MODUL-6
Financial Accounting
Full Disclosure in
Financial Reporting By
MUH. ARIEF EFFENDI,SE,MSI,AK,QIA
Magister Accounting Program (MAKSI)
BUDI LUHUR UNIVERSITY
Jakarta - Indonesia
2010
Full Disclosure in Financial Reporting
After studying this topic, students should be able to:1. Understand the basic of Full Disclosure in Financial Reporting.
2. Understand the Full Disclosure Principles.
3. Understand the Objective of Financial Reporting.
4. Understand the types of Financial Information.
5. Understand the Financial Accounting Environment.
6. Understand the Supply & Demand of Financial Information.
7. Understand the Type of Transactions to be Disclosure.
8. Identify the Agregation of Operating Segments & Reportable Segments.
9. Understand the Required Segmented Information.
10. Understand the Interim Reporting Requirements and the Problems of Interim Reporting.
11. Identify the major disclosures in the Auditor’s Report Standards & Auditor’s Opinion.
12. Understand the Management’s Report.
13. Identify issues related to Financial Forecasts and Projections.
14. Understand the Internet Financial Reporting.
15. Understand the regulation of BAPEPAM-LK in Indonesia.
16. Describe the profession’s (Independent Auditor & Internal Auditor) response to Fraudulent Financial Reporting (FFR).
Full Disclosure in Financial Reporting
Full Disclosure in Financial
Reporting : The Basic
Full Disclosure
Principle
Notes to
Financial
Statements
Disclosure
Issues
Auditor’s and
Management’s
Report
Current
Reporting
Issues
Increase in
reporting
requirements
Differential
disclosure
Accounting
policies
Common notes
Special
transactions or
events
Post-balance-
sheet events
Diversified
companies
Interim reports
Auditor’s report
Management’s
reports
Reporting on
forecasts and
projections
Internet financial
reporting
Fraudulent
financial reporting
Criteria for
accounting and
reporting choices
Full Disclosure Principles
Full disclosure principle calls for financial reporting of any
financial facts significant enough to influence the judgment of an
informed reader.
Financial disasters at Microstrategy, PharMor, WorldCom, and
Global Crossing highlight the difficulty of implementing the full
disclosure principle.
Requires that statements and their notes present all information that
is relevant to the users’ understanding .
Objectives of Financial Reporting
Financial reporting must provide information that is useful to
investors & creditors & other users in making rational
investment, credit, and similar decisions.
The information must be comprehensible to those who have a
reasonable understanding of business and economic activities
& are willing to study the information with reasonable
diligence.
To provide information useful in assessing cash flow
prospects.
To provide information about business resources, claims to
those resources, and changes in them.
Types of Financial Information
Financial Accounting Environment
Profit-orientedcompanies
Not-for-profitEntities
Households
Relevant
Financial
Information
Investors
Creditors
Employees
Labor unions
Customers
Suppliers
Governmentagencies
Financialintermediaries
Suppliers (Providers) of
Financial Information
External Users Group
(Demand) of information
Relevant of Financial Information
Market share
Capital expenditures
Market growth
Earnings
Cash flow by business segment
Competitive landscape
Revenue by product type
Relevant of Significant Informations
Quality of management
Regulatory environment
Customer churn rate
Pricing strategy
Growth strategy
Significant operating costs by category
Sales and marketing strategy
Number of customers by type
Cost per gross additional customer
Strategic alliances
Research & development activities
Breadth of product offerings
Brand equity
Supply of Financial Information
Financial information is provided primarily
through financial statements and disclosure notes.
1. Mandatory Financial statements for public
firms including : balance sheet, income
statement, statement of stockholders’
equity and statement of cash flows.
2. Disclosures (mandatory and voluntary)
3. Other forms of information: Press release and
management forecasts (MD&A).
Supply of Financial Information :
Disclosures
Type of Disclosures:
Mandatory Disclosures: accounting policies, critical
estimates, subsequent events, pension information, lease
disclosures, etc.
Voluntary disclosure is guided by cost/benefit
considerations
The following are disclosure costs :
Information production cost.
Competitive disadvantage.
Litigation exposure.
Political exposure..
What are the suppliers’ disclosure
incentives?
The following are disclosure benefits of
supplying quality, credible, audited financial
statements:
Increase investors’ confidence on
company’s financial information and thus,
reduce the uncertainty about the quality of
financial information.
Enable managers to raise capital cheaply.
Type Transactions to be Disclosure
Two types of post-balance sheet events
must be disclosed :
1. Events that provide additional evidence about conditions that existed at the balance sheet date that require adjustments.
