EVALUATION OF COMPLIANCE AUDIT PRACTICE ON LENDING PROCEDURE IN ORDER TO REDUCE THE NONPERFORMING LOAN (A Study of Working Capital Loan Program at PT. Bank X (Persero) Tbk. Surabaya Branch) Repository - UNAIR REPOSITORY

  EVALUATION OF COMPLIANCE AUDIT PRACTICE ON LENDING PROCEDURE IN ORDER TO REDUCE THE NON- PERFORMING LOAN (A Study of Working Capital Loan Program at PT. Bank X (Persero) Tbk. Surabaya Branch) SUBMITTED IN PARTIAL FULFILLMENTS OF THE REQUIREMENTS OF BACHELOR DEGREE IN ACCOUNTING DEPARTMENT OF ACCOUNTANCY SUBMITTED BY: NOVITA DWIE NURFITRIANITA Student ID: 040810081 FACULTY OF ECONOMICS AND BUSINESS AIRLANGGA UNIVERSITY SURABAYA 2012

  

Skripsi EVALUATION OF COMPLIANCE AUDIT PRACTICE... NOVITA DWIE NURFITRIANITA

  

Skripsi EVALUATION OF COMPLIANCE AUDIT PRACTICE... NOVITA DWIE NURFITRIANITA

  

Skripsi EVALUATION OF COMPLIANCE AUDIT PRACTICE... NOVITA DWIE NURFITRIANITA

ACKNOWLEDGEMENT

  All praises to to Allah, the Rabb of universe, also for the acc accompaniment of

  salam

  and shalawat t to Prophet Muhammad saw. Alhamdulillah, , I finally able to finish my undergradua aduate thesis entitled “EVALUATION OF C F COMPLIANCE AUDIT PRACTICE E ON LENDING PROCEDURE IN ORDER ER TO REDUCE THE NON-PERFOR ORMING LOAN (A STUDY OF WORKI KING CAPITAL LOAN PROGRAM M AT PT. BANK X (PERSERO) TBK. K. SURABAYA BRANCH)” as a parti artial fulfillments of the requirements to obtain in bachelor degree in Accounting at Airla irlangga University.

  This thesis woul would not have been possible to complete without thout the guidance and the help of sever veral individuals during its completion process. ss. This section is especially dedicated to d to express my sincere gratitude to them.

  Foremost, I de deeply grateful to my supervisor, Prof. Dr. Arsono Arsono Laksmana, SE., Ak., CPA. whose hose support, supervision, and encourage dur during the thesis completion process.

  Prof. Dr. Mus Muslich Anshori, SE., Msc., Ak., as the dean an and Drs. Agus Widodo Mardijuwono, ono, M.Si., Ak., CMA as the head of of Department of Accountancy, Faculty ulty of Economics and Business, Airlangga Unive niversity. v

  All lecturers in Airlangga University, for valuable lectures that have been conducted which enlarged my knowledge in many ways. Special gratitude for Accounting English Class lecturers. Thank you for the direction, motivation, valuable knowledge, advices, ideas, and insights.

  The board of management of PT. Bank X (Persero) Tbk., especially for Mas Aldo Wardhana. Thank you for your help, kindness, and respect. Wish you an everlasting success.

  My beloved Mom. Thank you for your motivation, love and inspiration. Mom, you are my everything! I love you very much mom. And also thank you for my father for all the support, motivation and encouragement. Your advices make me become a strong independent woman. My life very blessed to have parents like both of you.

  My lovely sisters, Fitria Puspita Utami and Ragil Putri Rachmawati. Thank you for all the support, motivation and encouragement. For my older sister, thanks for all the attention, advice and strengthen me when I’m down. For my sweet little sister, thank you for your serious encouragement, thanks for always get angry when I feel lazy. It is very nice to have both of you in my life. My life would be tasteless without you.

