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.