THE ACCOUNTING ROLE IN GOOD GOVERNANCE

IMPLEMENTATION IN PUBLIC SECTOR

Arranged by:

RESKY ANDIKA YUSWANTO

B1034151017

AKUNTANSI KELAS INTERNASIONAL

FAKULTAS EKONOMI DAN BISNIS

UNIVERSITAS TANJUNGPURA

2017
FOREWORD

Praise and gratitude I send to the presence of Allah SWT because with the
grace I can finish this paper.

This paper is prepared for the purpose of completing the final exam of
Public Sector Accounting with the topic of The Accounting role in good governance
implementation in public sector.

I am sorry if in this paper there are still many wrong writing and many words
that are not standard. Hopefully readers can enjoy this paper we write and hopefully
this material is useful. Thanks.

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TABLE OF CONTENT

FOREWORD

………………………………................................................................................. 1

TABLE OF CONTENT
................................................................................................................................. 2

CHAPTER I PREFACE

1.1 Background ...................................................................................................... 3

1.2 Problem Formulation ....................................................................................... 4

1.3 Objectives ......................................................................................................... 4

CHAPTER II DISCUSSION

2.1.1 Definition of public sector accounting .......................................................... 5

2.1.2 Purpose and objectives................................................................................... 5
2.1.3 Fundamentals of Law / Principles …………………………........................ 5

2.2.1 Definition of good governance ……………………...................................... 6

2.2.2 Purpose and Objectives ................................................................................ 6

2.2.3 Fundamentals of Law / Principles .................................................................6

2.3 The implementation of Good Governance in indonesia public sector ............... 9

2.4 The role of accounting for implementing good governance in Public Sector…13

CHAPTER III CONCLUSION

……………………………............................................................................ 17
BIBLIOGRPAHY
………………………………........................................................................ 19

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 CHAPTER I

PREFACE

1.1 Background

An accountant is one of the professions involved in organizational management.

Involvement of an accountant includes one part of management to perform the
function as a provider of financial information presented in the financial statements
of the organization. As an accountant, the profession is part of organizational
management so that he is directly involved in organizational activities to motivate
management and employees to achieve organizational goals and prevent them from
deviant behavior from desirable in order to achieve organizational goals in the short
and long term. This will indirectly help the successful implementation of good
governance (GG). With the implementation of GG, in the long run can improve the
performance of the organization. During this time the public sector is blamed as the
main cause of corruption, collusion, nepotism, inefficiency and sources of waste of
the country. Indonesian government as one of the public sector organizations did
not escape from this accusation.

In the period 2004-2007, the Financial and Development Supervisory Board

calculated the state suffered losses of up to Rp 12.2 trillion. The loss was caused by
mistakes in the management of state finances. The loss is Rp 9 trillion and more
than US $ 10 million. Indicated corruption almost Rp 2 trillion. Based on the results
of the BPKP investigation audit, the state losses consisted of 636 cases of corruption
crimes worth Rp 1.9 trillion, 1,876 cases not corruption of Rp 1.2 trillion, and 1,266
cases of mismanagement of Rp 9.1 trillion.

This shows that the government has not applied the principle of good
governance. Especially for Accountability that is one of the main needs in good
governance. Not only for government institutions, but also the private sector and
civil society organizations must be acknowledged by the public and its
stakeholders. In general, an organization or institution is accountable to those who

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are affected by their actions or decisions. Accountability can not be enforced
without transparency and rule of law.

Article 7 of Law Number 28 Year 1999 explains that the meaning of

'Accountability Principle' is the principle which determines that every activity and
final result of the activities of the State Operator must be accountable to the public
or the people as the highest sovereign of the State in accordance with the provisions
of the legislation applicable. Therefore a person who receives a mandate must be
held accountable to the person who gives him trust.

1.2 Problem Formulation

• What is public sector accounting and good governance?
• What is the relation between public sector accounting and good governance?
• What are the principles of good governance / principles?
• How is the implementation of Good Governance in Indonesia Public Sector?
• What is the role of accounting for implementing good governance in Public
Sector?

1.3 Objectives
• To know the meaning of public sector accounting and good governance
• To understand the relation between public sector accounting and good
governance
• To know the principles of good governance / principles
• To understand the role of accounting for implementing good governance in
Public Sector

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 CHAPTER II

DISCUSSION

2.1.1 Definition of public sector accounting

Public Sector Accounting is a process for collecting, recording, classifying,

analyzing and reporting financial transactions for a public organization that
provides financial information to those who need it for use when making a decision.