2. Events that arose subsequent to the balance sheet date, not requiring adjustments.
Identifying Operating Segments
An operating segment is a component that:
engages in business activities,
is reviewed by the conglomerate’s chief
operating officer; and
produces discrete financial information
from the internal financial reporting
system.
Agregation of Operating Segments
Operating segments may be aggregated if
they have the same basic characteristics in:
products and services rendered
production process
type or class of customer
methods of product or service distribution
regulatory environment
Reportable Segments
An operating segment is identified as
a reportable segment if it satisfies one
or more of the following criteria:
1. revenue criterion
2. profit or loss criterion
3. identifiable assets criterion
Reportable Segments
Criterion Thresholds
Segment revenue
Segment profit or loss
Identifiable assets
Is more than ten percent of the
combined revenue of all
operating segments
Is ten percent or more of the
greater of: the combined profit
of all operating segments not
showing a loss, or the combined
loss of all operating segments
reporting a loss
Ten percent or more of the
combined assets of all operating
segments
Required Segmented Information
General information about its operating segments
Segment profit and loss and related information
Segment assets
Reconciliation of segment revenues, profits and losses, and segment assets
Information about products and services and geographical areas
Major customers
.
Interim Reporting Requirements
Two approaches: integral and discrete
Most companies employ both approaches for
Reporting requirements:
1. Use of same accounting principles.
2. Period costs often charged as incurred
3. Not required to publish Balance Sheet or Statement of Cash Flows (SCF).
.
Problems of Interim Reporting
Advertising and similar costs
Expenses subject to year-end
adjustments
Income taxes
Extraordinary items
Changes in accounting principles
Earnings per share
.
Auditor’s Reporting Standard
states whether the financial statements are
in conformity with GAAP.
identify circumstances in which GAAP
have not been consistently applied.
disclosures in financial statements are
deemed adequate unless otherwise stated.
an opinion on the financial statements, if
possible.
.
The Auditor’s Opinion
The auditor can render or provide:
A qualified opinion
An unqualified opinion
Reasons requiring the addition of
explanatory paragraphs to the
unqualified report
An adverse opinion (circumstances)
A disclaimer
.
The Management’s Report
Management’s Discussion and Analysis covers three aspects of an enterprise :
Liquidity
Capital resources
Results of operations
Identifies favorable or unfavorable trends
Identifies any significant events and uncertainties that affect the three aspects
.
The Financial Forecasts & Projections
The investing public needs and wants more and better information about corporate expectations.
The disclosures take one of two forms:
1. Financial forecast of an entity’s expected financial position.
2. Financial projection based on hypothetical assumptions.
.
The Internet Financial Reporting
Corporations can reach more users by the
internet.
Internet reporting can make traditional reports
more useful:
Corporations can report more timely
information;
They can also report disaggregated data;
There is, however, concern about security
on the internet (hackers).
BAPEPAM-LK Regulation
Kewajiban bagi Emiten dan Perusahaan Publik untuk
menyampaikan Laporan Tahunan (annual report) :
1. Ikhtisar data keuangan penting
2. Laporan dewan komisaris
3. Laporan direksi
4. Profil perusahaan
5. Analisis dan pembahasan manajemen
6. Tata kelola perusahaan
7. Tanggung jawab direksi atas laporan keuangan
8. Laporan keuangan yang telah diaudit
BAPEPAM-LK Regulation
Peraturan BAPEPAM No. X.K.1 Lampiran Keputusan
Ketua Bapepam-LK Nomor : Kep-86/PM/1996
tanggal 24 Januari 1996 tentang Keterbukaan
Informasi yang Harus Segera Diumumkan kepada
Publik.
BAPEPAM-LK Regulation
Pedoman Penyajian dan Pengungkapan Laporan Keuangan
Emiten atau Perusahaan Publik (P3LKEPP):
Untuk memberikan suatu panduan penyajian danpengungkapan yang terstandarisasi dengan mendasarkanpada prinsip-prinsip pengungkapan penuh (full disclosure), sehingga dapat memberikan kualitas penyajian danpengungkapan yang memadai bagi pengguna informasiyang disajikan dalam pelaporan keuangan Emiten atauPerusahaan Publik.
Aturan yang lebih detil sebagai acuan untuk pelaksanaanguna melaksanakan Peraturan Nomor VIII.G.7 tentangPedoman Penyajian Laporan Keuangan. Peraturan inimenetapkan bentuk, isi, dan persyaratan dalam penyajianlaporan keuangan yang harus disampaikan oleh Emitenatau Perusahaan Publik.
