STRENGTHENING GOVERNMENT INTERNAL AUDITOR OF

INDONESIA

by Hasanuddin Najib (MEF 16505)

Internal audit has a big role to support a good governance

and clean governance of government. The Institute of
Internal Auditors Research Foundation (IIARF) of The Institute
of Internal Auditor (IIA) proposed the Internal Audit Capability
Model (IA-CM) to develop a good Government Internal
Auditor. The BPKP revealed that 85 % of APIP institutions are
still on the level 1 (the lowest level) of IA-CM. This paper
would explain a brief information of the Government Internal
Audit in Indonesia, the obstacles faced, and the
recommendation to solve the problems based on IA-CM.

Keywords: Internal Audit, BPKP, APIP, the Institute of Internal

Auditor (IIA), IA-CM.

A. Introduction

Society's demands for behavior of government officials

achieving good governance and reducing the risk of public
clean governance of government corruption (The IIA, 2012).
requires the government to
In addition, Mardiasmo (2009)
increase the transparency and
stated that public transparency
accountability of the government's
and accountability are the
financial statements. Governance
obligation of a fiduciary to provide
is the combination of processes
accountability, serving, reporting,
and structures implemented by
and disclose all activities and
the board to inform, direct,
events it is responsible to the
manage, and monitor the
mandate giver and IIA (2012)
organizations activities toward the
mentioned that it relates to the
achievement of its objectives (The
openness of a public sector entity
Institute of Internal Auditors (IIA),
to its constituents. Therefore, it
2012). In the public sector,
takes a role that allows auditors
governance relates to the goals
can act as a consultant who serves
which are established and
as a conduit early detection in
accomplished. Moreover, It also
identifying organizational risk and
includes activities that ensure a
performance-oriented organization
public sector entitys credibility,
Overall. The role can be performed
establish equitable provision of
by an internal auditor who help
services, and assure appropriate
the management to ensure that

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the organization's internal control : services and role of internal
system has been developed auditing, people management,
appropriately and all the professional practices,
organization's operations have performance management and
been carried out effectively, accountability, organizational
efficiently, and economical (Haron relationships and culture, and
et al., 2004). governance structures. Moreover,
these levels can be described
To develop a good Government
briefly in the table 1.
Internal Auditor, The Institute of
Internal Auditors Research The IIA Suggested that
Foundation (IIARF) of The Institute Government Internal Auditors
of Internal Auditor (IIA) proposed improve their ability to the certain
the Internal Audit Capability Model level / effective level which at
(IA-CM) for the Public Sector in least has Key Process Areas (KPA).
2010. The IA-CM for the Public The lowest level (level 1) has no
Sector is a recognized KPA, so it is not recommended for
international framework that them, while the highest level
identifies the fundamentals (level 5) needs many efforts to
needed for effective internal reach and probably not suitable
auditing in the public sector. It is a for developing country such
universal model with comparability Indonesia. Level 2, 3, and 4 are
around principles, practices, and recommended. In addition, since
processes that can be applied the main purpose is to reach the
globally. The IA-CM identifies five effective level, so if the
progressive capability levels tied circumtances need the level 2 or 3
to leading practices. Each of Government Internal Auditor, it
capability level identifies key is preferable that Government
process areas and essential Internal Auditor may choose to
practices that must be remain at level 2 or 3, and not
implemented within the six aspire to a higher capability level
elements of an internal audit because the current level is the
activity identified in the model most cost effective at that
(IIARF, 2014). The six elements are particular time (The IIA, 2009).

Table 1 : The level of IA-CM

LEVE NAME BRIEFLY DESCRIPTION

LS
Level Optimizing Internal audit learning from inside and outside
5 the organization for continuous improvement
Level Managed Internal audit integrates information from
4 across the organization to improve governance
and risk management

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 Level Integrated Internal audit management and professional
3 practices uniformly applied
Level Infrastructur Sustainable and repeatable internal audit
2 e practices and procedures
Level Initial No sustainable, repeatable capabilities
1 dependent upon individual efforts
Source: The Institute of Internal Auditors Research Foundation (IIARF),
2009.

