Many business owners only realise their company must be audited when a bank, a prospective investor, or the tax office asks for audited financial statements. Yet the obligation is set out from the start: its main basis is Article 68(1) of Law Number 40 of 2007 on Limited Liability Companies (the Company Law).
This article summarises when a limited liability company (PT) must submit its financial statements to a public accountant, how this relates to the annual corporate income tax return (SPT Tahunan PPh Badan), and what to prepare before a first audit.
Six Mandatory Audit Criteria Under the Company Law
Article 68(1) of the Company Law requires the Board of Directors to submit the company's financial statements to a public accountant for audit if the company:
- conducts business in raising and/or managing public funds;
- issues debt instruments to the public;
- is a public company;
- is a persero (a state-owned enterprise in limited liability company form);
- has assets and/or business turnover of at least Rp50 billion; or
- is required to do so by laws and regulations.
Meeting a single criterion is enough to trigger the audit obligation. Note the phrase "assets and/or business turnover" in the fifth criterion: a company with small assets but annual turnover of Rp50 billion is still covered, and vice versa.
The sixth criterion opens the door to sector-specific obligations. Several regulated sectors, such as financial services, have their own audit requirements. Companies in regulated sectors should therefore check their sector regulations, not only the Company Law.
Beyond Statutory Obligations
Companies that do not meet the criteria above often still need audited financial statements because other parties ask for them, including:
- banks or finance companies when applying for or renewing credit;
- tender committees and prospective business partners;
- investors, prospective share buyers, or shareholders;
- the company's own articles of association or a GMS resolution.
In these situations, an audit is not merely an administrative requirement. Audited statements give users assurance that the financial statements are fairly presented in accordance with the applicable reporting framework.
Link to the Annual Corporate Income Tax Return
The General Provisions and Tax Procedures Law (UU KUP) requires tax returns to be accompanied by the necessary information and documents. The Elucidation of Article 4(4) of the UU KUP states that if financial statements have been audited by a public accountant but are not attached to the return, the return is considered incomplete and unclear and is therefore deemed not to have been filed—a consequence consistent with Article 3(7)(b) of the UU KUP.
In practice, a company whose financial statements are audited must make sure the audited report, including the public accountant's opinion, is attached when filing its annual corporate income tax return. Technical filing rules now follow the return provisions in the Coretax system; the tax team should confirm the format and upload method required for the relevant reporting year.
Who May Perform the Audit
Under Law Number 5 of 2011 on Public Accountants, assurance services in the form of audits of historical financial information may only be provided by a licensed Public Accountant through a Public Accounting Firm. Before appointing an auditor, make sure the licences of both the Public Accountant and the firm are current and that there is no conflict of interest.
Preparing for a First Audit
- Make sure the books are closed and opening balances can be traced to supporting documents.
- Prepare bank reconciliations, receivable and payable listings, a fixed asset register, and inventory records.
- Determine the appropriate reporting framework: Indonesian SAK, SAK for Private Entities, or SAK EMKM.
- Gather legal documents: deed of establishment and amendments, licences, key contracts, and GMS minutes.
- For a first-year audit, the auditor must obtain assurance over opening balances. Allow extra time and prepare prior-year data.
Conclusion
The audit obligation does not apply only to listed companies. Companies with assets or turnover of at least Rp50 billion, companies managing public funds, persero, and companies required by sector regulations must submit their financial statements to a public accountant. Where financial statements are audited, the audited report must also be attached to the annual corporate income tax return.
Not sure whether your company must be audited? See the Financial Statement Audit service, learn about opinion types in Understanding Audit Opinions, or request an estimate through the Proposal page.
Official References
- Law Number 40 of 2007 on Limited Liability Companies, Article 68.
- General Provisions and Tax Procedures Law, Article 3(7) and the Elucidation of Article 4(4).
- Law Number 5 of 2011 on Public Accountants.
This article is general information and is not legal, audit, or tax advice for any particular situation. Application to each company must consider the relevant facts, documents, and applicable regulations. The Indonesian version is the original text.