  Huge thanks to M. Adam Koconegoro, for great experiences and beautiful togetherness. You always give me big motivation to finish this research, never imagine how my life would be without you. Being with you is awesome and I hope our togetherness grows by time. vi

  My special friends since high school, Tommy Adisurya Werianto, Viali Akbar Rafsyanjani, Dhea Novita Sari, Lutfi Dwi Ariefiandi, Herdian Bintang Raharja thank you for the memories, motivations, tears, laughter and togetherness.

  Aryo Zeto and Brian Audika for sharing and supervise me in finishing and submitting process of this thesis and for the huge motivation.

  Big family of Accounting, especially batch 2008. Hope we all can get the everlasting togetherness and success. Cen Andalan Cak! Big family of Accounting English Class, especially batch 2008: Rika, Iin,

  Candy, Farah, Aldo, Dindot, Aulia, Chusnul, Berwin, Permata, Prima, Cahyo, Gita, Andre, and Inez. Glad to have amazing classmates like you. Thank you for everything, thank you for being nice friends in every single moment.

  Mas Qowy, Mimi, Theo, Hapsari, Lince, Hilda, Nuke, Eka, Endah, Meisar, Riyon. It is very nice to be around you.

  Mas Cahyo, for a nice learning experience, sharing, and courage. Wish you an everlasting success! Big family of Academic HMA UA, especially for my “twin” head of divisions, Mutia and Taufik. Thanks for helping me a lot! Big family of SMA Negeri 2 Surabaya who taught me excellent knowledge and shared me great experiences. vii

  My dosen wali, Mr. Djoko Dewantoro, for all the advices during my undergraduate program . May Allah bless you in every single thing. Hope you always be healthy.

  Big family of KAP Hasnil, M. Yasin & Rekan Surabaya Branch, especially for Bu Nung, Mas Roni, Rizal, Ibe and Alex. Also thanks for my manager Mr. Marwandi, for introduced me to mas Aldo.

  All officers of Department of Accountancy, all officers in Reading Room, all officers in Akademik and Kemahasiswaan. Thanks for your help and officially support. Big thanks for Pak Anang, you help me a lot when I have to use some rooms for HMA-UA events, hope you always be healthy.

  Last but not least, I offer my regards to all of those who supported me in any respect during the thesis completion process.

  Surabaya, October 2012 Researcher viii

  ABSTRACT

  Lending sector is an important area in the economic and business sectors. The role of lending sector in the field of financing activities will help economic and business people in developing their business. Lending sector is also the main income for almost all banks in addition to income from fees charged to customers in other bank services. Lending activities is a business activity that has a large risk, because there is a possibility of uncollectible loans. The bank should also be able to maintain the level of Non-Performing Loan below the maximum set by Bank Indonesia with strengthen monitoring activities on lending. That monitoring activities can be performed through the compliance audit implementation on lending activities.

  The objectives of this research is to identify and assess the suitability of the implementation of lending procedures performed by the internal parties of PT. Bank X (Persero) Tbk. to the procedures and policies that has been established by PT. Bank X (Persero) Tbk.. Compliance audits as a management tool in monitoring to improve the quality of management in order to achieve optimal results. The approach used in this study is the evaluation study approach, the approach that focuses on understanding, thought and perception.

  The research result found the administrative findings related to the recordkeeping of documents and principal audit findings related to procedures and policies. It can be an evaluation for banks to be more careful in the implementation of lending because it can affect the level of Non-Performing Loan. Resident Auditor - Branch Office PT. Bank X (Persero) Tbk. has performed compliance audit in accordance with procedures and policies set in the handbook and effective in helping PT. Bank X (Persero) Tbk. to maintain Non-Performing Loan below 5%.

  Lending sector is expected to further improve the accuracy in collecting and analyzing documents from debtor to maintain the business continuity of PT. Bank X (Persero) Tbk. In the monitoring function is also expected to further monitor and supervise all lending activities so it can comply with lending procedures and policies.

