The Role of the KAP in an IDX Listing: What to Expect from Your Auditor

The auditor, or KAP (Kantor Akuntan Publik), occupies a specific and non-negotiable role in the Indonesian IPO process. Its opinion on the company's financial statements is a required component of the prospectus. Without a clean audit opinion from an OJK-licensed KAP, the registration statement cannot be filed and the IPO cannot proceed.

Yet many companies approach the KAP relationship without fully understanding what it requires, what it constrains, and how to manage it effectively through the listing process.

The OJK licensing requirement

Not all KAPs in Indonesia are licensed to audit companies seeking a capital market listing. OJK maintains a separate register of KAPs authorised to perform capital market-related audit work. This register is publicly available on OJK's website.

Before engaging an auditor for IPO purposes, the company must verify that the specific KAP, and the specific partner who will sign the audit opinion, both hold active OJK capital market licences. Large international affiliate firms (the Big Four and several large national firms) generally hold these licences. Mid-tier and regional firms often do not.

If your company has been audited by a KAP that does not hold an OJK capital market licence, those audit reports cannot be submitted directly in the prospectus. The company will need to engage a licensed KAP to re-perform the audits, which adds time and cost to the preparation process.

What the auditor reviews for the prospectus

For a standard IDX listing, the prospectus requires:

• Audited financial statements for the two most recent full fiscal years (Papan Pengembangan) or three years (Papan Utama).
• A review report on interim financial statements, typically the most recent six-month period, if the filing date is more than three months after the last audited fiscal year end.
• A comfort letter issued by the KAP to the underwriter, confirming that the financial information in the prospectus is consistent with the audited statements.

The KAP also reviews the financial information included throughout the prospectus, not just in the financial statement section. Any financial data cited in the business description, management discussion and analysis, or use of proceeds section must be consistent with the audited statements. The auditor's comfort letter provides the underwriter's required assurance on this consistency.

Managing the auditor relationship

The IPO audit process is more demanding than a standard annual audit in several respects. The timeline is compressed. The level of scrutiny from OJK is higher. The auditor must be prepared to respond to OJK comment letters within defined timeframes.

Companies that manage this relationship well do several things consistently. They engage the KAP early, well before the formal prospectus preparation begins, and give the auditor time to understand the business and identify any accounting issues that need to be addressed. They maintain clean, organised financial records throughout the preparation period. And they treat the auditor as a technical partner in the process, not a counterparty to be managed at arm's length.

When the auditor finds something

During the audit process for IPO purposes, it is not uncommon for the KAP to identify accounting treatments that need to be revised, related-party transactions that require additional disclosure, or revenue recognition practices that should be restated. These findings are not unusual. What matters is how they are addressed.

A company that has prepared thoroughly, normalised its financials before engaging the auditor, and disclosed related-party matters proactively will find the audit process more straightforward. A company that presents its financials to the auditor without prior preparation, expecting the audit to be a simple endorsement, will find that assumptions were incorrect.

The audit is a substantive review. Preparing for it as such is the most efficient path through it.