................ 196
6.1.2 Independence in Budgeting ........................................................................................ 199 Independence in Budgeting Pre Audit Reform ................................................................................................ 199 Independence in Budgeting Post Audit Reform ............................................................................................... 200
6.1.3 Independence of Board Members and Auditors ......................................................... 203 Independence of the Board Members Pre and Post Audit Reform ................................................................... 203
Pre Audit Reform ........................................................................................................................................ 203 Post Audit Reform ....................................................................................................................................... 205
Independence of Auditors Pre and Post Audit Reform .................................................................................... 207 Pre Audit Reform ........................................................................................................................................ 207 Post Audit Reform ....................................................................................................................................... 208
6.1.4 Conclusion on BPK Independence ............................................................................. 214 6.2 INTEGRITY AND PROFESSIONALISM OF BPK MEMBERS AND AUDITORS ...................... 215
6.2.1 Legal Basis for BPK’s Integrity and Professionalism ................................................ 215 6.2.2 Professionalism and Integrity of BPK Pre Audit Reform ........................................... 216 6.2.3 Professionalism and Integrity of BPK Post Audit Reform ......................................... 219 6.2.4 Survey Results and Comments on Professionalism and Integrity .............................. 222 6.2.5 Conclusion of BPK Integrity and Professionalism ..................................................... 225
6.3 AUDITING RESOURCES OF BPK ..................................................................................... 226 6.3.1 Budget Resources ....................................................................................................... 227 6.3.2 Human Resources ....................................................................................................... 230
Organisational Reform ..................................................................................................................................... 231 Quantity and Quality of Personnel ................................................................................................................... 233
6.3.3 Training and EducationCentre ................................................................................... 238 6.3.4 Information Technology and Modern Office Equipment Resources .......................... 242 6.3.5 Office Resources ......................................................................................................... 245 6.3.6 Conclusion on BPK Resources ................................................................................... 250
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CHAPTER 7 FACTORS INFLUENCING ACTING ON INFORMATION IN BPK
REPORTS 252
7.1 POLITICAL SUPPORT FROM THE LEGISLATURE .............................................................. 252 7.1.1 BPK Reports and Parliament Pre and Post Audit Reform ......................................... 252 7.1.2 Communication and Agreement between BPK and the Legislature ........................... 253 7.1.3 Survey Results and Comments on Political Support from the Legislature ................. 263 7.1.4 Conclusion on Political Support from the Legislature ............................................... 266
7.2 SUPPORT FROM THE EXECUTIVE .................................................................................... 267 7.2.1 BPK Opinion and Findings on Public Sector Accountability .................................... 268 7.2.2 Survey Results and Comments on Support from the Executive .................................. 273
7.3 LAW ENFORCEMENT SUPPORT FROM AUTHORISED INVESTIGATORS ............................ 276 7.3.1 Mechanisms and Findings Indicating Corruption...................................................... 279 7.3.2 Survey Results and Comments on Support from Authorised Investigators ................ 284
