Overview

Since the reactivation of the capital market by President Soeharto way back on 10 August 1977,[1] the Indonesian capital-market sector has undergone a period of rapid development which has seen an increase in the level of capitalization from 2.73 billion rupiah in 1977 to 6,870.7 trillion rupiah in 2018, a figure which continues to rise annually.[2] More recently, the Indonesian capital market has been aiming to introduce further innovations and implemented the two-day settlement of stock transactions on 16 November 2018 through the issuance of Regulation of the Financial Services Authority (“OJK”) No. 21/POJK.04/2018 on Settlement Periods for Stock-Exchange Transactions which, it has been projected, will ultimately increase efficiency and reduce systemic risk relating to the capital market.[3]

The development of national capital markets cannot be separated from the strong involvement and excellent services which are rendered by capital-market supporting professionals (“Supporting Professionals”). The support and assistance that these new players provide in facilitating the extensive and rather complicated processes which are involved in the workings of the capital market cannot be overestimated. The regulatory framework which addresses capital-market Supporting Professionals themselves is extensively laid out under Law No. 8 of 1995 on the Capital Market (“Capital-Market Law”), which basically determines four types of Supporting Professionals, specifically: 1) Public accountants (“PA”) and public accounting firms (“PAF”); 2) Legal consultants; 3) Appraisers; and 4) Notaries.[4]

Matters relating to general provisions and practices applied to the Indonesian capital market have already been extensively covered in previous editions Indonesia Law Digest (ILD).[5] Therefore, this edition of ILD will focus on Supporting Professionals and the following issues:

1. Public Accountants and Public Accounting Firms

1. Scope of auditing activities under working agreements; and
2. Registration procedures for PA and PAF.

2. Legal Consultants

1. Scope of legal consultants’ responsibilities; and
2. Registration procedure for legal consultants.

3. Appraisers

1. Registration procedures for appraisers; and
2. Obligations of and prohibitions on appraisers.

4. Notaries

1. Registration procedures for notaries.

1. Public Accountants and Public Accounting Firms

The activities of PA and PAF within the capital-market sector are regulated under the Capital-Market Law and several of its implementing regulations, specifically, Regulation of the Financial Services Authority (“OJK”) No. 13/POJK.03/2017 on the Utilization of Public Accountants and Public Accounting Office Services during Financial Services Activity (“Regulation 13/2017”) and Circular of the OJK No. 36/SEOJK.03/2017 of 2017 on Procedures for the Utilization of Services Offered by Public Accountants and Public Accounting Offices during Financial-Service Activities (“Circular 36/2017”),[6] which address the following specific issues, among others: 1) Scope of auditing activities under working agreements; and 2) Registration procedures for PA and PAF.

1. Scope of Auditing Activities under Working Agreements

Financial-service institutions are required to establish working agreements with public accountants and/or PAF in order to implement annual financial-auditing services.[7] In this regard, non-banking financial institutions and capital-market institutions may stipulate the scope of any auditing activities under a given working agreement, although this is not a mandatory step.

Within the capital-market sector specifically, the Capital-Market Law sets out the specific scope of PA and PAF responsibilities in relation to auditing activities. Under the Capital-Market Law, all registered PA are responsible for auditing the financial reports of a number of different capital-market-related parties, such as issuers, stock-exchange markets, clearing and guarantee institutions, and savings and settlement agencies.[8] In addition, any parties which are intending to utilize PA and PAF services in order to implement annual audits are first required to establish working agreements with the relevant PAF.[9]

2. Registration Procedures for PA and PAF

In order to provide accounting services to the various parties which are operating within the capital-market sector, PA and PAF are required to officially register with the OJK by satisfying the following prerequisites:[10]

1. Must have a valid license issued by the Minister of Finance;
2. Must have never had their registration certificates revoked; and
3. Must have never been convicted of any crime relating to the financial sector and must not be included on any list of bad credit/financing.

Additionally, both PA and PAF have their own set of additional prerequisites which must be fulfilled, as addressed in the table below: