Audit and Compliance in Indonesia: A Guide for Foreign Investors

Posted by Written by Ayman Falak Medina Reading Time: 3 minutes
  • Foreign investors should understand the Company Law, which sets outs the requirements for audit compliance and preparing financial statements.
  • Other important and relevant laws are the Investment Law and Capital Markets Law.
  • If a company’s fiscal year differs from the calendar year, then their deadline for reporting and paying corporate income tax is four months after the end of their fiscal year.

There is currently no single unifying regulation on auditing and compliance in Indonesia. Foreign investors will need to be aware that regulations regarding auditing, accounting, and financial reporting are stipulated over several laws and bylaws, and that a good understanding of these can ensure their business stays compliant.

Foreign investors should, however, focus on the 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.



What other laws should investors be paying attention to?

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$3.6 million);
  • Public companies;
  • Companies that issue debt instruments;
  • The company is a state-owned enterprise; 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 ten years from the end of its reporting period. Moreover, audits are to be conducted based on the Indonesian Financial Accounting Standards (SAK), which are set by the Financial Accounting Standards Board (DSAK IAI) and the Indonesian Sharia Accounting Standards Board (DSAS IAI), for sharia-based companies.

Since 2015, the DSAK IAI has converged its accounting standards with that of the International Financial Reporting Standards (IFRS), issued by the IFRS Foundation and the International Accounting Standards Board (IASB). (The IFRS are a set of global accounting standards that apply to all financial reporting, quality control, and auditing standards relating to all profit-oriented entities.)

This is part of Indonesia’s efforts to make local financial statements more comparable and understandable across international boundaries as the country aims to attract greater foreign investment and play a more prominent role within the G20.


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 interests and adhere to MOF regulations.

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 of partners at the company.

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.

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.

Additionally, 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.

Annual reports

Every 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. All financial statements must be prepared in the Indonesian language. A company can use another language only if it has received permission from the MOF.

The accounting books must also use the rupiah as its currency. Companies will need to seek permission from the tax authorities for the use of the US dollar, the only other eligible functional currency.


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

ASEAN Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia and maintains offices throughout ASEAN, including in SingaporeHanoiHo Chi Minh City and Jakarta. Please contact us at or visit our website at

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