Audit and Compliance in Indonesia

There is currently no single unifying regulation on auditing and compliance in Indonesia.

Foreign investors must be aware that regulations regarding auditing, accounting, and financial reporting are stipulated over several laws and by laws, and that a good understanding of these can ensure their business stays compliant.

Foreign investors should focus on Company Law, which dictates the terms for when audits become obligatory in addition to the accounting standards companies should adhere to when preparing financial statements.

Investors should use the services of registered local advisors to make sure they understand the prevailing regulations.

Auditing and compliance requirements

The Investment Law lays out the basic requirements on how to operate in Indonesia. These are part of key compliance norms:

  • Implementing good corporate governance;
  • Undertake corporate social responsibility activities;
  • Comply with the labor law;
  • Submit quarterly investment activities to the Investment Coordinating Board (BKPM); and
  • Honor the cultural traditions of communities.

Who is obligated to be audited?

The Company Law mandates that financial statements of a limited liability company must be audited by a public accountant registered in Indonesia if they meet at least one of the following criteria:

  • Companies with assets exceeding 50 billion rupiah (US$3.2 million);
  • Public companies;
  • Companies that issue debt instruments;
  • Certain types of state-owned enterprises; or
  • The company collects or manages public funds (such as banks and insurance companies).

By law, a company must keep its accounting records and books for at least 10 years from the end of its reporting period.

Annual reports

All registered company’s annual financial statements are to be submitted to a regional tax office once a year. Financial statements consist of the following:

  • Balance sheet;
  • Cash flows;
  • Profit and loss statement; and
  • Statement of changes in equity.

Financial statements are required to provide both the current and previous year’s figures and need to be presented on a comparative basis.

Periodic financial statements must be presented in the Indonesian language and a foreign language. The obligation to use foreign languages does not apply to small- and medium-sized enterprises. Periodic financial statements that utilize foreign languages must contain the same information as the periodic financial statements that use the Indonesian language.

If there is a difference in the interpretation of the information presented in foreign languages with those presented in the Indonesian language, the information in the Indonesian language shall be used as a reference. 

The accounting books must also use the rupiah as their currency. Companies will need to seek permission from the tax authorities for the use of the US dollar, the only other eligible functional currency. This must be done no later than three months before the start of the accounting year.

Public companies

Under the Capital Markets Law, foreign companies are allowed to be listed in the country’s bourse.

Their prospectus, however, must first be audited by an auditing firm that is recognized by the country’s Financial Services Authority (OJK), the main regulator of Indonesia’s financial services sector.


Establishing an Effective Corporate Compliance Program in Indonesia

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The annual financial statement must be submitted to the OJK and announced to the public by no later than the end of the third month from the date of the annual financial statement. The submission of periodic financial statements must be conducted through the electronic reporting system of the OJK.

Public companies must also establish internal audit committees, an internal audit unit, and a company secretary. The audit committee supports the board of commissioners to ensure the effectiveness and integrity of a company’s financial statements and internal controls.

The committee will also review the risk management activities conducted by the board of directors and oversee the implementation of the recommendations of the internal and external auditors.

Auditor independence

The auditor must be a registered and independent public accountant as stipulated by the Ministry of Finance (MOF). They must avoid all potential conflicts of interest and adhere to MOF regulations.

Did You Know
The MOF does not allow a company to use the services of an auditing firm for six consecutive years unless there have been significant changes in partners at the company.

The Indonesia Financial Services Authority stipulates the mandatory rotation of the public accountant every three years with a two-year cooling period. This only applies to the public accountant and not the public accountant firm.

One-month rule

Taxpayers undergoing an audit must furnish the documents and information requested by tax auditors within one month of the request date. Failure to comply within this timeframe may lead the Directorate General of Taxes (DGT) to assess tax liabilities based on deemed profits. Any documents or information not provided within the specified period cannot later be utilized by the taxpayer to contest the assessed tax amount.

Following the conclusion of a tax audit, the taxpayer will receive a written notification detailing the audit findings from the tax auditors. In the event of disagreement, the taxpayer must respond in writing. Subsequently, during the closing conference discussion, the taxpayer can reaffirm its stance regarding the tax audit corrections and provide pertinent supporting documents.