2.1.2 Purpose and objectives

Objectives of Public Sector Accounting

 Management Control, the purpose is to provide the information needed to
manage an organization quickly, precisely, efficiently and economically on
the operation and use of resources entrusted / budgeted for an organization.
 Accountability, this goal is similar to management control that provides
useful information for public sector managers used to report on the
implementation of resource responsibilities / fields / divisions under its
authority. In addition to reporting activities to the public on government
operations as well as the use of public funds / budget.

2.1.3 Fundamentals of Law / Principles

According to Decentralization, the regions have the authority to organize their own
household affairs with details in the area of regional finance which include:

 The collection of regional revenue sources as referred to in Law No. 22 year

1999 article 79
 Financial management and accountability in the implementation of
Deconcentration, Co-Administration and Decentralization as contained in
Law No. 25 of 1999 Chapter IV, V and VI

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  Determination of regional budget (APBD) and calculation of APBD, as
referred to in Law No. 25 year 1999
 Received equalization funds in the form of general allocation funds and
special funds as regulated in the Law no.25 year 1999 and PP no.104 year
2000 balance funds
 Conducting regional loans as stipulated in the PP no.107 year 2000 Regional
loans

2.2.1 Definition of good governance

Good Governance is an agreement on state arrangements created jointly by

governments, civil society, and the private sector. Good Governance is also a set of
rules governing the relationship between shareholders, managers (managers of the
company), the creditor, the government, employees, and other internal and external
stakeholders related to their rights or obligations, or in other words a system which
governs and controls the company.

2.2.2 Purpose and objectives

Use and exercise political, economic and administrative authority to be well

organized. Therefore, in practice, the concept of Good Governance must have
support from all parties, namely state (government), private (private) and society
(society).

2.2.3 Fundamentals of Law / Principles

Principles of Good Governance and Its Application

The principles of Good Governance consist of: Fairness, Transparency,

Accountability, and Responsibility. As explained as follows:

1. Fairness (Fairness / Justice)

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 The principle of 'Fairness or Fairness' can be defined as efforts and actions that
do not differentiate all stakeholders (stakeholders) against the organization or
related companies. This principle is manifested, among others, by:

a. Establish a corporate law that protects the interests of minority

shareholders;
b. Establishing corporate conduct and / or policies protecting
corporations against insider misconduct, self-dealing and conflict of
interest;
c. Establish the roles and responsibilities of the board of
commissioners, directors, committees including remuneration
system; and
d. Provide reasonable information or full disclosure of any material.

2. Transparency

In this principle, shareholders should be given the opportunity to play a role

in making decisions about fundamental changes in the company and can obtain
correct, accurate and timely information about the company. Simply put, this
principle does not want the various stakeholders to be misled or will not make the
wrong conclusions or decisions about the company. In practice, the company should
be obliged to disclose important transactions related to the company, such as high
value contracts with other companies, risks faced and company plans / policies to
be implemented. This principle is manifested, among others, by:

a. Developing accounting systems that are based on accounting

standards and best practices that ensure the availability of quality
financial statements and disclosures;
b. Develop information technology (it) and management information
system (mis) to ensure adequate performance measurement and
effective decision-making process by board of commissioners and
directors; and
c. Develop enterprise risk management that ensures that all significant
risks have been identified, measured and manageable at a clear level
of tolerance.

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3. Accountability (Accountability)

Accountability can be interpreted as clarity of functions, implementation,

and accountability of organiza- tion so that the management of the company is
implemented effectively. The OECD states that this principle relates to the
availability of systems that control relationships between the organs within the
company. Furthermore, this principle of accountability can be applied by
encouraging all organs of the company to recognize their respective responsibilities,
powers, rights and obligations. Corporate governance should ensure the protection
of shareholders, especially the minority and foreign shareholders and the clear
limits of power in the board of directors.

The realization of this principle can be the establishment and development

of an audit committee that can support the implementation of the board of
commissioner's oversight function, as well as a clear formulation of the internal
audit function. Especially for the field of accounting, the preparation of financial
statements in accordance with the applicable SAK and published on time is also the
embodiment of this principle of accountability.

4. Responsibility (Responsibility)

The OECD maintains that this principle of responsibility emphasizes the

existence of a clear system for regulating corporate accountability mechanisms to
shareholders and stakeholders. It is intended that the goals to be achieved in good
corporate governance can be realized, namely to accommodate the interests of
various parties related to companies such as society, government, business
associations, and so on.

This principle of responsibility also relates to the company's obligation to

comply with all applicable laws and regulations, as well as the principles governing
the preparation and presentation of the Company's Financial Statements.

