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 : The Basic

Full Disclosure in Financial Reporting

Notes to Auditor’s and Current

Full Disclosure Disclosure
Financial Management’s Reporting
Principle Issues
Statements Report Issues

 Increase in  Accounting  Special  Auditor’s report  Reporting on

reporting policies transactions or  Management’s forecasts and
requirements events reports projections
 Common notes
 Differential  Post-balance-  Internet financial
disclosure sheet events reporting
 Diversified  Fraudulent
companies financial reporting
 Interim reports  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

Suppliers (Providers) of External Users Group

Financial Information (Demand) of information

Investors
Profit-oriented Relevant Creditors
companies Employees
Labor unions
Not-for-profit Customers
Entities Suppliers
Financial
Information Government
Households agencies
Financial
intermediaries
 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  Is more than ten percent of the
combined revenue of all
operating segments
 Segment profit or loss  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
 Identifiable assets 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 dan
pengungkapan yang terstandarisasi dengan mendasarkan
pada prinsip-prinsip pengungkapan penuh (full disclosure),
sehingga dapat memberikan kualitas penyajian dan
pengungkapan yang memadai bagi pengguna informasi
yang disajikan dalam pelaporan keuangan Emiten atau
Perusahaan Publik.
 Aturan yang lebih detil sebagai acuan untuk pelaksanaan
guna melaksanakan Peraturan Nomor VIII.G.7 tentang
Pedoman Penyajian Laporan Keuangan. Peraturan ini
menetapkan bentuk, isi, dan persyaratan dalam penyajian
laporan keuangan yang harus disampaikan oleh Emiten
atau Perusahaan Publik.
 P3LKEPP BAPEPAM-LK :
Industry Categories

 Industri Manufaktur  Industri Konstruksi

 Industri Investasi  Industri Perdagangan
 Industri Rumah Sakit  Industri Transportasi
 Industri Real Estate
 Industri Jalan Tol
 Industri Peternakan
 Industri Perhotelan  Industri Perkebunan
 Industri Restoran  Industri Pertambangan
 Industri Umum
Telekomunikasi  Industri Minyak &
Gas Bumi.
 Industri Perbankan.
 Fraudulent Financial Reporting (FFR) :
Definition

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

 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 (FFR)

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) :
Categories

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) :
Causes

 Impacted by internal and external

environments.
 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.
 Fraudulent Financial Reporting (FFR) :
COSO Research

 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) :
Prevention & Detection

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) :
Independent Auditor’s Responsibility
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) :
Internal 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.
 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 Assurance
Services : An Integrated Approach, Pearson Education, 10th Edition, 2005.
3. Financial Accounting Standard Board (FASB), http://www.fasb.org
4. Http://www.bapepam.go.id
5. Indonesian Institute of Accountants (IIA), Dewan Standard Akuntansi
Keuangan (DSAK), http://www.iaiglobal.or.id
6. International Accounting Standard Board (IASB), http://www.iasb.org
7. International Financial Reporting Standard (IFRS), http://www.ifrs.org
8. 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.