Telkom likely to appoint KPMG as new auditor

Telkom likely to appoint KPMG as new auditor

The Jakarta Post, Jakarta

PT Telekomunikasi Indonesia (Telkom) will ask auditor KPMG to
review its 2002 financial report, in a last-ditch effort to beat
the July 15 deadline set by the U.S. Securities and Exchange
Commission (SEC) for submitting an audited financial report and
avoid being delisted from the New York Stock Exchange.

A source at the country's largest telecommunications firm said
on Wednesday an internal audit commission proposed hiring KPMG,
although no deal has been made yet, pending an agreement with
KMPG.

"If (the appointment) is accepted, we will formally make the
announcement tomorrow (Thursday)," the source said.

He did not elaborate on why KPMG was chosen as the auditor,
but the move should come as no surprise given the limited options
available.

Currently, accounting firms operating in Indonesia which are
SEC-certified are limited to the so-called world's big four:
Deloitte Touche Tohmatsu, Price WaterhouseCoopers, Ernst & Young
and KPMG.

The 2002 financial report of Telkom -- whose shares are listed
on both the U.S. and Indonesian stock markets -- was rejected by
the SEC after it learned that the company had used Eddy Pianto as
an auditor, despite the fact that he has no affiliation with an
audit firm certified by the SEC.

Eddy was formerly a local partner of Grant Thornton
International, but ended the relationship on March 31. Grant
Thornton is an SEC-registered auditor.

He was appointed shortly after Telkom's previous auditor,
Ernst & Young, resigned in the middle of the auditing process in
November last year without providing an explanation.

The SEC ordered Telkom to revise its report using an auditor
affiliated with an accounting company registered with the SEC,
and to resubmit the financial report to the commission by June
30.

Should Telkom fail to meet this deadline, the SEC will give
the company an additional 15 days to resubmit the report or face
delisting.

In a related development, the Indonesian Capital Market
Supervisory Agency (Bapepam) said it would ask Ernst & Young to
clarify why it pulled out of the Telkom auditing process.

Bapepam chairman Herwidayatmo was quoted by detik.com as
saying clarification was needed to avoid any misunderstanding of
the issue, adding that Bapepam has heard there was a potential
conflict of interests.

Bapepam previously said it would ask for a similar
clarification from Eddy, who has now formed a new accounting firm
called KAP Jimmy Budhi, which is affiliated with Moores Rowland
International.

The Jakarta Stock Exchange, along with Bapepam, earlier
concluded that there was nothing wrong with the audit results
themselves, saying the audit had been conducted in accordance
with Indonesian auditing standards and local capital market
regulations.