Government may fire Telkom management if audit shows error
Government may fire Telkom management if audit shows error
Dow Jones Jakarta
The government said on Friday that it could fire management of the country's largest phone company if an ongoing financial audit uncovers evidence of mismanagement.
The publicly-listed PT Telkom said late on Thursday that it may have to reduce a previously stated Rp 8.34 trillion (about US$987 million) net profit for 2002 by between 4 percent and 20 percent.
Problems with the 2002 accounts emerged after PricewaterhouseCoopers was called in to reaudit the figures in June. The U.S. Securities & Exchange Commission had rejected an earlier filing because the original auditor, an Indonesian company, was not properly registered in the U.S.
"We could replace Telkom's management if the audit results shows the management made mistakes," Roes Aryawijaya, a deputy at the Office of the State Minister of State Enterprises, said.
During its reaudit, PricewaterhouseCoopers discovered that Telkom had not made adequate provisions in its 2002 accounts for a number of liabilities. These included employee benefits such as housing allowances, transportation, and a post-retirement health care scheme, Telkom said.
The auditor also identified the need to make adjustments in the 2002 results to the calculation of deferred taxes. PricewaterhouseCoopers believes these adjustments also mean the company will have to restate its 2000 and 2001 financial results, Telkom said.
Telkom said it was currently in talks with Deloitte Touche Tohmatsu, the auditor of the 2000 and 2001 results, over what adjustments to make.
Failure to reach agreement with Deloitte would mean that PricewaterhouseCoopers will have to reaudit those accounts, which could delay the restatement of the 2002 profit by up to four months, Telkom said.
The SEC has threatened to delist Telkom's shares from the NYSE if it fails to quickly clear up the mess.
Meanwhile, Telkom announced on Friday that it would need more time to complete the reauditing process.
"The process is longer than expected because Telkom and audit firm PricewaterhouseCoopers are still in the process of determining the necessary adjustment to Telkom's previously issued financial statements for 2002," the company said in a statement made available to The Jakarta Post on Friday.