7.4 PUBLIC AND MEDIA SUPPORT ........................................................................................ 288 7.4.1 Media and the Public to Disseminate BPK Reports ................................................... 288
7.5 CONCLUSION ON FACTORS INFLUENCING PUBLIC SECTOR AUDITING IN INDONESIA ... 292
CHAPTER 8 CONCLUSIONS AND RECOMMENDATIONS .................................... 301
8.1 CONCLUSION OF THE INDONESIAN PUBLIC SECTOR AUDITING (BPK) BEFORE AND
AFTER AUDIT REFORM ............................................................................................................. 301 8.1.1 Content of BPK Audit Report Information ................................................................. 302 8.1.2 Communication of and Acting on Audit Report Information ..................................... 304
8.2 CONCLUSION OF FACTORS INFLUENCING INDONESIAN PUBLIC SECTOR AUDITING ..... 306 8.2.1 Independence and Autonomy of BPK ......................................................................... 306 8.2.2 Integrity and Professionalism of BPK Members and Auditors .................................. 307 8.2.3 Auditing Resources of BPK ........................................................................................ 309
8.3 RECOMMENDATIONS ...................................................................................................... 317 8.3.1 Legal Basis Aspects .................................................................................................... 317 8.3.2 Institutional and Resources Aspects ........................................................................... 318 8.3.3 Effectiveness of Audit Reports Aspects ....................................................................... 319 8.3.4 Human ResourceDevelopment Aspects ...................................................................... 319
8.4 FURTHER RESEARCH ...................................................................................................... 320
LIST OF REFERENCES ......................................................................................................... 322
Appendix A: Questionnaires ............................................................................................................................ 352 Appendix B: List of Interviewees .................................................................................................................... 356 Appendix C: Comparison of BPK Before and After the Audit Reform ........................................................... 360
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List of Tables
TABLE 1-1 COMPARISON BETWEEN FINANCIAL AND PERFORMANCE AUDITS ................................ 6
TABLE 2-1 SUMMARY OF CRITERIA FOR THE QUALITY OF AUDIT INFORMATION AND
FACTORS INFLUENCING THE EFFECTIVENESS OF INFORMATION ................................. 25
TABLE 2-2 40
TABLE 2-3 DEFINITION OF FACTORS INFLUENCING THE EFFECTIVENESS OF INFORMATION IN
AUDIT REPORTS ............................................................................................................ 42
TABLE 3-1DIFFERENCES BETWEEN FORMER (SAP 1995) AND NEW (SPKN 2007) AUDIT
STANDARDS .................................................................................................................. 89
TABLE 3-2 LEGAL CHANGES SINCE AUDIT REFORM (2001) IN INDONESIA ................................... 90
TABLE 3-3 RESOURCES OF BPK AND BPKP (2004) ....................................................................... 92
TABLE 3-4 INDONESIAN EXTERNAL AND INTERNAL AUDIT INSTITUTIONS AND THEIR
REPORT TO MAIN STAKEHOLDER(S) ............................................................................ 94
TABLE 3-5 COMPARISON OF INTERNAL AND EXTERNAL PUBLIC SECTOR AUDITING BEFORE
AND AFTER AUDIT REFORM (2001) .............................................................................. 97
TABLE 4-1 AUDITEES AND BPK AUDIT OPINION PERIOD 2006-08 .............................................. 105
TABLE 4-2 AUDITED ENTITIES AND VALUE(IN BILLION RUPIAHS) OF PERFORMANCE AND
SPECIFIC PURPOSES AUDITS 2005-2007 ..................................................................... 113
TABLE 5-1 EXAMPLES OF APPROXIMATE NUMBERS OF NEWS ARTICLES OF BPK‘S
FINDINGS/RESULTS IN 2006........................................................................................ 161
