Auditing is not just an administrative formality — it is an important instrument to ensure accountability, compliance, and business sustainability. This article discusses in detail the reasons why a company needs to be audited, the purpose of the audit, the risks if it is not audited, the factors that require an audit, the types of companies that need to be audited, the role of internal audit, as well as a brief explanation of audit obligations related to turnover.
Why Do Companies Need To Be Audited?
Audits provide independent assurance of the company's financial and operational information. The main benefits include:
- Increase the credibility of financial statements in the eyes of investors, creditors and business partners.
- Finding weaknesses in internal control so that management can make improvements before problems develop.
- Detect and preventing fraud(fraud) or deviation of operational procedures.
- Meet compliance requirements against legislation, contracts, or banking conditions.
In other words, audits help reduce asymmetric information between management and stakeholders, while strengthening corporate governance.
What is the main purpose of the Audit in the company?
It can be divided into two main types (external audit) and internal goals (internal audit), but generally include:
- Provide an independent opinion that the financial statements are prepared reasonably in accordance with applicable accounting principles.
- Assessing compliance against regulations, internal policies, and third party requirements (e.g. banks, investors).
- Identifying material risks - financial, operational, or compliance — and recommend mitigation.
- Improving the quality of internal control, business processes, and operational efficiency.
These objectives support sound governance and data-driven decision-making.
What happens if the company is not audited?
The absence of audits opens up some real risks:
- Errors or manipulation of financial statements undetected, potentially misleading stakeholders.
- Decline in investor and creditor confidence, which can make it difficult to access financing or damage reputation.
- Legal or administrative sanctions when the audit is a regulatory or contractual obligation. (The following section describes legal obligations.)
- Loss of business opportunity - strategic partners often request audited reports before signing a contract.
In short, unaudited = greater exposure to financial, legal, and reputational risk.
What makes a company audited?
Some of the triggers for audit obligations include:
- Legislation: Limited Liability Company Law (Law No.40/2007) and the capital market regulations regulate the conditions when financial statements must be audited. For example, the PT Law contains criteria that force the annual report of a PT to be audited by a public accountant.
- Financial sector regulatory provisions: Issuers, banks, and financial institutions are subject to OJK rules that require the submission of audited periodic financial statements.
- Third party requirements: Bank lenders, investors, or bondholders often require audit reports as a condition of granting facilities.
- Contractual clauses and shareholder interests: Board members, majority investors, or strategic investors may require audits to ensure transparency.
Thus, audit obligations arise from a combination of laws, regulators, and business needs.
What companies need to be audited?
Not all entities are required to be audited at all times; however the following groups generally necessary or recommended for auditing:
- Limited liability company (PT) that meet certain asset/turnover criteria according to the law.
- Public company (Tbk) and issuers traded in the capital market.
- Companies with significant external financing (bank, investor VC/PE) — audit menjadi persyaratan due diligence.
- Financial institutions, insurance, pension funds, and entities that raise public funds - subject to special regulation and strict audit.
- Companies that choose good governance models: even medium-sized private companies should conduct regular audits to evaluate risks and increase credibility.
The decision to conduct an audit also depends on business strategy, shareholder expectations, and capital access needs.
Why Do Companies Need An Internal Audit?
Internal Audit is different from external audit: its function is more pencegahan, continuous improvement, dan advisory. Benefits of internal audit include:
- Continuous Assurance on the effectiveness of internal control and risk management.
- Early detection of process weaknesses and recommendations for operational improvements thereby reducing costs and long-term risks.
- Support compliance to internal policies and external regulations before major issues arise.
- Assist strategic management with risk-based insights for better resource allocation.
- Coordination with external audit: internal audit reports and findings often accelerate the external audit process and reduce costs.
A healthy organization views internal auditing as an integral part of corporate governance, not merely a control function.
Is turnover above Rp50 billion required to be audited?
Practically: yes - for certain categories according to the Limited Liability Company Law, the company's financial statements must be audited if the company has total assets or total business turnover of at least IDR 50,000,000,000.00 (fifty billion rupiah) or if otherwise regulated by laws and regulations. This provision is contained in the related article of Law No. 40 in 2007.
Important notes:
- This obligation applicable to corporate entities (PT) and its technical implementation may be affected by implementing regulations, business sectors, and OJK provisions for supervised entities.
- For tax and other regulatory purposes, there are also specific provisions governing when audits are required; therefore it is best for companies to consult with a public accountant or legal advisor to ensure compliance.
Recommendations for the right time to conduct an Audit
To maximize the benefits of auditing, companies should:
- Setting annual audit schedule for external audits (if required) and Risk-Based internal audits throughout the year.
- Using risk-based audit: focus on areas that pose material risks (recording of income, inventories, cash, large contracts).
- Integrate technology (digital audit tools, continuous monitoring) agar audit lebih efisien, cepat, dan relevan.
- Follow up the audit findings with action plan clear, timeline, and progress monitoring.
Auditing is not the end goal; it is the implementation of recommendations that creates value.
Get the right Audit tools for your business
Auditing is the foundation of good corporate governance: ensuring financial statements are trustworthy, minimizing risks, and maintaining stakeholder trust. Both companies that are required by law and those that do so for strategic reasons, audits provide real value for business sustainability.
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