A loss-making foreign-owned company in Indonesia can still be required to have its annual financial statements audited. Under Article 68 of Indonesia’s Company Law, the audit requirement depends on the company’s assets, annual business turnover, and activities — not whether it reports a profit.
When Does Article 68 Require a Loss-Making Company to Be Audited?
An Indonesian limited liability company, including a PT PMA, must have its annual financial statements audited by a public accountant when it meets one of the conditions under Article 68 of the Company Law.
One of the main financial tests applies when the company has assets and/or annual business turnover of at least IDR 50 billion (USD 2.8 million).
The requirement can also apply where the company:
- collects or manages public funds;
- issues debt instruments to the public;
- is publicly listed;
- is a state-owned Persero; or
- is otherwise required to have its financial statements audited under applicable legislation.
A company’s profit or loss does not form part of the IDR 50 billion test.
Does your PT PMA require an audit? Contact MAP Resources Indonesia at info@mapresourcesindonesia.com
Can a Company Make a Loss and Still Exceed the Audit Threshold?
Consider a PT PMA with annual business turnover of IDR 60 billion (USD 3.4 million) and annual expenses of IDR 70 billion (USD 4 million).
The company records an IDR 10 billion (USD 570,000) loss. Despite the loss, the company requires an audit because its annual business turnover exceeds the IDR 50 billion threshold.
The same principle applies to assets. A company with annual turnover below IDR 50 billion can still meet the Article 68 financial test if its assets reach the threshold.
Does the PT PMA Investment Requirement Trigger an Audit?
The foreign investment requirement for a PT PMA and the Article 68 audit threshold are separate tests.
Under Indonesia’s current foreign investment rules, a PT PMA generally requires total investment of more than IDR 10 billion (USD 570,000), excluding land and buildings, per five-digit KBLI business field per project location. Different calculation rules apply to certain business activities.
This investment requirement does not mean the company automatically meets the IDR 50 billion audit threshold. The Article 68 test looks at the company’s assets and annual business turnover rather than its investment plan.
A capital contribution can, however, affect the company’s assets. If investment funds or assets introduced into the company cause total assets to reach IDR 50 billion (USD 2.8 million), the asset threshold can be met even if the company remains loss-making.
Foreign investors can read more about Indonesia’s PT PMA capital and investment requirements.
What Happens If a Required Audit Is Not Completed?
Where Article 68 requires an audit, failing to complete it affects the company’s annual corporate process.
Under Article 68(2) of the Company Law, financial statements that are legally required to be audited cannot be approved by the General Meeting of Shareholders (GMS) if the required audit has not been completed.
Arrange your statutory audit with MAP Resources Indonesia: info@mapresourcesindonesia.com
The audit also affects corporate tax reporting. Where a company is required to have its financial statements audited, the audit report must be attached to its annual corporate income tax return. DGT’s current guidance confirms this requirement for entities subject to mandatory financial-statement audits.
The statutory audit should not be confused with a tax audit. A statutory financial statement audit is conducted by a public accountant, while a tax audit is an examination conducted by the Indonesian tax authorities.
Can a Company Need an Audit Below IDR 50 Billion?
The IDR 50 billion financial threshold is not the only trigger under Article 68.
A company can be required to have its financial statements audited even when both its assets and annual business turnover remain below the threshold if another statutory trigger applies. Companies operating in regulated sectors can also face audit requirements under legislation applying specifically to their activities.
Can an Audit Be Required Even When Article 68 Does Not Apply?
A company that is not legally required to undergo an audit under Article 68 may still need audited financial statements for another specific purpose.
Need to confirm why your company requires an audit? Contact MAP Resources Indonesia at info@mapresourcesindonesia.com
For example, a foreign parent may require audited Indonesian financial statements for group reporting or consolidation. A financing agreement may also require audited accounts as a condition of the facility.
These requirements are separate from the statutory Article 68 test. If neither Article 68 nor another applicable law requires an audit, a parent-company, shareholder, or financing requirement does not turn the audit into an Article 68 statutory obligation.
Audit Requirements for Loss-Making PT PMAs with MAP Resources Indonesia
MAP Resources Indonesia can determine whether a loss-making PT PMA is subject to Indonesia’s statutory audit requirements and coordinate the audit where required. Contact MAP Resources Indonesia at info@mapresourcesindonesia.com.