TABLE 5-2 FOLLOWUP OF CASES AND THEIR VALUE (IN BILLION RUPIAHS) OF STATE
LOSSES DURING 2005-2006. ....................................................................................... 178
TABLE 5-3 FOLLOW UP OF BPK AUDIT FINDINGS (NUMBERS AND VALUE OF CASES) AT THE
CENTRAL AND LOCAL GOVERNMENT AND SOES IN 2008 ......................................... 180
TABLE 5-4 SUMMARY OF IMPROVEMENTS AND AREAS FOR FURTHER IMPROVEMENTFOR
PUBLIC SECTOR AUDIT REPORTS SINCE AUDIT REFORM (2001) ............................... 191
TABLE 6-1REMUNERATION INCOME OF BPK MANAGERS AND STAFF IN 2004 AND 2006(IN
RUPIAH) ...................................................................................................................... 221
TABLE 6-2 ANNUAL BUDGET ALLOCATION FOR BPK BEFORE (1993-2000) AND AFTER
AUDIT REFORM (2001-2009) ...................................................................................... 229
TABLE 6-3 NUMBER OF EMPLOYEES WHO RECEIVED REWARDS AND PUNISHMENTS(2004-
08) ............................................................................................................................... 232
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TABLE 6-4 RECRUITMENT OF NEW BPK PERSONNEL FOR THE FINANCIAL YEAR 2007-08 ........ 235
TABLE 6-5 FIELDS OF DUTIES AND FUNCTION OF INDIVIDUAL BPK MEMBERS, 2007 ................ 237
TABLE 6-6 NUMBER OF PARTICIPANTS IN BPK TRAINING AND EDUCATION (2004-06) .............. 239
TABLE 6-7 NUMBER OF COMPUTERS, NOTEBOOKS AND PRINTERS AT BPK OFFICES (1994-
2003) ........................................................................................................................... 243
TABLE 6-8 NUMBER OF PERSONAL COMPUTERS, NOTEBOOKS, PRINTERS AND SCANNERS
(2004-2006) ................................................................................................................ 244
TABLE 6-9 OPENING DATES OF BPK REPRESENTATIVE OFFICES (1950-2008) ........................... 247
TABLE 7-1 SUMMARY OF REFORMS IN FACTORS INFLUENCING INFORMATION IN BPK
REPORTS ..................................................................................................................... 299
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List of Figures
FIGURE 2.1 DIFFERENT LEVELS OF ACCOUNTABILITY AND SCOPE OF AUDITING ......................... 28
FIGURE 2.2 INDEPENDENT BUDGET PROCESS OF THE AUDIT INSTITUTION OFFICE IN
GERMANY ..................................................................................................................... 50
FIGURE 2.3 ANALYTICAL FRAMEWORK FOR REPORTING INFORMATION IN PUBLIC SECTOR
AUDITS ......................................................................................................................... 74
FIGURE 3.1 BPK UNDER 1945 CONSTITUTION AND PEOPLE‘S ASSEMBLY (MPR) ........................ 78
FIGURE 3.2 POSITION OF BPK UNDER THE THIRD AMENDMENT OF THE 1945 CONSTITUTION
(2001) ........................................................................................................................... 84
FIGURE 4.1 SURVEY RESULTS OF ‗BPK REPORTS PROVIDE CLEAR INFORMATION FOR AUDIT
SCOPE AND OBJECTIVES‘ ............................................................................................ 119
FIGURE 4.2 SURVEY RESULTS OF ‗INFORMATION IN AUDIT REPORTS IS SUPPORTED BY
STRONG EVIDENCE‘ .................................................................................................... 128
FIGURE 4.3 SURVEY RESULTS OF ‗INFORMATION IN BPK AUDIT REPORTS IS OBJECTIVE
(USING APPROPRIATE AUDIT TECHNIQUES AND PROFESSIONAL JUDGMENT)‘ ......... 134
FIGURE 4.4 SURVEY RESULTS OF ‗INFORMATION IN BPK AUDIT REPORTS IS CREDIBLE
(TRUSTED BY STAKEHOLDERS)‘ ................................................................................. 135
FIGURE 5.1 SURVEY RESULTS OF ‗INFORMATION IN BPK AUDIT REPORTS IS CLEAR AND
EASY TO UNDERSTAND‘ ............................................................................................. 147
FIGURE 5.2 SURVEY RESULTS FOR ‗FORMAT OF BPK AUDIT REPORTS IS PRECISE AND
INFORMATIVE‘ ............................................................................................................ 151
FIGURE 5.3 SURVEY RESULTS ON ‗BPK REPORTS ITS AUDIT RESULTS IN A TIMELY
FASHION‘ .................................................................................................................... 155
FIGURE 5.4 SURVEY RESULTS OF ‗BPK PUBLISHED ITS AUDIT REPORTS‘ .................................. 166
FIGURE 5.5 SURVEY RESULTS OF ‗BPK AUDITORS PROVIDE REALISTIC
