SA 220 (Revised): Quality Management for Audits of Financial Statements

Beginning with audit periods starting on December 31, 2025, all Public Accountants in Indonesia are required to adopt SA 220 (Revised), the updated standard governing quality management at the audit engagement level. Although this standard is directed at auditors and Public Accounting Firms, the implications extend directly to companies undergoing audits. Understanding this standard is increasingly important for businesses that rely on credible financial reporting and strong corporate governance.

A More Structured and Consistent Audit Process

SA 220 (Revised) enhances the expectations placed on audit planning, team supervision, and documentation quality. Under this new framework, auditors must design more comprehensive engagement strategies and maintain stricter oversight throughout the process. As a result, audits will run with greater structure, consistency, and fewer unexpected revisions—provided that companies prepare and present accurate data in a timely manner.

This approach improves efficiency and minimizes operational disruptions for management teams during the audit cycle.

Quality Documentation Is Now a Critical Requirement

The revised standard requires auditors to evaluate documentation with greater depth and skepticism. Evidence must be assessed more critically, and risk areas must be identified with more precision.

Consequently, companies should reinforce their internal processes—especially financial recordkeeping, periodic reconciliations, and internal controls. Strong accounting functions and reliable Bookkeeping Services significantly improve audit readiness. Businesses that maintain clean and organized records will experience smoother and more efficient audit procedures.

Strengthened Professional Skepticism

SA 220 (Revised) emphasizes the need for heightened professional skepticism. Public Accountants must be more alert to potential biases, misstatements, or inconsistent evidence. They are required to justify conclusions using robust, verifiable audit evidence.

For companies, this results in audit reports that carry stronger credibility—an essential factor for investors, lenders, regulators, and strategic partners.

Greater Involvement of the Engagement Partner

A key feature of SA 220 (Revised) is the requirement for deeper and earlier involvement of the engagement partner. Partners must actively monitor audit progress, evaluate critical judgments, and ensure timely decision-making on significant matters.

This reduces the likelihood of late-stage issues or last-minute revisions. Companies benefit from earlier discussions, better transparency, and greater clarity throughout the engagement.

Improved Document Preparation Expectations for Companies

Under this revised standard, companies are expected to prepare audit-related documentation with greater discipline. Efficient data access, responsive communication, and a dedicated audit liaison (PIC) are now essential. Organizations with strong systems—supported by robust Accounting Services or internal teams—will find the audit process significantly more efficient.

A disciplined approach will also produce higher-quality audit outcomes.

High-Quality Audits Offer Strategic Value

An audit conducted under SA 220 (Revised) provides more than compliance. It delivers strategic value to the business by strengthening:

• Investor and lender confidence

• Corporate governance

• Financial transparency

• Business reputation

• Access to financing and partnerships

By adopting SA 220 (Revised), Public Accounting Firms aim to enhance audit reliability. As a result, companies experience a more professional, structured, and insightful audit process.

Recommended Preparations for Companies

To prepare effectively for SA 220 (Revised), companies should begin by:

• Organizing monthly financial documentation

• Conducting routine reconciliations

• Ensuring auditors have timely access to data

• Appointing a knowledgeable audit PIC

• Strengthening internal controls and accounting procedures

These steps help companies adapt smoothly to the enhanced requirements. Although SA 220 (Revised) is designed for auditors, the success of its implementation depends significantly on the company’s readiness as an auditee.