Ernst & Young, Andersen form largest accounting firm in RI

Fitri Wulandari, The Jakarta Post, Jakarta Post

The Indonesian units of public accountants Ernst & Young and Arthur Andersen finalized months of merger talks by signing on Tuesday an agreement to combine their businesses, making it the largest public accounting firm in Indonesia.

"Ernst & Young will be a new and greater firm here in Indonesia and globally, with greater resources to provide solutions that help clients successfully manage their business issues," Simon Halim, the chief executive officer of Ernst & Young Indonesia, said after signing the merger deal.

Simon said that after they combined their businesses, the new firm would count up to 40 percent of public companies listed on the Jakarta Stock Exchange as clients.

He declined to provide details of the new firm's total market share in the country, or the expected annual fees after the merger.

However, he said the merger would give Ernst & Young a strong local base, as most of Andersen's clients were local companies. The Indonesian Bank Restructuring Agency is also one of Andersen's clients.

Most of Ernst & Young's clients in the country are multinational companies.

"With the combination, our market will be more complete," Simon said, adding that the Indonesian unit of Andersen was the 55th Andersen affiliate to merge with Ernst & Young.

Andersen's affiliates in Singapore, New Zealand and Australia signed deals to merge their operations with Ernst & Young after the reputation of Andersen's headquarters in Washington was ruined because of its involvement in the accounting scandal at American energy giant Enron Corp.

The merger comes amid reports of another accounting scandal, this one involving Andersen and U.S. telecommunications firm WorldCom, which has further damaged the accounting firm's credibility.

Ernst & Young's Indonesian unit was called Ernst & Young, Hanadi, Sarwoko and Sandjaja. And Arthur Andersen's Indonesian unit was known as Andersen, Prasetio, Utomo and Co. The firm resulting from the merger will be known as Ernst & Young, Prasetio, Sarwoko, Utomo and Sandjaja.

John Prasetio, from Andersen, will be the firm's chairman. Simon Halim from Ernst & Young will retain his position as the chief executive officer.

Asked about Andersen's alleged role in cooking the financial reports of WorldCom and Enron, John said it was all a matter of integrity.

"I think if an accounting firm has strong integrity, it would not do such thing."

John also said that with the merger, the new firm would be able to provide financial services to companies overseas.

"It makes Indonesia a serious player in the consulting and accounting business in the region," he said.

The new firm will be supported by 1,800 employees with offices in five major cities.