Forensic Accounting Developments in Indonesia

The development of forensic accounting is a bit late when compared to other accounting domains - financial accounting, auditing, internal auditing, and so on. Whereas in America, this science has been around since the case of Al Capone was revealed in 1931 ago by a forensic accountant, Frank J. Wilson. However, a new professional organization formed several decades later. Association of Certified Fraud Examiners recently formed in 1988. Campus, the American College of Forensic Examiners also recently founded in 1992.

In Indonesia the development of this science is still far from complete, of the many Public Accounting Firm (KAP) is only a few that offer this service, the reason what else if not a niche market that is still minimal, the science of economics "no market". Moreover, operational standards and certification exams, supposedly not very adequate, very much when compared to neighboring Australia is currently preparing Forensic Accounting Standards. Canada and the United States already has a default standard, but not as detailed as the Financial Accounting Standards (IFRSs.

The absence of a reasonable standard, an additional issue that makes this science so popular is less mastery of science is quite broad. In addition to accounting and auditing, forensic accountants also have to master the field related to financial crime (money laundering), law, psychology, sociology, anthropology, viktimologi, criminology, and others. Forensic accountants must have the ability to "multitalented".

In the future, some foresee the development of this profession will be more rapid. In addition to the more business offices of foreign countries to Indonesia., Also the increasing awareness of companies to protect their assets from acts of fraud patterns.

Why Corruption is Difficult to Eradicate?

Corruption is not only popular at this time but  since a few years ago corruption that has emerged just not as popular now. Which is about the 1980's corruption has also appeared in Indonesia. Lots of ways to overcome and has always been done, but until now it turns out that corruption cases are still there even has become a serious problem. Many cases of corruption that began to unfold a lot today. But so far why efforts to combat corruption is very difficult to achieve, certainly there are always those who feel aggrieved by the anti-corruption measures, they are certainly those who are parties that have been benefiting from corruption. Corruption is a disturbing phenomenon that threatens the safety once the nation's future. Not only economic salvation, but also broader implications, such as cultural impoverishment, moral values, political poverty, and social empathy. 

Actually, corruption is whose fault? System or is it? 

Some facts to support the occurrence of corruption:

1.For  company whose name is there ”success fee”,  “entertaintment fee” or whatever other terms, which are allocated to smooth the course of the project or projects to pass the company, the company is no longer the big problem would cost, but the most important certainty that the project can be accomplished. So for the actors to think, "this is not the people's money anyway, this from a company, we only received a little tired of money or money thanks to the success of this project".

2. Bureaucratic procedures are not clear, there are no tariffs. Example: In the submission of the Mining Business License. Usually the filing by the Department of Mines, then signed by the Regent. Due to the absence of a clear tariff, not a secret anymore, Head of Mining and the Regent could play here, for the signature of the IUP can reach 300 million dollars and even more, depending on how the area and location of mines. This is big money, even at a low level bureaucratic example of making driver's license, ID card, train ticket sales, has been running better.

3. Offender groups, usually in one department or one line of leadership all share, so the act protect each other.

4. Perpetrators  getting smarter. No more transfer system, all cash and carry, to a minimum the use of communication tools, if forced to communicate, they use a secret languages.

5. Lack of moral consciousness and spiritual, moral and religious knowledge only as a science, not as in love with the Creator. Strangely when it was caught, on average, be more polite, and diligent in worship.

Corruption is not only being faced by Indonesia alone, but some countries in the world is the same being intensively  eradicate corruption. Hopefully corruption cases in Indonesia can also be completed to its roots. Deconstruction is done by inverting the way of thinking, way of looking at problems, and reversing system. All people and all lines should be aware of and start this process. This should be coupled with the creation of small interruptions in the field of law enforcement and prevention of corruption.

Reconciliation Fiscal

Maybe for you that day - the day wrestling in the accounting field are already familiar with the term Fiscal Reconciliation. Reconciliation is done because of differences in income according to accounting (commercial) who arranged for the purpose of assessing the company's financial performance and standards of Financial Accounting System, while the earnings according to tax (fiscal) made with a view to preparing tax calculations and berstandarkan in tax laws (Tax Law income).