  Keywords: Lending, Lending Procedures and Policies, Compliance Audit,

  Administrative and Principal Findings ix

TABLE OF CONTENTS

  Title Page ................................................................................................................. i Approval Page......................................................................................................... ii Thesis Originality Declaration ............................................................................... iv Acknowledgement....................................................................................................v Abstract .................................................................................................................. ix Table of Contents .....................................................................................................x List of Tables........................................................................................................ xvi List of Figures ..................................................................................................... xvii

  CHAPTER I : INTRODUCTION

  1.1.Research Background .....................................................................................1

  1.2.Research Problems .........................................................................................5

  1.3.Research Objectives .......................................................................................6

  1.4.Research Contributions ..................................................................................6

  1.5.Research Systematic .......................................................................................7

  CHAPTER II : LITERATURE REVIEW

  2.1.Literature Review ...........................................................................................9

  2.1.1. Auditing..............................................................................................9

  2.1.1.1. Audit Definition....................................................................9

  2.1.1.2. Types of Audit ....................................................................10

  2.1.1.3. Audit Program ....................................................................12

  2.1.1.4. Audit Evidence ...................................................................13 x

  2.1.1.5. Audit Procedures ................................................................15

  2.1.2. Internal Control.................................................................................17

  2.1.2.1. Definition of Internal Control.............................................17

  2.1.2.2. Internal Control Systems Standard For Commercial Bank 18

  2.1.2.3. Components of Internal Control Structure .........................19

  2.1.3. Compliance Audit .............................................................................20

  2.1.3.1. Compliance Audit Definition .............................................20

  2.1.3.2. Compliance Audit Objectives.............................................21

  2.1.3.3. Scope of Compliance Audit................................................21

  2.1.3.4. Compliance Audit Program ................................................22

  2.1.3.5. Compliance Audit Procedure..............................................22

  2.1.3.6. Compliance Audit Process..................................................23

  2.1.3.7. Compliance Test .................................................................25

  2.1.3.7.1. Test of Recorded Transaction ............................25

  2.1.3.7.2. Audit Sampling ..................................................26

  2.1.3.8. User of Compliance Audit Report ......................................27

  2.1.3.9. Compliance Audit Assessment Criteria..............................28

  2.1.4. Bank ..................................................................................................30

  2.1.4.1. Definition of Bank ..............................................................30

  2.1.4.2. Bank Function.....................................................................31

  2.1.5. Loan ..................................................................................................32

  2.1.5.1. Loan Definition...................................................................32

  2.1.5.2. Elements of Loan................................................................33 xi

  xii

  CHAPTER III : RESEARCH METHODOLOGY

  4.1.1. A Brief History of PT. Bank X (Persero) Tbk. ................................61

  4.1. Company Profile.........................................................................................61

  CHAPTER IV : RESULT AND DISCUSSION

  3.6. Technique of Data Analysis .......................................................................59

  3.5. Data Collection Procedures........................................................................58

  3.4. Type and Source of Data............................................................................56

  3.3. Scope of Research ......................................................................................56

  3.2. Research Design.........................................................................................54

  3.1. Type of Research........................................................................................53

  2.3. Conceptual Framework ..............................................................................52

  2.1.5.3. Types of Loan .....................................................................34

  2.2. Previous Research ......................................................................................50

  2.1.7.4. Non-Performing Loan Settlement ......................................49

  2.1.7.3. Preventive Action on Non-Performing Loan......................47

  2.1.7.2. Causes of Non-Performing Loan ........................................47

  2.1.7.1. Non-Performing Loan Definition .......................................45

  2.1.7. Non-Performing Loan.......................................................................45

  2.1.6. Working Capital Loan ......................................................................43

  2.1.5.6. Lending Procedures ............................................................39

  2.1.5.5. Lending Policies .................................................................38

  2.1.5.4. Lending Principals ..............................................................36

  4.1.2. Organizational Structure in PT. Bank X (Persero) Tbk. ..................64

  4.1.3. PT. Bank X (Persero) Tbk. General Overview .................................65

  4.2. Working Capital Loan ................................................................................66

  4.2.1. Requirement For Debtor ...................................................................67

  4.2.2. Loan Facilities...................................................................................68

  4.2.3. Loan Policy .......................................................................................68

  4.2.3.1.Background ...........................................................................68