P3LKEPP BAPEPAM-LK :
Industry Categories
Industri Manufaktur
Industri Investasi
Industri Rumah Sakit
Industri Jalan Tol
Industri Perhotelan
Industri Restoran
Industri
Telekomunikasi
Industri Konstruksi
Industri Perdagangan
Industri Transportasi
Industri Real Estate
Industri Peternakan
Industri Perkebunan
Industri PertambanganUmum
Industri Minyak & Gas Bumi.
Industri Perbankan.
Arens (2005) :Fraudulent financial reporting (FFR) is an intentional misstatement or omission
of amounts or disclosure with the intent to deceive users.
Most cases of FFR involve the intentional misstatement of amounts not disclosures.
For example, Worldcom is reported to have capitalized as fixed asset, billions
dollars that should have been expensed.
Omission of amounts are less common, but a company can overstate income by
omitting account payable and other liabilities. Although less frequent, several
notable cases of FFR involved adequate disclosure.
For example, a central issue in the Enron case was whether the company had
adequately disclosed obligations to
affiliates known as specialm purpose entities.
Fraudulent Financial Reporting (FFR) :
Definition
Fraudulent Financial Reporting (FFR) :
Definition
Defined as “intentional or reckless
conduct, whether act or omission, that
results in materially misleading financial
statements.”
Could be gross and deliberate distortions.
Could be misapplication of accounting
principles or failure to properly disclose
material items.
Fraudulent financial reporting adalah perilaku
yang disengaja atau ceroboh,baik dengan tindakan
atau penghapusan,yang menghasilkan laporan
keuangan yang menyesatkan (bias).
Fraudulent financial reporting yang terjadi disuatu
perusahaan memerlukan perhatian khusus dari
auditor independen & internal auditor.
Fraudulent Financial Reporting (FFR)
1. Manipulasi, falsifikasi, alterasi atas catatan akuntansi
dan dokumen pendukung atas laporan keuangan yang
disajikan.
2. Salah penyajian (misrepresentation) atau kesalahan
informasi yang signifikan dalam laporan keuangan.
3. Salah penerapan (misapplication) dari prinsip
akuntansi yang berhubungan dengan jumlah,
klasifikasi, penyajian (presentation) dan
pengungkapan (disclosure).
Fraudulent Financial Reporting (FFR) :
Categories
Fraudulent Financial Reporting (FFR) :
Causes
Impacted by internal and externalenvironments.
Opportunities increase in certain situations:
1. Weak board of directors or audit committee.
2. Weak internal controls.
3. Unusual or complex transactions.
4. Accounting issues requiring significant subjective judgments.
5. Ineffective internal audit function.
Penelitian COSO (1999) yang berjudul “Fraudulent
Financial Reporting : 1987 – 1997, An Analysis of U.S.
PublicCompany”, bahwa dari hasil analisa perusahaan yang
listing di Securities Exchange Commission (SEC) selama
periode Januari 1987 s.d. Desember 1997 ( 11 tahun) :
Teridentifikasi sejumlah 300 perusahaan yang terdapat
fraudulent financial reporting yang memiliki karakteristik yaitu
memiliki permasalahan bidang keuangan (experiencing
financial distress), lax oversight dan terdapat fraud dengan
jumah uang yang besar (Ongoing, large-dollar frauds). Contoh
kasus Fraudulent Financial Reporting antara lain Enron, Tyco,
Adelphia dan WorldCom.
Fraudulent Financial Reporting (FFR) :
COSO Research
The National Commission On Fraudulent Financial Reporting
(The Treadway Commission) merekomendasikan 4 (empat)
tindakan untuk mengurangi kemungkinan terjadinya fraudulent
financial reporting :
1. Membentuk lingkungan organisasi yang memberikan
kontribusi terhadap integritas proses pelaporan
keuangan(financial reporting).
2. Mengidentifikasi dan memahami faktor- faktor yang
mengarah ke fraudulent financial reporting.
3. Menilai resiko fraudulent financial reporting di dalam
perusahaan.
4. Mendisain dan mengimplementasikan internal control yang
memadai untuk financial reporting.
Fraudulent Financial Reporting (FFR) :
Prevention & Detection
Mulfrod & Comiskey (2002) “The Financial
Numbers Game : Detecting Creative Accounting Practices”
Difokuskan bagi para investor sebagai pembelajaran untuk mengetahui secara cepat
adanya fraudulent accounting.
Tiga (3) atribut untuk mendeteksi adanya risiko fraudulent financial reporting :
1. terdapat kelemahan dalam internal control.
2. perusahaan tidak memiliki komite audit.
3. terdapat family relationship antara Director dengan karyawan perusahaan.