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 In the Decree of the Minister of SOEs no. KEP-117 / M-MBU / 2002
explained that in addition to the above four principles, there is one more principle
that is the principle of Independence (Independence), where according to this
principle a company must be managed professionally without any conflict of
interest and influence or pressure from any party that does not comply with
applicable laws and regulations and sound corporate principles.

2.3 the implementation of Good Governance in indonesia public sector

In order to support the realization of good governance in the implementation

of State, the management of State finances needs to be held professionally, openly
and responsibly. The manifestation of State financial management is the State
Budget (APBN) which is the main tool of the government to prosper the people and
at the same time the government tool to manage the state economy. Therefore, the
preparation, implementation, and accountability of the APBN must use a reference
based on laws and regulations that have improved the budgeting process in the
public sector so as to support the realization of good governance.

Since a few years ago, the Government Financial Management Reform has
been carried out. The Reformation has a strong legal foundation with the enactment
of Law Number 17 Year 2003 regarding State Finance, Law Number 1 Year 2004
on State Treasury, and Law Number 15 Year 2004 regarding Audit of State
Financial Management and Accountability. In addition, the application of the
principles of good governance is very important in the implementation of the central
government budget to realize welfare and equity. However, various problems still
arise in the implementation of the central government budget. Since the New Order
era the problem faced is the gap between planning and implementation. The
approved budget is not always usable and is not absorbed in a defined program. The
problem of slow absorption of the budget is also a routine every year, even the
disbursement of the central government budget tends to be implemented in the
second half, especially in November and December.

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 In addition, information disclosure and certainty of time are still much
complained by the private sector and the public in the implementation process of
the central government budget. According to Bambang P.S. Brodjonegoro, good
governance in the context of state financial management should not be synonymous
with the old and complicated budget disbursement process, but must be realized in
a timely and relatively simple process with due regard to the principle of decision
and propriety.

Communities still consider public services carried out by bureaucracy tends

to be slow, unprofessional, and expensive. The bad picture of bureaucracy is
bureaucratic organization of fat and inter-agency authority overlapping; systems,
methods, and work procedures are not orderly; civil servants not yet professional,
not yet neutral and prosperous; corruption, collusion and nepotism practices are still
rooted; coordination, integration, and program synchronization have not been
directed; as well as the discipline and work ethic of the state apparatus is still low.
Opinion about the poor all services conducted by bureaucracy according to Pandji
Santosa is a blurring of the meaning of bureaucracy that develops in society and
continues to take place by the silence of society.

These conditions reflect bad governance in the bureaucracy in Indonesia.

The governance paradigm has shifted from government to governance emphasizing
collaboration in equality and balance between government, the private sector and
civil society. Public service becomes the benchmark of the success of task
implementation and measurement of government performance through
bureaucracy.

Good Governance in Indonesia itself began to really pioneered and applied

since the eruption of Reformasi era where in that era there has been an overhaul of
the government system demanding a clean democratic process so Good Governance
is one of the tools of Reformation that is absolutely applied in the new government.
However, when viewed from the progress of the Reformation that has been running
for 12 years, the implementation of Good Governance in Indonesia can not be said
to succeed fully in accordance with the ideals of the previous Reformasi. There is

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still a lot of cheating and leakage found in the management of budget and
accounting which are the two main products of Good Governance.

However, it does not mean that it fails to be implemented, many efforts

made by the government to create a good climate of Good Governance, among
others are the start of public information transparency on the state budget so as to
facilitate the community to participate in creating policies and in the process of
supervising the management of the state budget and SOEs. Therefore, it can
continue to be a reference to the managerial accountability of the public sector so
that future is better and credible in the future. Laws, regulations and institutions
supporting the implementation of Good governance were formed. This is very
different when compared to the public sector in the Old Order era which many
politicized the management and also in the New Order era where the public sector
is placed as an agent of development rather than as a business entity so it is still
thick with a regime that greatly inhibits the birth of Good Governance-based
governance.

The Government has made various efforts to realize good governance in the
management of state finances. Legislation has been made in the package of state
finance management law, namely Law No. 17 of 2003 on State Finance, Law No.
1 of 2004 on State Treasury, and Law No. 15 of 2004 on the Audit of State Financial
Management and Accountability.

