Enhancing Infrastructure Accountability: An In-Depth Exploration of Infrastructure Companies Audit

Infrastructure is defined as the basic facilities, whether physical or social, of a particular community or area needed for community or organizational activities. In this article, we delve into the crucial realm of infrastructure companies audit, encompassing the evaluation and assessment of various infrastructure projects.

These projects encompass a wide range of essential elements, including roads and railroads, airports, wharves, ports, irrigation canals, clean water availability with treatment plants and distribution pipelines, electricity supply, telecommunication networks, and energy supplies such as petroleum, biodiesel, and gas along with their respective distribution pipelines. It is important to recognize that infrastructure development initiatives can be funded by public, private entities, or through public-private partnerships, making comprehensive audits vital in ensuring accountability and efficiency within this dynamic sector.

Infrastructure Companies Audit

Infrastructure project funding systems by the private sector or public-private partnerships attract foreign investors to do business in Indonesia. Investment by the private sector can take the form of a Joint Operation (JO) with other private parties or a JO with an Indonesian-Owned Enterprise (BUMN) or a private entity. Like other business entities in Indonesia, companies in the form of Limited Liability Companies (PT) must comply with relevant laws and regulations, as well as Joint Operations.

Infrastructure Companies Audit: Financial Audit and Government Funding for Development

Infrastructure development is a long-term development that requires careful planning and requires a relatively high cost. The government allocates the state budget (APBN) for infrastructure development to improve the welfare of the general public. Infrastructure development funded by APBN will be subject to a financial audit by Financial Audit Board (BPK).

Financial Audit Process by BPK

A financial audit by the BPK is a process of examining the financial reports of the central government or local government to provide an opinion statement about the level of fairness of the information presented in the government’s financial reports. This financial audit aims to provide reasonable assurance that the government’s financial statements have been presented fairly in all material respects and in accordance with applicable accounting standards. In addition to financial audits, the BPK also conducts performance audits and audits with specific objectives.

Infrastructure Companies Audit Process

Meanwhile, private companies or BUMN or Joint Operations are audited by public accountants, as are companies or business entities in general. The audit stage for entities that build infrastructure uses a risk-based audit approach. Based on this approach, the auditor must determine the risks that exist during the inspection process, both inherent risks and internal control risks.

The innate risks that may exist in the audit process for companies that build infrastructure are inappropriate revenue recognition, fraud in financial reports, and management override. While the risks related to internal control that may be identified are related to the ineffectiveness of the development process between plans and physical development, improper budgeting, or authorization of the use of inappropriate budgets.

Auditor’s Role and Priorities

The main priority of the auditor is to understand project risks, assess the infrastructure controls that the company has exercised when taking on complex infrastructure projects and ensure that project performance is reflected properly in the financial statements. At the start of assessing a large infrastructure project, auditors generally do not have enough information, which means there is an estimate of risk that needs to be considered from the start of the project.

Challenges in Infrastructure Projects

Many projects that start out having problems tend to deteriorate continuously until there is intervention, problem identification, and correction. It’s all about getting projects back on track – and quickly given the sheer volume of investment in infrastructure projects. The issues of wastage and sustainability are key aspects of all projects. The construction sector is subject to increased scrutiny in the prevailing business environment. In addition, there are climate risks and social risks that need to be understood.

Importance of Sustainability and Transition to Zero Carbon

It should be understood that investors are increasingly interested in seeing what companies are actually doing regarding climate change and behaving appropriately in a sustainable effort. The next step may be a global standard for environmental reporting, in the same way, that accountants have accounting standards. Investors are already interested in looking at the sustainability aspect and it is becoming increasingly important in the transition to zero carbon.

Stages of Infrastructure Audit Process

In general, the infrastructure audit process consists of 3 stages, namely the pre-engagement, planning, implementation, and reporting stages:

Planning Stage: Sample Selection and Coordination with Expert

At the planning stage, the inspection implementation of the selected samples will be tested and examined in depth, especially for infrastructure work projects, both those that have material value on a contractual basis, the degree of difficulty in carrying out the work, as well as project locations in remote areas. In addition, the auditor can coordinate with independent experts regarding the implementation of inspections that require certain technical qualifications, especially if the inspection requires testing of the quality of work. Documents that are usually collected at the beginning of the inspection are such as initial planning design drawings for work, Terms of Reference (KAK) for work implementation, bill of quantity, and self-estimated price Self-estimated Price (HPS) for infrastructure development projects.

Implementation Stage: Analysis of Planning Documents and Physical Inspections

At the implementation stage, the audit process begins with communicating and coordinating with the audited entity regarding the initial discussion plan and carrying out a field physical inspection of the inspection sample. The auditor will carry out an analysis of technical planning documents related to the appropriateness of the calculation of the quantity and price in the project, as well as changes in the volume of work carried out during the execution of the work.

Then, the auditor will analyze the suitability of the job description in the contract with the general conditions, special conditions, and technical specifications of the contract that regulate the implementation procedures and methods of measurement and payment to service providers. Field physical inspections also need to be carried out to test the suitability of the method of work implementation, volume, and specifications of work carried out by the party being inspected by comparing it with contracts or work implementation documents which are used as a reference in implementing the project.

Reporting Stage: Preparation of Audit Report and Key Audit Matters (KAM)

At the reporting stage, the independent auditor will prepare a report on the results of the inspection after the audit has been completed. In the financial statements for the 2022 financial year in Indonesia, an independent auditor’s report on examining the financial statements of companies listed on the capital market is required to include Key Audit Matters (KAM). The presence or absence of KAM is following the results of the auditor’s professional judgment which is the most significant thing in the financial statement audit that has been carried out.

Auditor’s Role in Infrastructure Projects

Auditors need to educate clients that the profit of an infrastructure project is important, so they need to be more efficient and financially careful. Furthermore, the auditor leads the decision-makers of business infrastructures to care about climate change. Their project impact may lead to increased costs, future hurdles that must be accommodated, sustainability issues, and ultimately there may be questions about expected returns. It comes down to looking at the overall business model and the strategic risks that will affect that business model and how the company will manage risks and report on them in the future.

With the infrastructure audit process that continues to experience development, it is hoped that the auditor will be able to provide significant findings and recommendations to make infrastructure developments carried out by the government better, more effective, and more efficient. If infrastructure developments improve and budget planning becomes more effective, economic growth, both at the national and regional levels, will increase, reduce unemployment, overcome poverty, and improve people’s welfare.

At SW Indonesia, we specialize in providing expert assistance and guidance for infrastructure companies audits. Our experienced team is dedicated to helping businesses navigate the complex audit process, ensuring compliance, risk management, and sustainable practices. Whether you need support in financial audits, risk assessment, or strategic planning, we are here to help. Contact us today at +62 2993 2132 to discover how our tailored solutions can enhance your infrastructure audit experience and drive success. Trust SW Indonesia for comprehensive support in your journey towards infrastructure accountability.


  • SW Indonesia

    As the webmaster and author for SW Indonesia, I am dedicated to providing informative and insightful content related to accounting, taxation, and business practices in Indonesia. With a strong background in web management and a deep understanding of the accounting industry, my aim is to deliver valuable knowledge and resources to our audience. From articles on VAT regulations to tips for e-commerce taxation, I strive to help businesses navigate the complexities of the Indonesian tax system. Trust SW Indonesia as your go-to source for reliable and up-to-date information, empowering you to make informed decisions and drive success in your business ventures.

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