Klasifikasi dari Creative Accounting Practices :
1. Recognizing Premature or Ficticious Revenue.
2. Aggressive Capitalization & Extended Amortization Policies).
3. Misreported Assets and Liabilities.
4. Creative with the Income Statement.
5. Problems with Cash-flow Reporting.
Fraudulent Financial Reporting (FFR) :
Prevention & Detection
Menurut The National Commission on Fraudulent Financial
Reporting, pencegahan dan pendeteksian awal atas
fraudulent financial reporting harus dimulai pada saat
penyiapan laporan keuangan.
Rezaee (2002) dalam bukunya “Financial Statement Fraud:
Prevention and Detection” membahas cukup mendalam
tentang teknik untuk mencegah dan mendeteksi adanya
fraud dalam laporan keuangan . Dalam buku tersebut
dijelaskan kasus kolapsnya Enron di Amerika Serikat (USA),
yang menghebohkan kalangan dunia usaha secara jelas dan
lengkap, termasuk adanya praktek kolusi.
Fraudulent Financial Reporting (FFR) :
Prevention & Detection
Statements on Auditing Standards No. 99(Consideration of Fraud in a Financial Statement Audit).
Revisi dari SAS No. 82, diberlakukan efektif untuk audit
laporan keuangan setelah tgl 15 Desember 2002.
Auditor bertanggungjawab untuk merencanakan dan
melaksanakan audit guna mendapatkan reasonable
assurance bahwa laporan keuangan bebas dari salah saji
material, baik yang disebabkan oleh kekeliruan error
maupun fraud.
Terdapat perubahan penting terhadap prosedur audit serta
dokumentasi yang harus dilakukan oleh auditor
Menegaskan agar auditor independen memiliki integritas
serta menggunakan professional skepticism melalui critical
assessment terhadap audit evidence yang dikumpulkan.
Fraudulent Financial Reporting (FFR) :
Independent Auditor’s Responsibility
Standar Profesional Akuntan Publik (SPAP)
Standar Auditing Seksi 110 :“Tanggung Jawab dan Fungsi Auditor Independen”
Pada paragraf 2, auditor bertanggung jawab untuk merencanakan dan
melaksanakan audit untuk memperoleh keyakinan memadai tentang
apakah laporan keuangan bebas dari salah saji material, baik yang
disebabkan oleh kekeliruan atau kecurangan.
Oleh karena sifat bukti audit dan karakteristik kecurangan, auditor
dapat memperoleh keyakinan memadai, namun bukan mutlak, bahwa
salah saji material terdeteksi.
Auditor tidak bertanggung jawab untuk merencanakan dan
melaksanakan audit guna memperoleh keyakinan bahwa salah saji
terdeteksi, baik yang disebabkan oleh kekeliruan atau kecurangan, yang
tidak material terhadap laporan keuangan.
Fraudulent Financial Reporting (FFR) :
Independent Auditor’s Responsibility
Statement on Internal Auditing Standards (SIAS) No. 3,
tentang Deterrence, Detection, Investigation, and
Reporting of Fraud (1985), memberikan pedoman bagi
auditor internal tentang bagaimana auditor internal
melakukan pencegahan, pendeteksian dan
penginvestigasian terhadap fraud. SIAS No. 3 tersebut
juga menegaskan tanggung jawab auditor internal untuk
membuat suatu laporan audit tentang fraud.
Fraudulent Financial Reporting (FFR) :
Internal Auditor’s Responsibility
REFERENCES
1. American Institute of Certified Public Accountants (AICPA) ,http://www.aicpa.org
2. Arens, Alvin A, Randal J. Elder & Mark S. Beasley, Auditing and AssuranceServices : An Integrated Approach, Pearson Education, 10th Edition, 2005.
3. Financial Accounting Standard Board (FASB), http://www.fasb.org4. Http://www.bapepam.go.id5. Indonesian Institute of Accountants (IIA), Dewan Standard Akuntansi
Keuangan (DSAK), http://www.iaiglobal.or.id6. International Accounting Standard Board (IASB), http://www.iasb.org7. International Financial Reporting Standard (IFRS), http://www.ifrs.org8. Kieso, Donald E., Jerry J. Weygandt & Terry D. Warfield, Intermediate
Accounting, John Wiley & Sons, Inc, 13th Ed, 2009.9. Mulford, Charles W. & Comiskey , Eugene E. The Financial Numbers Game :
Detecting Creative Accounting Practices. John Wiley & Sons. January 2002.
10. Rezaee, Zabihollah. Financial Statement Fraud : Prevention and Detection.
John Wiley & Sons, August 2002. 11. Warren, Carl S., James M. Reeve & Philip E. Fess, Accounting, South-Western College
Publishing, 21th Ed, 2004.