Understandable Information

5.1 Understandable Information

It is clear that an audit report should be easy to understand by all stakeholders. In the case of Indonesia, the stakeholders of BPK are Members of Parliament, audited entities and the public. Understandable information means that the information is simply presented and easily understood by readers so that misunderstandings between auditors and stakeholders are avoided.

5.1.1 Basic Rules for Clear and Understandable Reports

The responsibility of auditors to provide a clear and understandable report is stipulated in the BPK regulation on state finance auditing standards (BPK RI 2007g: 93).

The regulation requires that information in the reports is easily read and understood by: (i) using as clear language as possible; (2) using simple and non-technical language to simplify presentation; (iii) avoiding unfamiliar technical terms, abbreviations and acronyms that are not defined clearly; and (iv) not using acronyms too frequently. In addition, the audit standard stipulates that a report must answer questions with regard to auditing, present logical findings, provide conclusions and recommendations and present information that sufficiently convince readers that the findings and recommendations are valid. Auditors must try to avoid misunderstandings by the reader in respect to the work performed and not performed in the context of achieving the audit objectives, particularly if the auditing is limited by time or resource constraints. Therefore, the BPK audit standard has provided guidance for officials and auditors in charge of auditing to focus on matters requiring attention and in taking corrective measures to prepare audit report recommendations clearly and to avoid misunderstanding.

For performance auditing, the tone of the report must encourage decision makers to take action based on the findings and recommendations. Auditors must keep in mind that their objective is to convince and should avoid language that may result in a defensive and opposing attitude from audited entities. This means that although criticism of performance is often needed, audit reports must also focus on improvements.

5.1.2 Survey Results and Comments on Clear and Understandable Reports

During the survey, respondents were asked whether information in BPK audit reports is clear and easy to understand. Figure 5.1 (below) shows significant varying perceptions between auditors, auditees and Members of Parliament. Comparing the respondents from Parliament Members and auditees groups, auditors group had higher During the survey, respondents were asked whether information in BPK audit reports is clear and easy to understand. Figure 5.1 (below) shows significant varying perceptions between auditors, auditees and Members of Parliament. Comparing the respondents from Parliament Members and auditees groups, auditors group had higher

17 per cent were ‗neutral‘, 7 per cent ‗disagreed‘ and 1 per cent ‗strongly disagreed‘. The highest percentage of negative responses ‗disagreeing‘ came from the Members of Parliament group, followed by the auditee group where 10 per cent ‗disagreed‘ and 1 per cent ‗strongly disagreed‘.

Figure 5.1 Survey Results of ‘Information in BPK Audit Reports is Clear and Easy to U nderstand’

0 2 0 1 0 1 Strongly Agree

Strongly Disagree

Pe rce ptions

Auditors

Auditees

Members of Parliament

Overall responses

Source: Fieldwork survey from 5 th November 2006 to 25 th March 2007.

Members of Parliament from both central and local levels had the following criticisms:

 “Some financial and auditing terms in BPK audit reports were not clearly defined and difficult to understand for the Members of Parliament ” (Interview C5, with a Memberof Parliament).

 “We need information in audit reports which is easy to understand” (Interview C8, a Member of Parliament).  “Please correct audit reports’ language, so the Members and the public can easily understand ” (Interview C10, a Member of regional Parliament).  “Some auditing or financial terms were not familiar for us. We could not understand the meaning of these terms ”(Interview C9, a Member of Regional Parliament).

These quotes implied that stakeholders found the information in BPK audit reports difficult to follow and understand. In addition, the reports provided too many auditing and financial terms that were not defined clearly. As a result, the Members and other stakeholders who had no knowledge or background in finance and accounting found it difficult to understand These quotes implied that stakeholders found the information in BPK audit reports difficult to follow and understand. In addition, the reports provided too many auditing and financial terms that were not defined clearly. As a result, the Members and other stakeholders who had no knowledge or background in finance and accounting found it difficult to understand

Auditees also expressed negative views on understanding BPK audit reports:

 “Not all information in audit reports is easy to understand; sometimes, different perceptions and misunderstanding appeared ” (Interview A24, an auditee from Cianjur District).

 “Need further communication between the auditors and the auditees to provide better understanding of information in reports ” (Interview A8, an auditee from the Ministry of Finance).

 “We could not understand the accounting and auditing terms” (Interview A21, an auditee from Bandung City).  “We were sometimes confused by information provided in BPK audit reports”

(Interview A13, an auditee from Ministry of Foreign Affairs).  “We still could not understand why BPK provided ‘disclaimer’ to the central

government’s financial statements” (Interview A3, an auditee from National Electricity Company-PLN).

 “Some statements in audit reports were difficult to understand for auditees; we had to ask for further explanation from BPK ” (Interview A18, an auditee from state-owned bank).

These criticisms revealed that auditees experienced difficulty understanding audit reports and misinterpreted information. As a result, auditees had to ask for further explanations from BPK to obtain the same interpretation with auditors. Most of the public sector finance division had no personnel with accounting or finance backgrounds as auditing and financial accounting were never a priority during the Soeharto Era. The problem of understanding audit BPK reports, not only at local government level, but also at the central government level, even in state-owned bank.

BPK managers and auditors realised that some terms in audit reports were not understood by the readers. They argued that the ability to read and to understand BPK audit reports depends on stak eholders‘ educational background and knowledge. Their comments were as follows:

 “Understanding audit reports depended on the ability of the stakeholders to understand them, some of them were not well educated and sufficiently  “Understanding audit reports depended on the ability of the stakeholders to understand them, some of them were not well educated and sufficiently

 “Some auditing and financial terms could not be understood by the stakeholders. Educational backgrounds of stakeholders affected their ability to understand audit reports ” (Interview B17 an auditor of AKN I).

 “For some stakeholders, BPK audit reports were difficult to read and understand. For example, the Members of Parliament are highly dependent on assistance from expert staff rather than their own ability to review the BPK reports ” (Interview B27, a manager of BPK from publication sub division).

These statements implied that auditors noted the limited capacity of stakeholders in understanding reports. An auditee of good educational background supported these views, stat ing ―audit reports from BPK in general were easy to understand‖. Moreover, two Members of the Legislature with backgrounds in economics, accounting and management also commented positively on the BPK reports. As a new democratic country, voters in Indonesia selectedMembers of Parliament not based ontheir capacity to provide effective programs for the public, but more on their fame and popularity. Sudibjo (2009b: 165) confirms this, pointing out that many artists and other incompetent people were elected as Members of Parliament. Some 15 artists were elected as Members of Parliament (2009- 2014), such as Tantowi Yahya, Inggrid Maria Palupi, Venna Melinda, Jamal Mirdad, Nurul Arifin and so on, while Wanda Hamidah was elected as Member of Jakarta Province Parliament and resulted in a controversy. A Parliament researcher (Interview F6) mentioned, ―The lack of ability of the Members of Parliament at central and local levels should be considered by BPK auditors ‖. This statement indicates that auditors should be consider educational background of their readers, when they write audit findings for their main stakeholders, in this case is the Members of Parliament.

The survey results indicate various perceptions on whether or not BPK audit reports provided clear and understandable information. The study revealed that information in BPK reports was difficult for stakeholders to understand, especially when technical terms on The survey results indicate various perceptions on whether or not BPK audit reports provided clear and understandable information. The study revealed that information in BPK reports was difficult for stakeholders to understand, especially when technical terms on