1 Quality control at institutional level
1.1 Quality Management System requirements
According to asosai, a sai should have a Quality Management System designed to provide ‘reasonable assurance’ in the light of the likelihood and magnitude of
potential risks, that it conducts audits, both regularity and performance, in accordance with applicable legislative requirements, rules and regulations, audit standards, policy
manuals, guidelines and procedures. Such a Quality Management System supports, maintains and improves a sai’s role, function and responsibility to fulfil its mandate
appropriately. All elements must be linked to each other so that the right choices can be made in a Quality Control System. Quality control is supported by the following key
factors: • Independence and Mandate;
• Leadership and Internal Governance; • Human Resources Management;
• Audit Standards and Guidelines; • Institutional Support;
• Continuous Improvement; • External Stakeholder Relations;
• Results; • Audit engagement performance.
We set out our findings on each key element in the following sections.
1.2 Independence and mandate
SAI’s generally recognise eight core principles that contribute to independence. The principles were first set in the Lima Declaration and are confirmed in the Mexico
Declaration issai 10. The Peer Review team assessed
bpk
’s compliance with the Mexico Declaration on the basis of applicable laws.
The independence of bpk is clearly defined in Art. 23 e 1 of the Constitution 1945 of the Republic of Indonesia and section 2 of Law No. 15 Year 2006. Its mandate is further
specified in the following laws: • Law of State Finance Law No. 17 2003;
• Law of State Treasury Law No. 1 2004; • Law of Audit of State Financial Management and Responsibility Law No. 15 2004;
• New bpk Law Law No. 15 2006.
1.2.1 Audit function in the Republic of Indonesia
The enactment of the Law of State Finance clearly separates the functions of internal control and external auditor in public sector audit in Indonesia. Government
Regulation No. 60 2008 emphasises
bpkp
’s function as internal control unit, in contrast with
bpk
’s function as the only Supreme Audit Institution of the Republic of Indonesia to audit state finances.
With reference to the Auditor General of New Zealand’s recommendation in 2004,
bpk
’s role as a sai is now secured. Nevertheless, further arrangements with internal control units such as
bpkp
and Bawasdas are needed to clarify each other’s roles and responsibilities.
bpk
will be able to perform its specific role as a sai if it can fully rely on the quality of their reports. From our fact-finding we learned that financial
management at the ministries and especially at local government level is still far from adequate. According to
bpk
this is due to a lack of qualified personnel knowledge of financial management and accounting.
1.2.2 Mandate
Introduction of the New bpk Law No. 15 2006 was the final step in a duly prepared legislative process towards a free and independent bpk with authority to provide the
House of Representatives dpr, the Regional Representative Councils dpd and the regional Houses of Representatives dprd with the results of audits of state financial
management and accountability. Its government-wide mandate covers centralregional government, other state institutions, Bank Indonesia, state owned enterprises,
regionally owned enterprises, public service agencies, foundations, institutions or other agencies required due to the nature of their respective duties. To enforce its
constitutional mandate under Law No. 15 2006,
bpk
needs to expand and improve its institutional capacity. In the past three years,
bpk
has established new regional offices and recruited graduates from a variety of educational backgrounds, applying a
competitive selection process to optimise the quality, integrity and dedication of new employees.
bpk
has flexibility to recruit new staff and place and promote staff. To ensure professionalism and high quality oversight,
bpk
has recruited experts and high-ranking officials from other institutions.
bpk
has also enhanced the capability of its staff through various education and training courses at the
bpk
Training Centre.
1.2.3 bpk
’s budget
bpk
’s budget is allocated to a separate heading in the state Budget. The annual budget is based on
bpk
’s audit and support activities plan. It is discussed by
bpk
’s Secretary General with a relevant parliamentary committee, the Ministry of Finance and the
National Planning Agency Bappenas in accordance with the mechanism provided for in Law 17 2003 of State Finance. Only in budget execution does bpk have to follow a
government mechanism. In consequence,
bpk
has to submit a payment order to the government treasury to execute the budget.
1.2.4 Access to all necessary documentation and information
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