Indonesia’s Financial Services Authority (OJK) has slapped national flag carrier Garuda Indonesia and its directors with massive penalties for irregularities in its 2018 financial report.
In addition to fining the airline IDR100 million (about US$7,000), the OJK also ordered Garuda’s directors to personally pay the same, in addition to another joint fine of IDR100 million for all directors and commissioners who signed the report. Garuda Indonesia currently has seven directors and five commissioners.
In a report published on the OJK website it said the airline had violated Article 69 of Law No. 8/1995 concerning capital markets, in conjunction with Bapepam Regulation and LK No. VIII.G.7 on presentation and disclosure of financial statements, Interpretation of financial accounting standards (ISAK) 8, and PSAK (statement of financial accounting standards) 30.
The OJK ordered the airline to release a restated 2018 annual financial report within two weeks.
Also in the line of fire was auditing firm Kasner Sirumapea and public accounting firm Tanubrata, Sutanto, Fahmi, Bambang & Friends. Both firms are part of global accounting firm BDO International Limited.
Auditing licence suspended
The former saw its auditing licence suspended for a year, while the latter was given three months to fix lapses in procedure and quality control.
Garuda Indonesia’s chief executive officer, Gusti Ngurah Askhara Danadiputra, told a June 30 news conference “we will not argue with what the OJK has decided” and that the airline and its directors will comply with the orders from regulators to “fix and re-state” its financial statements and pay the fines for the errors.
Mr Danadiputra said that the required changes would not adversely affect the airline’s financial health, including its debt-to-equity ratio, “because there is no cash out”.
The airline’s troubles didn’t end there. The Indonesia Stock Exchange (IDX) slapped it with a IDR250 million (about U$17,700) penalty over the errors and also asked it to restate its first-quarter 2019 results.
Profit boost disallowed
While it was not clear what accounting errors the regulators and IDX were referring to, Mr Danadiputra confirmed on June 30 that they related to a misrepresentation of $240 million in revenue that it had yet to receive from PT Mahata Aero Teknologi.
According to its 2018 annual report the airline had forward-booked revenue from PT Mahata Aero Teknologi, helping to push Garuda to record a profit of $809,846 last year after recording a loss in 2017.
Auditing irregularities are not uncommon in Indonesia. In 2017 the US Public Company Accounting Oversight Board (PCAOB), the industry’s’ regulator, penalised local Ernst & Young affiliate Purwantono, Suherman & Surja, $1 million over “irregularities”.
Penalties were also imposed on Ernst & Young’s former Asia-Pacific region professional practice director, James Randall Leali and a former Ernst & Young Indonesia engagement partner at the time, Roy Iman Wirahardja. (See also: Auditing watchdog slaps Indonesia Ernst & Young affiliate with $1 mln fine)
Feature photo Garuda Indonesia
- Gov’t Prepares New Policies to Tame Skyrocketing Airfares (JakartaGlobe)
- Garuda Indonesia to operate from Halim Airport in January (Antara)
- Indonesia Mulls Allowing Foreign Carriers To Fly Domestically (AIN Online)
She commenced as an intern at AEC News Today and was appointed as a junior writer/ trainee journalist on April 2, 2018