There are only two months left in this year. In Indonesia, many companies close their accounts in December, so I think it's about time they start thinking about closing their accounts and doing year-end accounting audits. In this article, we will explain accounting audits, while also touching on the differences from tax audits.

1. Subject to accounting audit in Indonesia

In Japan, audits under the Companies Act apply to companies with capital of 500 million yen or more or total debt of more than 20 billion yen (so-called large companies), and must be audited by a certified public accountant who is independent and has no vested interest in the company, and must obtain an audit certificate. In Indonesia, foreign companies are classified as large companies, so all foreign companies, including Japanese companies, in Indonesia must be audited by an Indonesian certified public accountant and obtain an audit certificate.

2. Difference between accounting audit and tax audit

Accounting audits and tax audits use the same term "audit," but the entity conducting the audit, purpose, and frequency are all different. As mentioned above, accounting audits are conducted by certified public accountants, and the purpose is to determine whether financial statements conform to accounting standards. The frequency is annual. On the other hand, tax audits are conducted by the tax office, and the purpose is to find out whether tax calculations are being performed correctly and whether taxes are being paid at the correct time and amount. The frequency is not determined; some years there are inspections and some years there are no inspections at the discretion of the tax office. I have already written about tax audits in the 4th Tax Consultation Office (published in April 2021), so I will omit it here and will write about accounting audits below.

3. What does an accounting audit do?

Accounting audits involve verifying whether each item in the financial statements (cash, deposits, accounts receivable, inventories, fixed assets, accounts payable, accounts payable, parent company loan, capital, sales, cost of goods sold, selling, general and administrative expenses, non-operating expenses, etc.) is correct based on evidence such as receipts, invoices, bankbooks, sales sheets, and acceptance certificates. Analysis of fluctuations, confirmation of future plans, and confirmation of the validity of tax calculations are also performed, and as a result, the auditor provides an opinion and takes responsibility for ensuring that the financial statements are properly prepared. A company that has fewer mistakes, double-checks, etc., and prepares solid financial statements has effective internal controls, and there is less scope for checking, and the submission of evidence from the company is smoother, which reduces the amount of time required for audits and provides an audit opinion smoothly. However, if there are many errors in journal entries, it takes time to answer the auditor's questions, and it takes a long time to submit documents, the audit may not be completed. We recommend that you check your monthly financial statements and organize your documents before proceeding with an accounting audit.

Related laws: Article 68 of the Companies Act