Foreign companies selecting an external auditor in Indonesia should first establish whether they need an Indonesian statutory audit, work for an overseas group audit, or both. For a multinational subsidiary, the auditor may need to satisfy Indonesian requirements while also working with the parent company’s auditor and meeting an earlier group reporting deadline.
Establish the Audit Requirement Before Requesting Proposals
Certain Indonesian companies are required to have their annual financial statements audited by a public accountant. Under Article 68 of Indonesia’s Company Law (Law No. 40 of 2007), this includes companies that collect or manage public funds, issue debt to the public, are public companies or Persero companies, or have assets and/or annual revenue of at least IDR 50 billion (USD 2.84 million). An audit may also be required under other laws.
An Indonesian subsidiary may face separate requirements from its overseas parent, shareholders, lenders, or group reporting policies. If it forms part of the parent’s consolidated financial statements, the Indonesian auditor may also need to perform work for the group audit.
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Before requesting proposals, the company should give each audit firm the same basic scope: the entity and financial year being audited, the accounting standards being used, any group audit requirements, and the required completion date.
Check Whether the KAP Can Perform the Audit
Companies should confirm that the Public Accounting Firm (Kantor Akuntan Publik or KAP) and the public accountant signing the audit report are properly authorized under Indonesia’s public accountant framework, including Law No. 5 of 2011 on Public Accountants.
Membership of an international accounting network does not replace this requirement because the Indonesian audit report is issued through the Indonesian KAP.
Financial services companies need an additional check because not every KAP is necessarily eligible for every regulated engagement. OJK Regulation No. 9 of 2023 sets specific requirements for the use of public accountants and KAPs in banking, capital markets, and non-bank financial services.
A foreign investor in these sectors should check that the proposed auditor meets the requirements applying to that business rather than relying only on its general KAP status.
Check the Auditor’s Independence
The proposed auditor must meet the independence rules applying to the engagement.
This matters when the KAP or its wider network already provides accounting, tax, advisory, or other services to the Indonesian company or another entity within the same group. Those existing relationships should be disclosed before appointment so the KAP can assess whether they affect its ability to perform the audit independently.
For a multinational company, this check may extend beyond services provided directly to the Indonesian subsidiary because relationships elsewhere in the group can also be relevant.
Can the Auditor Handle the Group Audit Requirements?
For multinational groups, the Indonesian auditor may also need to work within the parent’s group audit. Indonesia’s revised SA 600 on group financial statement audits, which applies to group audits for periods beginning on or after December 31, 2025, covers group audits involving component auditors.
When an Indonesian subsidiary forms part of an overseas parent’s consolidated financial statements, its KAP may need to perform work requested by the group auditor and communicate with that auditor during the audit.
Differences in financial reporting can add another layer. The Indonesian subsidiary may prepare its financial statements under the accounting standards applicable in Indonesia, while its parent uses IFRS, US GAAP, or another framework for its consolidated accounts. The subsidiary may then need adjustments or a separate reporting package for the group.
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The proposed KAP should know before quoting whether it will be expected to perform work on this additional financial information. Otherwise, a proposal covering only the Indonesian financial statement audit may not reflect the full scope or cost.
The company should also check whether the proposed KAP has previously worked with overseas group auditors. Experience handling this type of engagement is more relevant than simply belonging to an international accounting network.
Does the Assigned Team Have the Right Experience?
The experience of the people assigned to the engagement should match the main accounting issues in the Indonesian business.
A manufacturing subsidiary may require significant audit work on inventory, production costs, and fixed assets. A company with substantial transactions with overseas affiliates may require more work on related-party transactions and balances between group companies.
If the subsidiary forms part of a multinational group, the team should also be able to handle requests and technical discussions with the overseas group auditor.
This allows the company to assess the people who will perform the work rather than relying on the KAP’s brand.
Can KAP Meet the Actual Reporting Deadline?
Consider an Indonesian subsidiary with a December 31 year-end whose overseas parent requires audited financial information by March 15.
If a proposed KAP cannot begin the required work until late March, it cannot meet the group’s deadline even if the Indonesian audit could be completed later.
The proposal should state when fieldwork will start, when the company must provide its accounts and supporting documents, and when the audit report and any group reporting work will be completed.
This makes the reporting deadline a measurable part of the selection rather than an assumption made after the auditor has been appointed.
Compare What Each Audit Fee Actually Covers
Consider a hypothetical Indonesian subsidiary whose parent requires its group audit work by March 15. It receives the following illustrative proposals:
| Auditor | Quoted Fee | Group Audit Experience | Group Reporting | Completion |
|---|---|---|---|---|
| KAP A | IDR 150 million (USD 8,520) | Limited | Extra fee | March 30 |
| KAP B | IDR 190 million (USD 10,800) | Regular | Included | March 10 |
| KAP C | IDR 210 million (USD 11,930) | Regular | Included | April 5 |
KAP C cannot meet the March 15 deadline unless it changes its schedule. KAP A appears IDR 40 million (USD 2,270) cheaper than KAP B, but its quotation excludes the required group reporting work.
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The company would need KAP A’s additional fee and revised completion date before the two proposals could be compared. If the extra work increases the fee or cannot be completed before March 15, the initial IDR 40 million saving does not provide a meaningful basis for selecting KAP A.
The comparison should be based on the cost of delivering the same required work by the required date.
Prepare for Your External Audit with MAP Resources Indonesia
MAP Resources Indonesia can help foreign-owned companies prepare their financial records for audit and coordinate with the external auditor throughout the process. Contact us at info@mapresourcesindonesia.com