Some approaches in preparing the Financial Report Fiscal:

1. Fiscal financial report prepared in conjunction with the commercial financial statements (although the Financial Statements prepared commercially but the tax provisions are still very dominant in the preparation of financial statements)

2. The financial statements of extra fiscal komtabel with business financial statements (financial statements prepared separately with the fiscal financial report and are in addition to commercial or complementary)

3. Fiscal financial report prepared by inserting a provision - the provision of business taxation in the financial statements (financial statements prepared on GAAP but if there are tax provisions that are inconsistent with the provisions of Financial Accounting Standards dominant tax)

To bridge pebedaan anta Fiscal and Financial Statements of assets and efficiency of the latter approach is often done.

The cause of the differences with the Commercial Financial Report Financial Report Fiscal:

1. Differences Accounting Principles

Some things that have been recognized in FAS but not recognized in Fiscal:

• Principle of Conservatism, that is inventory valuation with Lower of Cost or Market and valuation of receivables with the estimated net realizable value are recognized in FAS but not recognized in Fiscal

• Principle of Cost, labor in kind included in the determination of the cost price of manufactured goods are recognized in FAS but not according to the Fiscal.

• Matching principle between costs and outcomes, ie the depreciation cost is calculated when      the asset has been produced by a commercial, but according to the Fiscal can be done before these assets generate

2. Differences Accounting Methods and Procedures

• Inventory Valuation Method, which is in commercial permits selecting from all existing methods in determining the cost of inventories in fiscal whereas there are only two methods: the average and FIFO.

• Method of Depreciation and Amortization, which is in the commercial may choose from all the existing methods of depreciation, whereas in non-tangible assets for the fiscal building only two methods: straight line and declining balance and to assets in the form of buildings only straight-line method, as well as with age economic and commercial value of the residue can determine for themselves while in fiscal governed by the Laws of Taxation.

• Method of Elimination of receivables, which is in a commercial based backup methods, while in Fiscal deletion takes place at the receivables really are not collectible

3. Treatment differences and Revenue and Expense Recognition

• Income recognized by a commercial but not recognized by the fiscal should be deducted from the commercial profit.

• certain income in the commercial and tax shall be final it must be deducted from the profits of commercial

• Other income and extraordinary items, namely:

a) Losses by commercial enterprises abroad are not deductible against income

b) Losses in the country according to the Fiscal can be deducted against the total income of origin do not over 5 years

• Costs are recognized under commercial but not recognized by the fiscal, among others:

a) Replacement or compensation in kind

b) Income tax

c) administrsi sanctions, fines, interest, increase

d) Fees charged taxpayers for personal gain or his dependents

e) Fees charged for the personal benefit of shareholders, partners and members

Effect of Amendments to the Income and Fiscal Fiscal Fiscal Cost 

Fiscal Correction	Fiscal Earnings	Fiscal costs
Positive Negative	Increased Decreased	Decreased Increased

The Impact of Corruption on The Economy of The Country

Corruption itself according to the viewpoint of economics known as the misuse of public office for private gain. Meanwhile, the burden of economic actors as a result of corruption called the high cost economy. From the first term above, it appears that the potential of growing corruption in the countries yag government strictly controls apply in practice the economy, aka a big power monopoly. Because the abused here are devices and public or government who benefit are the interests of a personal nature. This shows the fallacy most developing countries are talkative imitate the capitalist countries in terms of opening the tap of foreign investment are loosely, but in practice it is too much governed by the government rather than through the coaching community in advance so that they can push themselves to develop cooperation with foreign parties.Whereas the ability of government and their own moral credibility is not good enough. Eventually, high cost economy. For example is the bureaucracy, where this aspect is the biggest source of most flat and spreading throughout the country against corrupt practices. 

Everywhere seems to block the scourge of bureaucracy, both in terms of population administration or matters relating to business administration. In fact, a source in the internet bubble mention that the cost of unnecessary bureaucracy it suck up about 20% of the budgets of small businesses-businesses, according to statistics. Of course, on the other hand, significantly hindering the development of SMEs, but SMEs we know is one of the main pillars of macroeconomic stability in Indonesia since its ability to absorb massive workforce.

Corruption is also difficult for economic development by creating distortions and inefficiencies are high. In the private sector, corruption increases the cost of trading due to losses from illegal payments, management fees in negotiating with corrupt officials, and the risk of cancellation of the agreement or because the investigation. Although some have claimed that corruption reduces costs (commercial) to simplify the bureaucracy, the emerging consensus concluded that the availability of bribes led officials to create new rules and new obstacles. Where corruption is causing inflation fare trade, corruption also disrupt the "field of commerce." Companies that have a connection is protected from competition and as a result retain companies that are inefficient.