RECOMMENDATIONS‘ ................................................................................................. 173
FIGURE 5.6 SURVEY RESULTS OF ‗BPK AUDIT REPORTS ARE FOLLOWED UP‘ ........................... 182
FIGURE 6-1 PERCEPTIONS OF ‗BPK IS AN INDEPENDENT AUDIT INSTITUTION‘ ........................... 197
FIGURE 6.2 BPK BUDGETING RESOURCES ................................................................................... 201
FIGURE 6.3 APPOINTMENT PROCESS FOR MEMBERS, CHAIRMAN AND VICE CHAIRMAN OF
BPK ............................................................................................................................ 206
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FIGURE 6.4 SURVEY RESULTS OF ‗BPK AUDITORS PERFORM WITH PROFESSIONALISM AND
INTEGRITY‘ ................................................................................................................. 223
FIGURE 6.5 SURVEY RESULTS OF ‗BPK HAS SUFFICIENT AUDIT RESOURCES‘ ............................ 227
FIGURE 6.6NUMBER OF BPK EMPLOYEES FOR THE PERIOD 2000-2008 ...................................... 234
FIGURE 6.7 REPRESENTATIVE OFFICES OF BPK IN 33 PROVINCES (2008) ................................... 249
FIGURE 7.1PROCESS OF BPK AND PARLIAMENT FUNCTIONS FOR PUBLIC ACCOUNTABILITY .... 255
FIGURE 7.2 COORDINATION BETWEEN BPK AND THE LEGISLATIVE ........................................... 257
FIGURE 7.3 SURVEY RESULTS THAT ‗MEMBERS OF PARLIAMENT PROVIDE POLITICAL
SUPPORT FOR THE ROLES AND FUNCTIONS OF BPK‘ ................................................. 263
FIGURE 7.4 SURVEY RESULTS ON ‗GOVERNMENT PROVIDES SUPPORT FOR BPK RESULTS
AND RECOMMENDATIONS‘ ......................................................................................... 273
FIGURE 7.5 COORDINATION BETWEEN BPK AND THE ATTORNEY GENERAL INDICATING
CORRUPTION ............................................................................................................... 283
FIGURE 7.6 SURVEY RESULTS OF ‗AUTHORISED INVESTIGATORS SUPPORT THE AUDIT
FINDINGS OF BPK INDICATING CORRUPTION AND FRAUD‘ ....................................... 284
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List of Acronyms, Abbreviations and Glossary
AAB Advisory Audit Board
ADB Asian Development Bank
AIPRD-GPF Australia Indonesia Partnership for Reconstruction and Development-
Government Partnership Fund
APIP Aparat Pengawasan Internal Pemerintah or Akuntabilitas Kinerja Instansi
Pemerintah; Government Internal Auditors or Performance Accountability of
Government Agencies
APRU Association of Pacific Rim Universities
AKN Auditama Keuangan Negara; Auditors of State Finances
ANAO Australian National Audit Office
Angbintama Anggota Badan Utama; Member of BPK
ANZO Audit New Zealand Office
APBD Anggaran Pendapatan Belanja Daerah; Regional Government Budget
APBN Anggaran Pendapatan Belanja Negara; State Government Budget
ASOSAI Asian Organisation of Supreme Audit Institutions
AusAID Australian Aid for International Development
Bappenas Badan Perencanaan Pembangunan National; The National Development
Planning Board
Bawasda Badan Pengawasan Daerah: Regional Supervision Agency
BI Bank Indonesia; the Central Bank of Indonesia
BLBI Bantuan Likuiditas Bank of Indonesia; Liquidity Aid of the Central Bank of
Indonesia
BKN Badan Kepegawaian Negara; State Personnel Board
BLU Badan Layanan Umum; Public Service Board
BNI Bank Nasional Indonesia; Indonesia State Bank
BPK Badan Pemeriksa Keuangan; Indonesian State Audit Board
BPKP Badan Pengawas Keuangan dan Pembangunan; Financial and Development
Supervisory Board
BPS Badan Pusat Statistik; Central Board of Statistics
BRR Badan Rehabilitasi dan Rekonstruksi; Rehabilitation and Reconstruction Board
BULOG Badan Urusan Logistik; Logistic Agency
BUMD Badan Usaha Milik Daerah; Regional-owned Enterprise
BUMN Badan Usaha Milik Negara; State-owned Enterprise (SOE)
GAS Ghana Audit Service
GGR The Comptroller General of the Republic
DPA Dewan Pertimbangan Agung; Supreme Advisory Council
DPD Dewan Perwakilan Daerah; the Senate
DPR Dewan Perwakilan Rakyat; Parliament
DPRD(s) Dewan Perwakilan Rakyat Daerah; regional Parliament(s)
Fatwa Legal decision, edict
FCPP Financial Crime Prevention Project
US GAO The United States Government Accountability Office
GOI Government of Indonesia
HAPSEM Hasil Pemeriksaan Semester; Summary of Semester Report
HRB Human Resources Bureau
IAI Ikatan Akuntansi Indonesia; Indonesian Accountants Association
