Title: EVALUATION OF THE ROLE OF INTERNAL AUDITORS IN IMPLEMENTING GOOD CORPORATE GOVERNANCE: Case Study at PT Semen Gresik (Persero) Tbk.
Author: ARIEF GASTRI TJAHJONO
Affiliations: Master of Accounting Study Program, Faculty of Economics and Business, Universitas Airlangga Surabaya
Publisher: Universitas Airlangga
Abstract
Nowadays, the demand for the realization of good corporate governance (GCG) in every public and private sector, both in international countries and in Indonesia, is increasingly important. This demand is a natural thing because various studies have shown that the economic crisis in Asian countries, especially in Indonesia, is due to bad governance from economic actors. This can be seen through research, that the corporate governance ranking score in Asian countries shows that Indonesia has a score of 8.29, which is in 9th place out of 11 countries in Asia. Besides that, investors' views on the quality of GCG in Asia say that Indonesia is on an index of 1.1, this shows that it is very poor among Asian countries.
The low quality of GCG implementation will affect investor confidence in investing capital in Indonesia. This is one of the factors that prolongs the economic crisis in Indonesia. The poor implementation of GCG in Indonesia shows that economic actors still do not understand and understand the concept of good corporate governance so that each person has a different view regarding what is meant and the benefits of implementing GCG in a company.
It is said that economic actors still lack understanding of good corporate governance, so the consequence is that bad governance occurs in business practices. Bad governance from management causes huge losses which result in bankruptcy of large companies both internationally and in Indonesia. Another thing that causes companies to go bankrupt is the failure of legal audits for both external legal auditors and internal legal auditors in detecting fraud and the ability to reveal what is actually happening within the company. This is due to the lack of independent attitude of the auditor. Especially for internal auditors, they cannot maintain independence because their scope is limited by management. Besides that, internal auditors have unprofessional behavior and inadequate competence.
Failure in company management will hinder the nation's economic growth. For this reason, the government's focus is to prevent and overcome failures in company management, through the Decree of the Minister of BUMN No: Kep-117/M-MBU/2002 concerning the implementation of GCG in BUMN. Article 2 paragraph 1 states that State-Owned Enterprises (BUMN) are obliged to implement good corporate governance (GCG) consistently and/or make GCG an operational basis.
Implementing good corporate governance (GCG) in companies, the role of internal auditors is very important because internal auditors can help management by evaluating the control system and pointing out weaknesses in internal control. Apart from that, internal auditors can act as management partners who can contribute ideas about business management, including detecting risks and providing suggestions for overcoming company risks so that organizational performance can be realized. However, in practice, internal auditors still play little role in implementing GCG. This is because structurally internal auditors are in a difficult position to be independent and objective.
To get an idea of the effectiveness of the role of internal auditors in implementing good corporate governance at PT Semen Gresik (Persero) Tbk, it is very important to evaluate the activities of internal auditors in order to realize GCG. The results of this evaluation can become a basis for internal auditors to improve the performance of internal auditors. Besides that, internal auditors can increase their role in helping management to make optimal contributions in order to provide added value to the company.
Based on the background above, the problem of this qualitative study is "Evaluation of how effective the role of internal auditors is in relation to good corporate governance?"
The purpose of this research is to determine the effectiveness of the role of internal auditors in supervising and improving the effectiveness of the internal control system by conducting operational audits and compliance audits, and to determine the role of internal auditors in contributing to company risk management. Apart from that, to find out the implementation of good corporate governance in companies and evaluate the role of internal auditors in implementing GCG.
This research is qualitative research using a single case study approach with multi unit analysis. This research is more directed at evaluating the role and activities of internal auditors in relation to the implementation of good corporate governance. This research was conducted on internal audit staff and auditees as well as the Audit Committee, which provides an overview of the role of internal auditors in implementing GCG. This research was carried out in two stages, namely: 1) the initial stage was depth interviews (direct interviews), observation and documentation, 2) the stage where confirmation was carried out, grouping answers and then interpretation of the data.
The research results show that the role of internal auditors in implementing good corporate governance is effective, although not 100%, but overall it is adequate. It is said to be effective because the internal auditor has attempted to carry out his responsibilities in supervising the control system in all company activities very well and has always tried to improve the quality of performance. All internal auditor activities in conducting company operational audits and the Semen Gresik Management System are carried out in accordance with existing mandatory regulations and based on the Annual Supervision Work Program (PKPTP) as well as implementing procedures and supported by adequate documents. Apart from that, the new paradigm of the internal auditor's role is as a consultant for the auditee and also as a catalyst between divisions with the aim of creating good communication with the auditee as well as between the auditee and the auditee.
The effectiveness of the role of internal auditors in helping management to create a healthy and successful organization can be seen from their seriousness in carrying out their functions well, so that over time there are developments in company management. This can be seen from the company's GCG implementation which is already at an acceptable stage and to this day improvements are being made in all aspects of company management to move towards the best practice. The development of GCG implementation can be seen that the company's financial performance increases every year and in 2005 profits increased 106.5% from the previous year.
This research has limitations because it does not entirely carry out direct observations of the assignment process of internal auditors but only through a review of existing evidence. Besides that, there are obstacles to interviewing top leaders (directors), so that the conclusions drawn are seen in the context of time constraints.
Keywords: Internal Auditor, Good corporate governance, monetary performance
Sources: http://repository.unair.ac.id/36299/