Corruption leads to distortions (chaos) in the public sector by diverting public investment into projects where bribes and people who pay more available. Officials may increase the complexity of community projects to hide corrupt practices, which ultimately result in more chaos. Corruption also reduces the fulfillment of the terms of building security, environmental, or other rules. Corruption also reduces the quality of government services and infrastructure; and added pressures on government budgets.

Economic experts gave the opinion that one of the factors of economic underdevelopment in Africa and Asia, especially in Africa, is the corruption in the form of rent collection leading to the displacement of investment (capital investment) abroad rather than invested in the country (hence the ridicule that often true that some African dictators having Swiss bank accounts). In stark contrast with Asian dictators like Suharto, who often take a cut of everything (ask for a bribe), but rather provides the conditions for development, through infrastructure investment, law and order, and others.

 Experts from the University of Massachusetts estimates that from 1970 to 1996, capital flight from 30 sub-Saharan countries totaled U.S. $ 187 trillion, exceeding the amount of foreign debt of their own. [1] (The results, in terms of development (or lack of development) has been created for a single model in economic theory by Mancur Olson). In the case of Africa, one factor is political instability, and also the fact that the new government is often sealed off the old government assets are often derived from corruption. This gave impetus for officials to accumulate their wealth abroad, out of reach of expropriation in the future.

How The Audit Process?

In the financial world may already be familiar with the name of the audit. because of the company within a certain period will be audited financial statements of the company. Audit or investigation in a broad sense meaningful evaluation of an organization, system, process, or product. Audits conducted by the competent, objective, and impartial, called auditors. The goal is to verify that the subject of the audit has been completed or run in accordance with standards, regulations, and practices that have been approved and accepted.

Audit Process: 

Audit in the context of information technology is to check whether the computer system running properly. Seven-step audit process:

1. Implement a strategy of risk management-based audit and control practices that can be agreed by all parties.
2. Set the steps detailed audit.
3. Use facts / material evidence sufficient, reliable, relevant, and useful.
4. Make the report and its conclusions based on facts collected.
5. Examine whether the audit objectives achieved.
6. Present reports to interested parties.
7. Ensure that the organization implements risk management and control practices.

Before running the audit process, of course, the audit process should be planned in advance. Audit planning (planning the audit) should clearly explain the purpose of the audit, the authority of auditors, the approval of higher management, and audit methods. Audit methodology:

• Audit subject. Determine what will be audited.

• Audit objective. Determining the purpose of the audit.

• Audit Scope. Determining the system, function, and part of an organization that is specific / particular will be audited.

• Preaudit Planning. Identify resources and human resources that are needed, determine what documents are needed to support the audit, determine the location of the audit.

• Audit procedures and steps for data gathering. Determine how to conduct an audit to examine and test control, determining who would be interviewed.

• Evaluation results of the testing and inspection. Specific to each organization.

• Communication procedures with management. Specific to each organization.

• Audit Report Preparation. Determine how to inspect the results of the audit, namely the evaluation of the validity of the documents, procedures, and policies of the organization being audited.

 

The structure and content of audit reports are not standard, but generally consist of:

1. Introduction. The purpose, scope, duration of the audit, the audit procedures.
2. General conclusions of the auditors.
3. Audit results. What was found in the audit, whether the procedures and controls are not feasible or
   Recommendations. The response from management (if necessary).
4. Exit interview. Last Interview between auditors with management to discuss the findings and recommendations follow. At once to convince the management team that the audit results valid.

So, the audit is very important to minimize the risk of benefit fraud and error within an organization or company to run, as appropriate, procedures or standards set.

What is The Basel Accord?

Maybe for you who daily engaged in the banking world are already familiar with the name Basel Accord. Yes, Bassel Accord is an International Standard which is used as the basis for the State to regulate the amount of bank financing in order to face the financial and operational risks that may arise. Basel Accord refers to the banking supervision Accords (recommendations on law, banking law and regulations). The Basel Committee comprises representatives from central banks and regulatory authorities of the G10 countries, as well as other countries (especially Luxembourg and Spain). The Committee recommendation does not force-rekimendasinya, although kbanyakan Member States tend to implement kabijakan-policy committee. This means that recommendations are implemented through the laws and regulations of national (or EU-wide), rather than as a result of the recommendations of the committee - although sometimes be among the recommendations and implementation of the law at the national level.

