5 Basic Principles of Accountant Ethics Violated by PT Asuransi Jiwasraya

Meiyo Glori Tarigan (2330203030176) 

Riskyanto Sutrisno   (2330203030147) 

Dosen pengampu VERRA RIZKI AMELIA, S.E., M.ACC.

5 BASIC PRINCIPLES OF ACCOUNTANT ETHICS VIOLATED BY PT ASURANSI JIWASRAYA

Professional ethics are a very important foundation for every profession, especially for accountants who play an important role in ensuring transparency and accuracy of the company's financial reports. However, violations of ethical principles often occur, one of which is the scandal involving PT Asuransi Jiwasraya. 

The case of PT Asuransi Jiwasraya has become a public concern because the losses suffered by the company were quite large due to manipulation of financial reports and irresponsible investment decisions. This violation not only resulted in financial losses, but also tarnished the good name of the company and the accounting profession as a whole. 

In this context, it is important to understand the basic principles of accountant ethics that were violated in PT Asuransi Jiwasraya which became one of the biggest financial scandals in Indonesian history. It is important to understand the 5 basic principles of ethics violated by the parties involved, especially in the financial scandal that resulted in state losses of up to billions of Rupiah.

1. Integrity

 The principle of integrity is one of the main pillars in the ethics of the accounting profession. Accountants are required to always be honest, fair, and act based on the principle of truth, without hiding information that could mislead users of financial statements. Integrity is the basis for public, investor, and regulator trust in the information presented by the company. However, in the case of PT Asuransi Jiwasraya, this principle was significantly violated, which ultimately triggered one of the biggest financial scandals in Indonesia.

a. Manipulation of Financial Reports

The most prominent integrity violation in the Jiwasraya case was the manipulation of financial statements. The insurance company aimed to present a healthy and financially profitable image to the public and regulators, even though it actually suffered significant losses from high-risk investments. In its financial statements, Jiwasraya allegedly engaged in "window dressing", namely falsifying financial statements to hide actual losses.

b. Dishonesty in Disclosure of Information

The principle of integrity requires accountants to disclose information honestly, especially information that can influence the economic decisions of users of financial statements. 

In the Jiwasraya case, there are indications that the company failed to disclose important information related to its risky investments, especially in stock mutual funds with highly fluctuating values. Rather than being transparent about the potential for large losses from these investments, management and accountants chose to hide the facts.

c. Presentation of Misleading Information

Integrity is also related to providing information that is not misleading. In the Jiwasraya case, the company allegedly presented figures that did not correspond to the actual conditions, such as exaggerating the value of assets and delaying the recognition of losses. As a result, the company's financial statements provided a misleading picture to the public and shareholders.

d. Accountants Involved in Scandals

Accountants involved in the preparation of Jiwasraya's financial statements have a great responsibility to uphold the integrity of their profession. However, in this scandal, they appear to have violated that responsibility by following management's instructions to manipulate the financial statements. 

The principle of integrity should prevent accountants from engaging in unethical or illegal actions. Accountants with integrity will refuse to engage in legal and ethical violations, even when under pressure from management or shareholders.

2. Objectivity

The principle of objectivity is a fundamental principle in the accounting profession, requiring accountants to be free from bias, conflict of interest, and external influences that may affect their professional judgment. Objectivity ensures that accountants maintain independence, fairness, and impartiality in presenting financial statements and providing accurate and reliable information to the public. However, in the PT Asuransi Jiwasraya financial scandal, this principle was significantly violated by the accountants and management involved.

a. The Influence of Management on Accountants

One of the violations of the principle of objectivity in the Jiwasraya case was the influence of company management on accountants involved in preparing financial statements. 