Meanwhile, Badan Pengawasan (initial), 69 APIP Institution or

Keuangan dan Pembangunan 14,56% in the level 2
(Finance and Development (Infrastructure), only 1 APIP
Supervisory Board) of Indonesia Institution or 0,21% in the level 3
which is The Government Internal (Integrated), and no APIP
Auditor of Indonesia, revealed the Institution in the level 4
assessment of capability of (Managed ) or 5 (Optimizing)
Government Internal Auditor (BPKP, 2015). Hence, most APIP
(Aparat Pengawas Internal Institutions does not fulfill the
Pemerintah - APIP). This minimum requirement of IA-CM
assessment was conducted to 474 standard.
APIP Institution of 627 APIP
Based on the explanation and
Institution (which consists of 86
gap above, this paper will explain
Central Government of APIP
a brief information of the
Institution and 541 Local
Government Internal Audit in
Government of APIP Institution).
Indonesia, the obstacles faced,
The result showed that 404 APIP
and suggest the recommendation
Institutions or 85% of APIP
to solve the problems based on IA-
Institution still on the level 1
CM.

B. Internal Audit in Indonesia

C. The IIA defined accomplish its objectives by

internal audit as : bringing a systematic,
disciplined approach to
D. Internal audit is an
evaluate and improve the
independent, objective
effectiveness of risk
assurance and consulting
management, control, and
activity designated to add
governance process.
value and improve an
organizations operations. It E. Internal auditing is
helps an organization conducted by professionals

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 with an in-dept called Badan Pengawasan
understanding of the Keuangan dan
organizations business Pembangunan (Finance and
culture, system, and Development Supervisory
process. Moreover, Internal Board). The BPKP acts as an
auditors are expected to internal auditor for central
obey the standard of internal government and a
audit and adhere to its Code coordinator for all
of Ethics. government internal audit
agencies.
F. Government of
Indonesia conducted internal G. How about the regional and
audit since 1961 when local government ? in 1972,
Djawatan Akuntan Negara Indonesian Government
(State Accounting Agency) established Inspectorate Province
was established and which is an internal audit agency
separated from General of for regional/province government
Treasury. Both of the and Local Inspectorate - which is
institutions are under The an internal audit agency for local
Ministry of Finance. In government. The main purpose of
addition, in 1996 establishing these agencies is to
government established control government finance. These
General Directorate of State kinds of Internal Audit Agencies
Finance Supervisory are still exist until now eventhough
(DDPKN), but still remained in line with the development of
under The Ministry of governmental issues, economics
Finance. At the same year, and politics issues, they change
Government of Indonesia year by year. Some of the changes
also established are organizational issues like
Inspectorate General - which changing in the name,
is an internal audit agency in organization structures, and so on.
every ministry. In 1983, Others are regulation, authority,
Governments established an responsibility, job description, and
independent internal auditor so on.

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 H. The BPKP, Inspectorate as Government Internal Auditor
General, Inspectorate Province, (Aparat Pengawas Internal
and Local Inspectorate are called Pemerintah-APIP).

