Thu, 19 Jun 2003

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 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.