Disclosure of Weaknesses and Effectiveness of Internal Control in Indonesia

Authors

  • Alfita Rakhmayani Vocational School, Diponegoro University, Indonesia
  • Maya Aresteria Vocational School, Diponegoro University, Indonesia

DOI:

https://doi.org/10.34010/icobest.v4i.486

Keywords:

Disclosure, Internal Control, Weaknesses, Effectiveness

Abstract

Internal control plays an important role in managing the company's resources to achieve its goals, guarantees that the financial reports presented can be trusted and ensures that there are no violations of the provisions committed by the company. However, parties outside the company cannot know directly the implementation of internal control that has been carried out. Adequate disclosure can help stakeholders to assess the quality of the company's internal control system. Section 302 and Section 404 of SOX state that management is responsible for establishing and maintaining the company's control system as well as disclosing weaknesses and providing management's assessment of the company's internal controls. This study aims to conduct a review of the provisions for disclosing internal control in Indonesia through a literature review and analysis of item descriptions of disclosures for companies that are members of the 2020 IDX80. The results of the study indicate that disclosure of internal control in Indonesia has been regulated by the Financial Services Authority but has not detailed for disclosure of weaknesses and effectiveness of internal control. The implication is that not all companies disclose the effectiveness of internal control. The results of the analysis show that there are still 28.21% of companies that have not declared the effectiveness of their internal controls. Meanwhile, for internal control weaknesses, no company has yet disclosed them in the annual report. In order for a company to disclose the effectiveness and weaknesses of its internal control, it is necessary to have provisions that clearly explain the content of the disclosure.

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Published

2023-03-31

How to Cite

Rakhmayani, A. ., & Aresteria, M. . (2023). Disclosure of Weaknesses and Effectiveness of Internal Control in Indonesia. Proceeding of International Conference on Business, Economics, Social Sciences, and Humanities, 6, 1104-1109. https://doi.org/10.34010/icobest.v4i.486