I. Analysis

J. C.1 Problem not be executed by government

K. As author mentioned
in the Introduction that 85%
of APIP Institutions are still
on the level 1 (initial) and
are not adequate well to
perfom internal audit, so the
author will focus the
problem on this APIP
institution. To analyse the
problems of Government
Internal Audit in Indonesia,
the author use the six
elements of Internal Audit
Capability Model (IA-CM)
since the basic knowledge
and standard conducted in
this paper also use the same
thing. These problems can
be explained as follows :
1. Services and Role of Internal
Auditing.
L. The services include the
provision of assurance and
advice as well as co-sourced
services with external service
providers. The role is to provide
independent and objective
assessments to help the
organization accomplish its
objectives and improve
operations (IIA, 2014). In this
element, many APIP institutions
faced difficulties to give reliable
assurance and adequate
advices. Bunch of advices could
properly and the assurance
seems to shallow.
M. In addition, the role of
APIP institution as Indonesian
Government Internal Auditor are
very wide. It includes audit,
review, evaluation, monitoring,
and other supervisories. Of
course, these roles are also
exist in Government Internal
Auditor in many countries.
However, in terms of Indonesian
cases, APIP institutions do not
do these roles properly. In my
opinion, the main cause is
capabily of internal auditor
itself.
2. People Management.
N. This element can be defined
as a process of creating a work
environment that enables
people to perform to the best of
their abilities. People
management includes job
descriptions, recruiting,
performance standards,
professional development,
training, ongoing coaching, and
career development.
O. In many cases in
Indonesia, the recruiting of
internal auditor (APIP auditor) is
not really clear in terms of what
organizations need and what
the qualification of new
employees is. In the BPKP and

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 the Inpectorate General of
ministries (APIP in each
ministry), it seems to be no
problem since they have many
human resources and can
recruit from the proffesional
auditor. Trainings were also held
in occationally especially for
regional and local APIP. BPKP as
a coordinator of APIP sets up the
guide line of training and
provides online training for
internal auditor depending the
level of traininng where auditor
is and the purpose what auditor
need. However only few
participants joint this training.
Probably because not
interesting or something else.
Moreover, ongoing coaching
also became a problem in most
of APIP institution, since there is
no ongoing coaching for APIP
auditor. In addition, career
development actually was
designated well, unfortunately it
does not work as the design.
There is a valuation for every
auditor in respective APIP
institution every year, but the
result seems could be
compromised among the them.
Promotion for instance, to get
the higher level position was
usually not because of ability
and experience but mainly
because of the relationship
among the subordinate and
bosses.
3. Professional Practices.
P. This element reflects the
policies, processes, and
practices that enables the
internal audit activity to be
performed effectively and with
proficiency and due professional
care. The association of
Indonesian Government Internal
Audit (Asosiasi Auditor Intern
Pemerintah Indonesia - AAIPI)
set up the standard of
government internal audit.
These standards contained
general standard (which is
included competency and
austerity of auditor, and auditor
responsibility), standard of
internal audit implementation
(which is included planning and
implementing of internal audit),
and standard of internal audit
communication.
Q. These standards resembles
a guide line to do internal audit
including the processes and
practice. The problem is do the
internal auditors obey all the
standards or partially ? I believe,
if the internal auditors steady
these standard consistently the
audit process and result will be
better.
4. Performance Management and
Accountability.
R. This element refers to the
information needed to manage,
conduct, and control operations
of the internal audit activity and
account for its performance and
results. To gather the
informations properly, adequate
system of performance
management and accountability
should be applied. The main
problem of APIP institutions in
this element is, there is no
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 standard system for all APIP institutions was managed by
institutions to gather Ministry of Internal Affair, so all
information. Respective APIP of them have same organization
institutions seems try to solve structure. While APIP in
the problems by their self. Most respective ministry was set up
of the systems are still manually by government regulation.
and not to be documented well, Conversively, the cultures in
some use simple computerized every ornazation are unique, the
and perform limited differences in tribes, cultures,
documentations. This affect and customs may affect the
difficulties in managing, relationship even though every
conducting, and controlling the govenrment has same standard
operation of internal audit of government accounting as
activity. Internal audit report for well as same standards of
example, was not to be internal audit. In addition, how
documented well, so they can to develope the relationship
not learn what previous auditors among the auditor and CAE or
did several years ago and the between APIP institution and its
mistakes they did. auditee are depending on their
5. Organizational Relationships attitudes.
and Culture. 6. Governance Structures.
S. This element surrounds the T. This element explained the
organizational structure and the reporting relationship
internal management and (administrative and functional)
relationships within the internal of the CAE and how the internal
audit activity itself, as well as audit activity fits within the
the Chief of Audit Executives organizational and governance
(CAE) relationship with senior structure of the entity. It seems
management. The structure of not to be a problem for APIP
Regional and Local APIP institutions in Indonesia.
U.