IAR Instructie en verdere bepalingen voor de Algemeene Rekenkamer; Instruction
and further provisions for the Office of State Audit
IBRD International Bank for Reconstruction and Development
IBW Indische Bedrijvenwet; Trade laws for the East Indies
ICW Indische Comptabiliteitswet; Laws for financial accountability for the East
Indies
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ICW Indonesian Corruption Watch
INCOSAI The International Congress of Supreme Audit Institutions
INTOSAI International Organisation of Supreme Audit Institutions
ISSAI The International Standards of Supreme Audit Institutions
IG Inspektorat Jenderal; Inspectorate General (IG)
JCPAA Joint Committee of Public Accounts and Audit
KAP Kantor Akuntan Publik; Public Accountant Office
KKN Korupsi, Kolusi dan Nepotisme; Corruption, Collusion, and Nepotism
KPK Komisi Pemberantasan Korupsi; the Corruption Eradication Commisssion
KY Komisi Yudisial; Judicial Comission
LAN Local Area Network
LHP Laporan Hasil Pemeriksaan; Audit Result Report
LKBI Laporan Keuangan Bank of Indonesia; Financial Statement of the Central Bank
of Indonesia of Indonesia
LKD Laporan Keuangan Daerah; Regional Financial Statement
LKL Laporan Keuangan Lembaga; Institutional Financial Statement
LKPD Laporan Keuangan Pemerintah Daerah; Financial Report of the Regional
Government
LKPP Laporan Keuangan Pemerintah Pusat; Central Government‘s Financial Report
LP3ES Lembaga Penelitian, Pendidikan dan Penerangan Ekonomi dan Sosial ;
Economic and Social Research, Education and Information Agency
MA Mahkamah Agung; Supreme Court
MENPAN Kementrian Pendayagunaan Aparatur Negara; Ministry of Empowerment
State Apparatus - changed to Kementerian Pendayagunaan Aparatur Negara
dan Reformasi Birokrasi (Ministry of Administrative and Bureaucratic
Reforms) on the 2nd
Cabinet of Susilo Bambang Yudhoyono
MK Mahkamah Konstitusi; Constitutional Court
MOF Ministry of Finance
MoU Memorandum of Understanding
MPR Majelis Permusyawarahan Rakyat; People‘s Consultative Assembly
NAD National Audit of Department
NAO National Audit Office
NAD Province Nangroe Aceh Darussalam Province
NGO Non Government Organisation
PAP/PAC Panitia Akuntabilitas Publik; Public Accountability Committee
PAN Partai Amanat Nasional; National Mandate Party
PDAM Perusahaan Daerah Air Minum; Water Drinking Regional Enterprise
PDIP Partai Demokrasi Indonesia Perjuangan; Indonesian Democratic Party-
Struggle
PDS Partai Damai Sejahtera; Prosperous Peace Party
PHP Provincial Health Project
PG Partai Golkar; Golkar Party
PKB Partai Kebangkitan Bangsa; National Awakening Party
PKS Partai Keadilan Sejahtera; Prosperous Justice Party
PLN Perusahaan Listrik Negara; National Electricity Company
PNS Pegawai Negeri Sipil, Public/Civil Servants
PP Peraturan Pemerintah; Government Regulation
PPATK Pusat Pelaporan Analisis dan Transaksi Keuangan; the Centre of Reporting
and Analysis of Financial Transaction
PPPI Pusat Pengkajian Pelayanan Informasi; Centre for Information Service
Research
PSAK Pernyataan Standard Akuntansi Keuangan; Statement of Financial Accounting
Standard
PSP Pernyataan Standard Pemeriksaan; Statement of Auditing Standard
R2 Rehabilitation and Reconstruction Phase
RAB Reglement voor het Administratief Beheer; Regulations for administrative
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management
Retribusi Charges or levies
ROE(s) Regional-owned Enterprise(s)
Rp. Rupiahs; Indonesian currency
SAI(s) The Supreme Audit Institution(s)
SAP 1995 Standard Audit Pemerintahan 1995; Government Audit Standards 1995
SAP 2005 Standard Akuntansi Pemerintahan 2005; Government Accounting
standards2005
SNAO Swedish National Audit Office
SOE(s) State owned Enterprise(s)
Sosialisasi Promoting an idea or program usually by disseminating information
SPAP Standard Professional Akuntan Publik; Professional Standard for Public
Accountants
SPI Satuan Pengawas Internal; Internal Controller Unit
SPIP Sistem Pengawasan Internal Pemerintah; Government‘s Internal Control
System
SPKN 2007 Standar Pemeriksaan Keuangan Negara 2007; State finance audit standards
2007
STAR-SDP State Audit Reform Sector Development Project
SUN Surat Utang Negara; State Debt Letter
TMP Tidak Memberikan Pendapat; Disclaimer (No Opinion)
TW Tidak Wajar; Adverse Opinion
UN The United Nations
USAID The United States Aid
WDP Wajar Dengan Pengecualian; Qualified Opinion
WTP Wajar Tanpa Pengecualian; Unqualified Opinion
WTP-DPP WTP Dengan Paragraf Penjelasan; Unqualified Opinion with explanatory
paragraph