Board Accountability

Fauziah M. Rizka N. Provania SY.

 Points

• Disclosure and Transparency

• Financial Statements

• Performance Reports

• Case : Bank Bukopin (2018)

 Disclosure and Transparency

• The corporate governance framework should ensure that timely and accurate disclosure is made on all material matters regarding the
corporation, including the financial situation, performance, ownership, and governance of the company. (OECD, 2015)
• Public disclosure is typically required, at a minimum, on an annual basis though some countries require periodic disclosure on a semi-
annual or quarterly basis, or even more frequently in the case of material developments affecting the company. Companies often make
voluntary disclosure that goes beyond minimum disclosure requirements in response to market demand.
• To determine what information should be disclosed at a minimum, many countries apply the concept of materiality. Material information
can be defined as information whose omission or misstatement could influence the economic decisions taken by users of information.
Material information can also be defined as information that a reasonable investor would consider important in making an investment or
voting decision.
• A strong disclosure regime that promotes real transparency is a pivotal feature of market-based monitoring of companies and is central to
shareholders’ ability to exercise their shareholder rights on an informed basis. It can also be a powerful tool for influencing the behaviour
of companies and for protecting investors. A strong disclosure regime can help to attract capital and maintain confidence in the capital
markets.
• Disclosure also helps improve public understanding of the structure and activities of enterprises, corporate policies and performance with
respect to environmental and ethical standards, and companies’ relationships with the communities in which they operate.
 A. Disclosure should include, but not be limited to,
material information on:

1. The financial and operating results of the company.

2. Company objectives and non-financial information.
3. Major share owenership, including beneficial owners, and voting rights.
4. Remuneration of members of the board and key executives
5. Information about board members
6. Related party transactions
7. Foreseeable risk factors
8. Issues regarding employees and other stakeholders
9. Governance structure and policies
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B. Information should be prepared and disclosed in accordance with high quality
standards of accounting and financial and non-financial reporting.
C. An annual audit should be conducted by an independent, competent and qualified,
auditor in accordance with high-quality auditing standards in order to provide an external
and objective assurance to the board and shareholders that the financial statements fairly
represent the financial position and performance of the company in all material respects.
D. External auditors should be accountable to the shareholders and owe a duty to the
company to exercise due professional care in the conduct of the audit.
E. Channels for disseminating information should provide for equal, timely and cost-
efficient access to relevant information by users.
 Audit Committee
• Management needs to ensure the financial information reported to shareholders includes all the transactions and disclosures it should and
is recorded, processed, and summarized accurately.
• Audit committees should understand what processes management uses to ensure its financial reports capture all relevant data. Such
information provides additional assurance that financial statements are accurate and complete.
• When reviewing narrative reporting and other such disclosures, audit committees should consider whether the reporting:
• Provides real analysis
• Enhances the overall financial disclosure and provides a context for analyzing the company’s financial condition
• Provides information about the quality and potential variability of the company’s earnings and cash flows
• Is clear, candid, and written in plain language for understandability
• Gives greatest prominence to the most important information
• Discusses known material events, trends, and uncertainties that would indicate the company’s past performance
• Describes the company’s ability to meet both short- and long-term cash requirements
• Is consistent and comparable from period to period and compared with past results, industry norms, and management expectations
• Provides additional insight, instead of simply repeating information from the financial statement footnotes
• Complies with the spirit of relevant professional and regulatory disclosure requirements, reporting not just the form, but the substance.
• Provides forward-looking perspective about expected trends of the business, market, industry, competitive factors, etc.
• One philosophy regarding disclosure and transparency is to view information required for regulatory or statutory reporting as the
minimum the company should disclose. Audit committee members should then consider what additional information would be important to
investors and other users of financial reports.
 Disclosure and Transparency in
Indonesia
• The Indonesian Financial Services Authority (Otoritas Jasa Keuangan – “OJK”) issued OJK Regulation No.
31/POJK.04/2015 on December 22, 2015 regarding Disclosure on Material Information or Facts by Issuers or
Public Companies (“POJK No.31/2015”).
• The regulation material information and facts defined as important and relevant information or facts in any events
or regarding any facts which may affects (i) the listedshares price and/or (ii) the decision of shareholders,
prospective shareholders, or any other party who has an interest of such information or facts (the “Material
Information”).
• An Issuer shall provide a report to OJK and make an announcement to the public of the occurrence of any
Material Information. The announcement shall include the following: (i) the date of an event, (ii) types of Material
Information, (iii) description on the Material Information, and (iv) the impact caused by such Material Information.
• Based on POJK No.31/2015, the announcement obligation to the public falls under two categories, namely:
• for a listed company, the announcement shall be made through its website (in Indonesian and English
language, and any other foreign language (optional)), the Indonesian Stock Exchange’s (IDX) website, as well
as at least 1 (one) national newspaper; and
• for a non-listed company, the announcement shall be made through its website (in Indonesian and English
language, and any other optional foreign language (optional)) as well as at least 1 (one) national newspaper.
 Case : Bank Bukopin
• PT Bank Bukopin Tbk revised its financial statements for the last three years, on 2015,
2016 and 2017.
• The financial statements were audited by EY affiliates in Indonesia, namely the Public
Accounting Firm (KAP) Purwantono, Sungkoro and Surja.
• It is because the modification of credit card data that Bukopin has been done more than 5
years ago. The number of modified credit cards is more than 100,000 cards. This
modification caused the position of credit and Bukopin's commission-based income to
increase improperly.
• Revisions also occur in the financing of the Bank Syariah Bukopin subsidiary (BSB) related
to the addition of the reserve balance of certain debtor impairment losses. As a result, the
allowance for impairment losses on financial assets was revised up from Rp 649.05 billion
to Rp 797.65 billion. This caused the company's burden to increase by Rp 148.6 billion.
 Analysis
• Executives from Bosowa who handle Bank Bukopin are Muhammad Rachmat Kaimuddin who
served as Commissioner from 2014 to 2018, and Eko Rachmansyah Gindo who served as
Director of Finance from 2015 to 2018.
• Regarding the recording of BSB Bank credit card and financing/receivables, this seems to be
more due to the Financial Reengineering carried out by the previous Management.
• The new management found out about the wrong practice and try to restate the financial
statement based on the standard of accounting practices.
• In general terms, board accountability is about taking responsibility for all of a company’s
activities and presenting a fair, balanced and understandable assessment of an organisation’s
position and prospects to stakeholders.
• It proves that Bukopin has a problem in the Board Accountability, that are not fulfilling the criteria
that has been explained on the theory, especially on the financial and operating results of the
company.