If there remains a dispute regarding the legal basis of an adjustment during the discussion of the tax audit findings, the taxpayer has the option to request a discussion with the Quality Tax Audits and Tax Assessments Assurance Team (QAT). This team is appointed either by the Regional Tax Office or the Directorate of Tax Audit and Collection.

Fiscal year

The annual deadline for reporting and paying corporate income tax is April 30 – if a company’s fiscal year begins from January 1 – December 31. If a company’s fiscal year differs from the calendar year, then its deadline is four months after the end of its fiscal year.

Penalties for non-compliance

Companies that fail to comply with Indonesia’s audit and tax requirements can expect to receive monthly interest penalties starting from two percent and up to 48 percent. Furthermore, issuing false tax and accounting documents can also result in imprisonment.

Tax collection through a distress warrant

If a taxpayer fails to pay a legally mandated tax collection instrument within the specified timeframe, the Directorate General of Taxes (DGT) is empowered to issue a Distress Warrant (Surat Paksa). These instruments encompass various documents such as Tax Collection Letters (Surat Tagihan Pajak/STP), Overpaid Tax Assessment Letter (Surat Ketetapan Pajak Lebih Bayar/SKPLB), (Surat Ketetapan Pajak Kurang Bayar/SKPKB), Tax Objection Decision Letters, Tax Court Decisions, and Correction Decision Letters, all of which may require additional payments from the taxpayer.

The taxpayer in question is obligated to settle any underpaid tax specified in the tax collection instrument within one month of its issuance. Failure to do so incurs an interest penalty, calculated based on the applicable monthly Ministry of Finance Interest Rate, for a maximum period of 24 months.

If the underpaid tax remains outstanding beyond the specified timeframe, the DGT may proceed with the following steps as part of executing the Distress Warrant:

  • Issuance of a Warning Letter (Surat Teguran) if the underpaid tax is not resolved within seven days of the due date.
  • Issuance of a Distress Warrant if the underpaid tax remains unsettled within 21 days of the Warning Letter issuance.
  • Implementation of a Confiscation Order (Surat Sita) if the underpaid tax is not resolved within 48 hours of the Distress Warrant issuance.
  • Publication of an auction announcement regarding the confiscated assets if the underpaid tax persists beyond 14 days from the Confiscation Order issuance.
  • Conduct a public auction within 14 days of the auction announcement.

Tax disputes

Tax disputes between taxpayers and the DGT typically stem from disagreements arising after the issuance of an SKP by the DGT, which the taxpayer contests. Legal tax collection instruments such as an SKPKB, an SKPKBT, and an STP serve as the basis for the DGT to issue a Distress Warrant if the taxpayer fails to settle the underpaid tax promptly.

There are several avenues available to address such tax disputes:


A taxpayer dissenting from an SKP can lodge an Objection with the DGT within three months from the SKP's date of issue. The Objection must outline the taxpayer's calculated tax amount and provide reasons for disputing the DGT's tax assessment.

The DGT is obligated to render a decision on the tax Objection within 12 months of its filing date. Failure by the DGT to issue a decision within this timeframe automatically results in the Objection being deemed approved by the DGT.


If the DGT rejects the Objection, any underpayment incurs a surcharge of 30 percent. However, if the taxpayer lodges an Appeal with the Tax Court regarding the Objection Decision, neither the underpaid tax nor the surcharge is payable.

Additionally, taxpayers have the option to file an Objection with the DGT office concerning tax withheld by a third party, subject to the same time limits for filing and the DGT's decision.

Regarding Appeals, if a taxpayer disagrees with the DGT's Objection Decision, they can submit an Appeal to the Tax Court within three months of receiving the DGT's decision. According to the Tax Court Law, at least 50 percent of the tax due must be settled before filing the Appeal if the DGT's decision calls for a tax payment.

The Tax Court typically renders a decision on appeals within 12 months. Any underpaid tax resulting from the Tax Court's decision is subject to a surcharge of 60 percent.


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