V. C.2 Recommendation

W.Based on the explanation These are :

above, the author proposes some
1. Recognizing the weaknesses
recomendations to solve the
and strenghts.
problem. The recommendation X. To recognize the weaknesses
objective is mainly to raise the and strenghts, APIP can use the
level of Internal Audit Capability result of assessment from BKPP,
Model (IA-CM) of 85 % of APIP they can grade which element is
institution from level 1 to level 2. the weakes to strongest.

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2. Undersanding the criterias in main building blocks that
every level determine the capability of an
Y. The IIA provides the criterias
internal audit activity (The IIA,
for each level of IA-CM, thus one
2014). when performed
thing that APIPs are suggested
collectively, achieve a purpose
to do is studing and
and produce immediate outputs
understanding the criteria by
and longer-term outcomes. The
discussion among them or
KPA is achieved when it is
directly with the IIA
implemented in an effective,
representative in Indonesia. This
lasting way.
can broaden their knowledge of 4. Focused Group Discussion (FGD)
AB. Based on the data
internal audit and hopefully can
revealed by BPKP, there are 404
also recognize their weaknesses
APIP institutions in the level 1
and strenghts indirectly.
3. Establishing the guide line to (initial), 69 APIP Institutions in
raise the level the level 2 (Infrastructure), 1
Z. BPKP as a coordinator of
APIP Institutionin the level 3
APIP institutions in Indonesia is
(Integrated), and no APIP
suggested to establish a guide
institution in the level 4
line to raise the level step by
(Managed) or level 5
step. BPKP also has to monitor
(Optimizing).
the development of respective AC. It is preferable if all
APIPs and provides the APIPs be divided in to
consultations, guidance, certain amount of groups. The
gradually including which factor APIP institutions which are in the
has been done, which sector level 2 can give advices to the
has not been done yet and so APIP institutions in the level 1
on. by discussions. Of course a big
AA. To establish the guide
Focused Group Discussion (FGD)
line, BPKP is suggested to focus
is too noisy and not effective,
on the Key Process Area (KPA).
then they can not concentrate
KPA relateS to the six elements
on the problems and solving in
and are found within each
discussion. Hence, enough
capability level. KPAs are the
number of members in a group

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 is suggested. In addition, proper the informations and discussion
documentations of discussion results to the other groups.
are required in order to share

AD. Summary

AE. Good AF. In addition, BPKP revealed

governance and clean the assessment based on IA-CM in
governance of government 2015. The result showed that 404
entails the government to APIP Institutions or 85% of APIP
increase the transparency Institution still on the level 1
and accountability. It takes a (initial), 69 APIP Institution or
role that allows auditors can 14,56% in the level 2
act as a consultant who (Infrastructure), only 1 APIP
serves as a conduit early Institution or 0,21% in the level 3
detection in identifying (Integrated), and no APIP
organizational risk and Institution in the level 4
performance-oriented (Managed ) or 5 (Optimizing). The
organization and this role problems of 85% APIP which are in
can be performed by an the level 1 mainly about not
internal auditor. To develop a sufficient services, a bad people
good Government Internal management, the neglecting
Auditor, the IIA proposed IA- standard of professional practices,
CM. The IA-CM has 5 levels, a bad system in performance
these are : level 1 (initial), management and accountability,
level 2 (Infrastructure), level and diversity of organizational
3 (Integrated), level 4 relationship and cultures.
(Managed) and level 5
AG. There are 4
(Optimizing). Effective level
recommendations that
is required to perform
author propose to solve the
effective Government
problem: Recognizing the
Internal Audit, while level 1
weaknesses and strenghts,
is not adequate.
Undersanding the criterias in
every level, Establishing the

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 guide line to raise the level, Discussion (FGD).
and Focused Group

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