Basel Accord was created by the Basel Committee on Banking Supervision to avoid the problems encountered during the liquidation committee Herstatt Bank in Frankfurt in 1974. Liquidation is problematic because there are deals to New York left at the bank is liquidated. This occurs because of differences in time zones so that when the bank is liquidated, the transaction is unresolved. This encourages the countries of the G-10 established the Basel Committee on Banking Supervision.

Basel Committee on banking supervision to provide a forum for regular cooperation on banking supervisory matters. The goal is to increase understanding of key supervisory issues and improve the quality of banking supervision globally. The Committee tried to do by way of exchange of information on national supervisory issues, approaches, and techniques with a view to promoting common understanding. At this time, the committee uses common sense to develop the guidance (guidelines) and supervisory standards in areas where they are considered. Based on this, the committee's most recognizable because of international standards on capital adequacy (capital adequacy), the basic principles for effective banking supervision, and the concordat (harmony) in banking supervision across boundaries.

Committee members come from Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, Netherlands, Spain, Swediam, Switzerland, UK and U.S.. Countries represented by their central bank and also Authoritative with formal responsibility for supervising the prudential principles of banking business that is not a central bank. Committee chairman at the moment is Mr. Nout Wellink, president of Bank of the Netherlands.

The Committee encourages the various contacts and cooperation among its members and other banking supervisory authorities. The results are presented to the inspectors all over the world both in publications and in which there is no hint in banking supervision. Various contacts have been strengthened by an International Conference of Banking Supervisors (ICBS) held every two years.

Committee secretariat housed at the Bank for International Settlements in Basel, Switzerland, and its staff mainly from the professional supervisor with a temporary secondment from member institutions. Furthermore the implementation of the work, the secretariat of the committee and sub-committee of experts, ready to give advice to the various regulatory authorities in all countries. Mr Stefan Walter is the secretary general of the Basel Committee. (Geraldine Megan Tauran)

Until now there have been two standards of Basel I and Basel II standards that enhance coverage in Basel I.

1. Basel I, focused on the credit risk of the bank where the assets are classified in five categories depending on credit risk. Basel II was created with a more standard that is believed to contribute to keep the international financial system from problems that may arise if there is a fall of one or several large banks.
2. Basel II, uses 3 concepts, 1. minimum capital requirements, 2. assessment monitoring, and 3. market discipline.
   Basel I also use the three concepts above, but not all parts of the concepts used so incomplete, like the concept of minimum capital requirements, Basel I only consider the credit risk and market risk and the risk of passing operations.

Source of: http://www.wealthindonesia.com

The Differences of Cost and Expense

Maybe today there are still not able to distinguish notion of "Cost" and "Expense" . Most people mentioned that the second term is the same sense but in fact these two terms have different meanings. This happens simply because there is no equivalent word for the term "cost".

People (especially Indonesia) already understand a misconception for example the term "Cost of God Sold" is defined as Cost of goods sold while the "Cost of Labor" is defined as the cost of labor. Means "cost" here means the price and also the cost. While the notion of accounting "cost" was not price or cost.

Cost and Expense are two different things. Let's look at an example of this issue to differentiate.

If you reserve the booking business making bags from fabric. One day there are customers who book bag as many as 100 pieces. The next day you buy the fabric as much as 75 meters. To create 1 piece of cloth bags as much as 0.5 meters is required. Price a meter of fabric is a 4 U $ D. Thus you spend money to buy fabric is 300 U $ D. You will use the fabric as much as 50 meters to make 100 bags. The rest you store in the warehouse for supplies.

In this example, Cost $ 300 U $ D consisting of the Expense of 200 U $ D and Assets  (Inventory) 100 U $ D.

In this example can be concluded that the "Accountants use the term to mean a cost expense That has being used up while a company is doing its main revenue-generating activities".

A Cost Not necessarily become an Expense. As we saw above, Cost $ 300 U $ D was composed of 200 U $ D as an expense and 100 U $ D as an asset.

Perhaps the most extreme example is when we buy land to run a business. Then the cost of land will only be recorded as an asset and will not be an expense because the land can not be depreciated.

Likewise, when we buy a machine for example for a factory, in balansheet cost of the machine will be recorded as an asset (Machine), but over time, the cost would be an expense because it would depreciate the machine when used in running the business and it was depending on what method of calculating depreciation.

While the burden has meaning to something that should be covered (as if the revenue obtained first, and because getting the revenue we have to bear the burden). Understanding Expense (cost) here in line with what is listed in the definition of the elements of financial statements in GAAP.