  4.2.3.2.The Role of Working Capital Policy ....................................69

  4.2.3.3.The Target of Bank’s Lending Policy...................................69

  4.2.3.4.Purposes of the Implementation on Bank’s Lending Policy ....................................................................................70

  4.2.3.5.Scope of Working Capital Loan ...........................................70

  4.2.4. The Flow of Providing Working Capital Loan .................................71

  4.2.5. Working Capital Loan Guidance and Supervision ...........................80

  4.2.5.1.Principals of Working Capital Loan Guidance and Supervision ...........................................................................81

  4.2.5.2.Objectives of Working Capital Loan Guidance and Supervision ...........................................................................81

  4.2.5.3.Object on Working Capital Loan Guidance and Supervision ...........................................................................82

  4.2.5.4.Scope of Working Capital Loan Guidance and Supervision ...........................................................................83

  4.2.5.5.Internal Control System on Lending Activity.......................85 xiii

  4.2.5.6.Review on Lending Activities ..............................................86

  4.2.5.7.Internal Audit for Lending....................................................87

  4.2.5.8.External Inspection ...............................................................89

  4.2.6. Non-Performing Loan Management .................................................89

  4.2.6.1.Handling Strategy on Non-Performing Loan........................91

  4.2.6.2.Follow-Up Plan.....................................................................94

  4.2.6.3.Non-Performing Loan Write-Off..........................................96

  4.3. Internal Audit (Resident Auditor) .............................................................97

  4.3.1. Organizational Structure .................................................................100

  4.3.2. Roles and Function of Resident Auditor – Branch Office..............102

  4.3.3. Resident Auditor – Branch Office Scope of Work .........................103

  4.3.4. Risk Based Audit Process ...............................................................104

  4.4. Audit Process in PT. Bank X (Persero) Tbk. ..........................................106

  4.4.1. Annual Audit Planning ...................................................................106

  4.4.1.1.Audit Objectives .................................................................106

  4.4.1.2.Audit Universe ....................................................................107

  4.4.1.3.Branch Office Operational Risk .........................................107

  4.4.1.4.Unit Assessment, Consolidation and Coordination ............108

  4.4.2. Performing The Individual Audit ...................................................109

  4.4.2.1.Audit Planning ....................................................................109

  4.4.2.2.Audit Process ......................................................................109

  4.4.2.3.Audit Report .......................................................................112

  4.4.3. Documentation and Recordkeeping................................................116 xiv

  4.4.4. Quality Assurance...........................................................................118

  4.5. Compliance Audit Findings......................................................................118

  4.5.1. Administrative Findings .................................................................118

  4.5.2. Principal Audit Findings .................................................................124

  4.5.3. Conclusion from the Findings.........................................................146

  4.6. Interview Result .......................................................................................147

  4.6.1. Interview Result with Account Officer...........................................147

  4.6.2. Interview Result with Resident Auditor – Branch Office...............149

  4.6.3. Conclusion from Interview Result ..................................................151

  4.7. Discussions on Evaluation of Compliance Audit Implementation in Working Capital Lending Procedures .................................................151

  CHAPTER V : CONCLUSION AND SUGGESTION

  5.1. Conclusion ...............................................................................................154

  5.2. Suggestion ................................................................................................155

  LIST OF REFERENCES

  xv

LIST OF TABLES

Table 2.1 Comparative Summary of Types of Audit ............................................29Table 2.2 Previous Researches...............................................................................51Table 4.1 PT. Bank X (Persero) Tbk. General Overview .....................................65Table 4.2 Debtor Category ....................................................................................93Table 4.3 Interview Result with Account Officer................................................148Table 4.4 Interview Result with Resident Auditor – Branch Office....................150

  xvi

LIST OF FIGURES

  xvii

Figure 2.1 Bank Function ...............................................................................31Figure 2.2 Lending Procedures........................................................................42Figure 2.3 Conceptual Framework .................................................................52 Figure 4.1 Organization Structure in PT. Bank X (Persero) Tbk.

  Surabaya Branch ...........................................................................64