Ideally, accountants should uphold independence and not be influenced by pressure or direction from interested parties, including management. However, in the Jiwasraya case, accountants allegedly followed management instructions to manipulate financial statements, so they were no longer acting objectively in carrying out their duties.

b. Dependence on Stakeholder Decisions

The principle of objectivity also includes freedom from external influences, such as shareholders, investors, or other stakeholders. In the Jiwasraya case, there are indications that accounting decisions were not entirely based on an objective assessment of the company's financial condition, but were influenced by the interests of certain parties in maintaining the company's image in the public eye.

c. Conflict of Interest in Decision Making

A conflict of interest is a situation in which an individual, including an accountant, has a personal interest that may affect his or her judgment in carrying out his or her professional duties. In the case of Jiwasraya, it is possible that some individuals involved in financial reporting and investment decisions may have a conflict of interest, leading to a lack of objectivity.

d. Investment Data Manipulation

One real example of a violation of objectivity in the Jiwasraya case is the manipulation of data related to the company's investments. Jiwasraya invested in high-risk products, but the investment data was reported inaccurately. The accountants involved should have provided an objective assessment of the risks and potential losses of the investment, but instead presented information that did not reflect the actual conditions.

e. Failure to Maintain Independence

The principle of objectivity is closely related to independence, which is the ability of accountants to act independently without being influenced by parties with personal interests. In the Jiwasraya case, accountants who should have been independent in conducting audits and preparing financial reports, failed to distance themselves from the influence of company management.

3. Professional Competence and Due Care

 The principle of professional competence and due care is a basic ethic for accountants, which requires continuous improvement of knowledge and skills, as well as careful and diligent actions in carrying out tasks. In the context of PT Asuransi Jiwasraya, this principle was seriously violated, resulting in one of the biggest financial scandals in Indonesian history.

a. Lack of Required Knowledge and Skills

Competence requires accountants to have adequate knowledge of accounting principles, financial reporting standards, and a thorough understanding of the industry they are working in. 

In Jiwasraya, there were indications that accountants involved in preparing the financial statements did not have an adequate understanding of the financial instruments used. For example, the company made high-risk investments, such as stock mutual funds, without conducting an in-depth analysis of the potential losses and associated risks.

b. Neglect of Standards and Best Practices

As part of the principle of competence, accountants are required to comply with accounting standards and best practices in the industry. In the Jiwasraya case, it was found that the financial statements prepared did not comply with applicable accounting standards. For example, there were inaccuracies in revenue recognition and asset measurement. The accountants involved not only ignored best practices but also allowed the financial statements to be filled with misleading information.

c. Deficiencies in Reporting and Communication

Competence also includes the ability to communicate information effectively to stakeholders. In the Jiwasraya case, poor communication between accountants, management, and shareholders led to misunderstandings about the company's financial condition. Accountants should act as a bridge of clear and accurate information, but in this case, the information provided did not reflect the company's true condition.

d. Responsibility in Internal Supervision

As part of their professional obligations, accountants also have a responsibility to ensure that there is a good internal control system. In the context of Jiwasraya, ineffective internal controls have led to manipulative and unethical practices. Accountants must be involved in designing and evaluating internal control systems to prevent deviations that can harm the company.

e. Caution in Decision Making

Professional due care requires accountants to make decisions based on thorough analysis and consideration of potential risks. In the case of Jiwasraya, there was a lack of due care in making investment decisions. The company was known to invest in highly volatile instruments without considering potential losses. Accountants must play an active role in providing advice based on data and risk analysis.

4. Confidentiality

 Confidentiality is a key principle in accounting ethics that requires accountants to safeguard and protect sensitive information obtained in the course of carrying out their professional duties. Accountants are expected not to disclose this information without proper authorization, unless legally required. In the context of PT Asuransi Jiwasraya, the breach of the confidentiality principle has led to the collapse of the company and damaged public confidence in the insurance sector and accounting as a whole.

a. Misuse of Sensitive Information

In the Jiwasraya case, there are indications that sensitive information regarding the company's financial condition and investment strategy was not well protected. For example, data related to high-risk investments should be kept confidential to prevent misuse by certain parties. However, there is a possibility that this information could be leaked or used for personal gain by irresponsible parties, such as management or external entities.