In the Elucidation of Law of the Republic of Indonesia Number 17 Year

2003 regarding State Finance that the general principle of state financial
management in order to support the realization of good governance in the
implementation of state, the management of state finances should be organized in
an orderly, obedient, efficient, effective, transparent and responsible manner with
the basic rules set forth in the Constitution. In accordance with the mandate of
Article 23C of the Constitution, the Law on State Finances has set out the basic
rules set forth in the Constitution into general principles in the management of state
finances, such as the annual principle, the principle of universality, the principle of
unity, and the principle specialization and principles as a reflection of best practices
in the management of state finances. Furthermore, in Government Regulation No.

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8 of 2006 it is explained that to improve the reliability of financial statements and
performance, each accounting reporting entity shall establish an internal control
system in accordance with relevant laws and regulations.

The implementation of Good Governance in Indonesia has not only brought

positive impacts in the government system but it is capable of bringing positive
impact to non-government entity by the birth of Good Corporate Governance. With
a strong foundation is expected to bring the nation of Indonesia into a government
that is clean and trustworthy.

Good governance touches 3 (three) parties namely the government (state

organizers), the corporate or business (economic movers), and civil society (find its
suitability). These three parties play a role and influence in the implementation of
a good state. Synchronization and harmonization between parties is a big answer.
But with the current state of Indonesia is still difficult to happen.

With various negative statements made against the government over the
current state of Indonesia. Many basic things that must be improved, which affect
the clean and good governance, including:

1. Integrity of Government Actors

The role of government is very influential, then the integrity of the principals of
government is high enough will not be affected even if there is an opportunity to
perform irregularities such as corruption.

2. Internal Political Conditions

For the realization of good governance political concepts that are not / less
democratic that have implications on various problems in the field.

3. Economic Condition of Society

Economic crisis can give birth to various social problems that if not resolved will
disrupt the overall performance of government.

4. Social Condition of Society

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A solid society and active participation will greatly determine the various
government policies.

5. The Legal System

2.4 The role of accounting for implementing good governance in Public Sector

The principle of public accountability is a measure that indicates how much

the level of service conformity with the size of the values or external norms owned
by stakeholders with an interest in the service. Thus, based on the stages of a
program, accountability of each stage is:

1. At the stage of the decision-making process, several indicators to ensure

public accountability are:
a. Making a decision must be made in writing and available to every citizen in
need
b. The decision-making has met the applicable ethical standards and values,
meaning in accordance with the principles of the correct administration and
values applicable to stakeholders
c. The clarity of the policy objectives taken, and is in accordance with the
vision and mission of the organization, as well as applicable standards.
d. There is a mechanism to ensure that the standards are met, with
consequences of liability mechanisms if they are not met.
e. Consistency and feasibility of established operational targets as well as
priorities in achieving those targets.
2. At the stage of policy dissemination, several indicators to ensure public
accountability are:
a. Dissemination of information about a decision, through mass media, media
nirmassa, and personal communication media
b. Accuracy and completeness of information related to how to achieve the
goals of a program
c. Public access to information on a decision after a decision is made and a
community grievance mechanism

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 d. Availability of management information systems and monitoring of results
achieved by the government.

To be able to develop and implement Good Governance required role of

accountant, either as accountant company and as practitioner of accounting and
auditing both internally and as external auditor. To prove that the company has been
running Good Governance, it is necessary to evaluate by independent third party to
the practice of corporate governance. These independent third parties are
accounting managers and public accountants.

The financial statements as set by the accounting standards should present the
information as is, without any attempt to cover up everything that should be
disclosed. This is regulated in IFRSs which clearly define the qualitative
characteristics that financial statements must meet. These characteristics consist of
understandable, relevant, reliable, and comparable. Fulfillment of the four
characteristics above will make the financial statements contain information that is
not misleading to the wearer. In addition, the basic understanding of the financial
statements is not only limited to the financial statements, but also includes notes on
the financial statements that will overall describe the complete condition finance,
results of operations and all things related to corporate finance. This fulfills the
transparency principle in the Good Governance concept that wants shareholders to
obtain sufficient, accurate, accurate and timely information so that shareholders do
not get lost in decision making.

Accounting standards require consistent use of methods or techniques and

principles, although accounting standards are permitted by companies to change
accounting methods used (eg methods in valuation of inventories, depreciation of
property and equipment), but the effects, disclosures and reasons for their
replacement should still be disclosed in the records of the financial statements. This
provision will clearly make the financial statements more qualified and useful
because the users can measure and compare the financial conditions and
developments and company performance over time. Thus the principle of
transparency of good corporate governance can be fulfilled.

