Laws and Regulations as the Basis of Strong Audit Evidence

4.2.1 Laws and Regulations as the Basis of Strong Audit Evidence

As stipulated by the Audit Law (2004) and the Law on BPK (2006), any organisation that uses public/state finances must give BPK auditors access to any documents and/or data to be audited. The right of auditors to access all documents and data for auditing and to ask for the required documents from officials or other parties is stipulated in Articles 10 and 11 of the Audit Law (GOI 2004b). Auditors have the authority to access all auditees‘ documents includes access to all types of goods, documents and data under the authority or control of auditees. Moreover, they can seal cash boxes and lock up goods and documents relating to state finance arrangements; take pictures, records, and retrieve any sample as a tool for auditing; and ask for information from anybody.

In order to avoid the misuse of BPK powers in accessing data and information, fraud provisions are regulated by Article 25 of the Audit Law (GOI 2004b). Sanctions and

a penalty of at least three years jail or a fine of no more than Rp.1 billion are stipulated in this article to prevent officials, Board Members and auditors of BPK misusing documents provided by audited entities. In particular, it relates to dealing with information and data collected before and after auditing, and before reporting to the Parliaments or to the public. In addition, Article 24 of the Audit Law (GOI 2004b) stipulates punishment by a penalty of at least three years jail or a fine of no more than Rp.1 billion are stipulated in this article to prevent officials, Board Members and auditors of BPK misusing documents provided by audited entities. In particular, it relates to dealing with information and data collected before and after auditing, and before reporting to the Parliaments or to the public. In addition, Article 24 of the Audit Law (GOI 2004b) stipulates punishment by

running of the auditing of state finance management 46 and accountability 47 . It also includes those who intentionally avoid, obscure, and/or fail to implement auditing instructions (Article 10) and those who refuse a request from BPK without providing written reasons for refusal (Article 11).

Moreover, anybody (auditors) who intentionally forges or falsifies documents submitted for auditing may be subject to imprisonment for a maximum of three years and/or a penalty of no more than Rp.1 billion. Article 24 of the Law on BPK requires the government institutions as auditees to cooperate with the auditors in terms of providing data and information (GOI 2006b).

The BPK Regulation, Number 1 of the Year 2007, on audit standards provides guidelines for an accurate, valid and reliable audit report (BPK RI 2007g). Paragraph 42 (BPK RI 2007g: 91-92) emphasises the importance of an accurate audit report and the impact of an inaccurate audit report. In addition, Paragraph 43 (BPK RI 2007g: 92) describes how auditors should provide information that is valid, accurate and reliable. Audit reports must contain information supported by competent and relevant evidence in

46 According to the Law on BPK (GOI 2006b ), state finance management is ―all activities carried out by the state finance management officer in accordance with their position and authorities, covering planning,

47 implementation, supervision and accountability.‖ According to the Law on BPK (GOI 200 6b), state finance accountability is ―the government obligation to

carry out state finance management in an orderly manner, in compliance with the law and legislation, efficiently, and economically, transparently, and accountably, with due observance of fairness and

appropriateness.‖ appropriateness.‖

How the evidence, audit standards and reference can help auditors to provide an accurate and reasonable audit report is stated in Paragraph 44:

Evidence in audit reports must be reasonable and represent the accuracy of matters reported. Correct description means an accurate explanation on the audit scope and methodology, and the presentation of findings is consistent with the scope of audit. One of the ways of ensuring that audit reports have met audit standards is by exercising quality control, such as a reference of the process. The reference process is a process in which an auditor who is not involved in an audit process conducts an examination to find whether or not the facts, numbers, or dates have been reported accurately, the findings are supported by audit documents, and conclusions and recommendations are logically based on the supporting data.

In summary, since the introduction of the Audit Law (GOI 2004b) and the Law on BPK (GOI 2006b), BPK auditors have gained a clear authority to access any data and information from auditees. These laws promote the openness and transparency in the government environment and power to BPK to scrutinise the performance and accountability of the public sector agencies. The sanctions are also stipulated for any person who deliberately does not providedata and information as required by the auditors and also for those whomisuse the audit data and information.