b. Third Party Involvement

The principle of confidentiality also requires accountants to limit access to confidential information to authorized parties. In the Jiwasraya scandal, it is possible that the company's financial and strategic information was shared with third parties without permission or clear need. This has the potential to create a conflict of interest and poses a risk of misuse of information.

c. Lack of Transparency and Oversight

Violation of the confidentiality principle can also occur due to a lack of transparency and oversight in company management. In the case of Jiwasraya, inadequate management mechanisms for handling sensitive information can lead to information leaks. Accountants have a responsibility to protect this information, but without management support, maintaining the confidentiality principle becomes difficult.

d. Obligation to Disclose Information

Although the confidentiality principle requires accountants to protect information, there are also legal obligations that may compel accountants to disclose certain information. 

In situations where there is an indication of legal or financial violations, accountants may feel pressured to violate the confidentiality principle in order to fulfill legal or ethical obligations. In the context of Jiwasraya, if an accountant is aware of unethical practices but chooses not to disclose them, then it would violate the principles of confidentiality and integrity.

5. Professional Behavior

The principle of professional behavior is a fundamental ethical foundation that must be upheld by every accountant in carrying out their duties and responsibilities. This principle emphasizes the importance of complying with applicable norms and provisions, and acting with integrity to maintain the good name of the accounting profession. 

In the context of the PT Asuransi Jiwasraya case, violation of the principle of professional behavior was one of the factors that caused a major scandal that harmed many parties. Here are some aspects related to the violation of the principle of professional behavior in this case:

a. Compliance with Rules and Regulations

One of the main components of professional behavior is compliance with laws and regulations. In the Jiwasraya case, there are indications that the company and the accountants involved did not comply with established accounting standards. For example, there was an attempt to cover up the company's losses by creating financial statements that did not reflect the actual financial situation. Accountants must refer to applicable Financial Accounting Standards (SAK), which require accurate and transparent disclosure of information.

b. Maintaining Professional Reputation

The principle of professional behavior also includes efforts to maintain the reputation and image of the accounting profession. The act of financial statement manipulation carried out by PT Asuransi Jiwasraya and the accountants involved tarnished the reputation of the accounting profession. This unethical behavior has caused a loss of trust in the ability and integrity of accountants, which has a negative impact on the entire accounting community.

c. Social Responsibility

The principle of professional conduct also includes the social responsibility of accountants to society and the environment. In the case of Jiwasraya, accountants are responsible for ensuring that the financial information presented is not only accurate, but also has a positive impact on policyholders and the general public. 

When accountants are involved in presenting dishonest reports, they are directly neglecting their social responsibility. This social responsibility includes protecting the interests of policyholders who have entrusted their funds to the insurance company. Accountants are supposed to serve as guardians of transparency and fairness in the management of funds, and failure to fulfill this responsibility contributes to significant losses for many parties.

d. Leadership and Ethics in Decision Making

Professional behavior also involves the ability to provide good leadership in decision-making. In the context of Jiwasraya, there has been a failure in ethical leadership, where decisions made by management and accountants do not consider ethical principles. Instead of making decisions that are in line with the long-term interests of the company and policyholders, they focus more on achieving short-term financial results.

CONCLUSION

The case of PT Asuransi Jiwasraya is an important reminder of the importance of ethical accounting principles in maintaining public trust in companies and the accounting profession. 

Violations of the five basic principles of ethics---integrity, objectivity, professional competence and due care, confidentiality, and professional conduct---have caused a major financial crisis with widespread impact. It is important for accountants to always uphold professional ethics in every situation to maintain public trust and prevent similar scandals from happening again in the future.

REFERENCE

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Hidayah, N. (2023, 3 Maret). 15 jenis profesi akuntansi untuk karir di masa depan. Diperoleh dari Mekari: https://mekari.com/blog/profesi-akuntansi/