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Accounting is neutral and independent. This neutral and independent attitude
applies in its entirety, not only theoretically but must also be reflected in the
attitudes and behaviors of accountants in their lives. This is set in the code of
conduct of the accountant. Thus the information prepared through the financial
accounting process will not be intended to be more advantageous for certain user
groups because it is not designed to meet the needs of one or more users, but is
prepared to meet the general needs of all types of users. So the neutral attitude and
independent of accounting and accountants will support the realization of good
corporate governance and fulfill the principle of "fair" in the concept of Good
Governance
One of the basic principles embraced in accounting is the principle of conservatism
(conservatism) which shows the attitude of prudence. This principle provides that
in the case of firms dealing with uncertainty, the financial statements should choose
numbers and positions that are less favorable. The Company has been able to record
an unrealized, but existing, unrealized loss, while the existing earnings of the
indication should not be recorded until the profit is realized. By embracing this
principle is clear that both the reporting of assets and the overstated or reverse
reporting of the understated obligations and expenses or losses will be avoided.
Accountants believe that by adhering to this principle the users of financial
statements are less likely to be misled (Schroeder et al., 2001). Thus adhere to the
principle of conservatism will support the creation of good corporate governance.
Management accountants based on business ethics and professions can provide
advice in accordance with the functions of management accounting that is the
problem of efficiency, support in the optimal decision-making process,
performance measurement, calculation and determination of remuneration
reasonable, and preparation of strategies that can improve the position of
competitiveness and of course also company performance. In addition, management
accountants can provide assistance to directors and board of commissioners to
prepare and implement Good Governance criteria in the company, to help provide
financial and operating data and other reliable, accountable, accurate, timely,
objective and relevant data. In addition, management accountants help directors to
develop and implement internal control structures.

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 Public accountant as an independent outsider is required to uphold the code of
ethics of the public accountant profession. The Code of Ethics of the Indonesian
Institute of Accountants provides eight principles covering professional
responsibility, public interest, integrity, objectivity, competence and professional
caution, confidentiality, professional conduct, and technical standards. The public
accountant conducts an examination of the client's financial statements, whether
presenting fairly and in accordance with generally accepted accounting principles.
The auditor's report will be used by various parties with an interest in the company
to make economic decisions, for which the auditor is required to be independent.
This independence attitude is needed in accordance with the function of public
accountant in supporting the implementation of good corporate governance.

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 CHAPTER III

CONCLUSION

Implementation of Good Governance in Indonesia which is only limited to the

concept discourse and far from its essence, can lead to fall for the management of
the state, because as good as any system applicable in our country, if the
government behave deviant and violate ethics and principal of Good Governance,
it can happen fraud practices are very harmful and can end up with fall of
management and can make the country loss. The implementation of Good
Governance requires the role of an accountant, either as a corporate accountant or
as an accounting and auditing practitioner either internally or as an external auditor.
Management accountants based on business ethics and professions can provide
advice in accordance with the function of management accounting. Public
accountant as an independent outsider is required to uphold the code of ethics of
the public accountant profession. In the Code of Ethics the Indonesian Institute of
Accountants set out eight principles of ethics covering professional responsibilities,
public interest, integrity, objectivity, competence and professional caution,
confidentiality, professional behavior, and technical standards. A public accountant
conducts an examination of the client's financial statements, whether presenting
fairly and in accordance with generally accepted accounting principles.

Accountants may play a role in corruption-proofing efforts through the

provision of audit investigation assistance, forensic audits, counting of state losses
and collection of material which will be used as evidence and evidence by law
enforcement. Accountants may also contribute greatly in providing expert
information to both the investigator and the judges in the trial of corruption.
In an effort to prevent corruption, accountants play a major role in providing
credible accounting information. Accountants are obliged to prevent the occurrence
of fraudulent financial reporting that occurs in many major financial scandals in the
world and in Indonesia. Besides, the accountants are also expected to assist the
government in preparing state financial managers who are reliable and integrity.
Accountants also play a role in calculating the impact of corruption. Quantification

17
of the impact of corruption will provide the basis for law enforcement and the
community to determine the actions that need to be taken for the eradication and
prevention of corruption, This is the real contribution of accountants in building a
corruption prevention system within the framework of development.
In addition, Moral and ethical emphasis should be the main focus of efforts to
eradicate corruption. Because corruption has grown so great as to become the new
"culture" in Indonesian society. To this end, this moral and ethical emphasis should
begin to be applied and taught to the lowest educational bench so that people are
accustomed to high moral and ethical systems and cultures. Without morals and
ethics, the "culture" of corruption will be very difficult to eradicate or eliminate.
Therefore, the hope to go to the so-called clean and good government will be
realized with the creation of a transparent information presentation system and
supported by professional morale and business ethics and accountants.

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