Auditing watchdog slaps Indonesia Ernst & Young affiliate with $1 mln fine

Auditing watchdog slaps Indonesia Ernst & Young affiliate with $1 mln fine
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The Public Company Accounting Oversight Board (PCAOB) is showing they won’t treat miscreants lightly, no matter where they are. An Indonesian affiliate of international accounting firm Ernst & Young has been fined US$1 million for audit failure, noncooperation, and violations of the Board’s quality control standards.

Penalties were also levied against Ernst & Young’s former Asia-Pacific region professional practice director, James Randall Leali and

Ernst & Young's Indonesia affiliate Purwantono, Suherman & Surja fined $1 million for 2011 dodgy audit report
Ernst & Young’s Indonesia affiliate Purwantono, Suherman & Surja fined $1 million for 2011 dodgy audit report R/DV/RS

against a former Ernst & Young Indonesia engagement partner at the time, Roy Iman Wirahardja.

The PCAOB fined Mr Leali $10,000 and placed a one one year ban on him serving as an engagement partner, an engagement review partner, or professional practice director, while Mr Wirahardja was ordered to pay a $20,000 fine in addition to being barred for five years from association with a PCAOB-registered public accounting firm. Neither of the two have admitted nor denied the allegations contained in the PCAOB order.

In an announcement posted to its website the auditing watchdog said an investigation of an audit of an Indonesian telecommunications firm six years ago by Ernst & Young Indonesian affiliate Purwantono, Suherman & Surja had uncovered irregularities.

According to the PCAOB, a US-based Ernst & Young partner performing a review required by PCAOB standards had notified the Indonesian firm that he was concerned a the lack of evidence to support the accounting for more than 4,000 leases for spaces on cellular tower.

The Indonesian partner notified Ernst & Young’s regional professional practice director, who authorised the Indonesian partner to release the unqualified audit report.

Slamming the Ernst & Young partner over its clack of cooperation, the PCAOB said it ‘participated in improperly creating another work paper, which was provided to PCAOB inspectors. EY (Ernst & Young) Indonesia and the engagement partner (local partner) subsequently failed to cooperate with the Board’s investigation’.

Summarising the investigations finding, Claudius B. Modesti, director of the PCAOB Division of Enforcement and Investigations, said: “In their haste to issue audit reports for their client, the firm and two partners shirked their fundamental duty to obtain sufficient audit evidence. Matters were made much worse when EY Indonesia and the engagement partner did not cooperate with the Board’s inspection and investigation”, he added.

Established more than nine years ago, the PCAOB oversees auditors’ compliance with the Sarbanes-Oxley Act, professional standards, and PCAOB and Securities and Exchange Commission rules in order to protect the interests of investors and further the public interest in the preparation of informative, accurate, and independent audit reports.


Correction: This story was last updated at 21:53 on March 14: The original article identified the PCAOB as an Indonesian watchdog. The PCAOB is the US audit regulator that inspects the firms that audit companies trading in the US.




Jose Rodriguez T. Señase in Phnom Penh contributed to this story




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John Le Fevre

Thailand editor at AEC News Today

John is an Australian national with more than 40 years experience as a journalist, photographer, videographer, and copy editor.

He has spent extensive periods of time working in Africa and throughout Southeast Asia, with stints in the Middle East, the USA, and England.

He has covered major world events including Operation Desert Shield/ Storm, the 1991 pillage in Zaire, the 1994 Rwanda genocide, the 1999 East Timor independence unrest, the 2004 Asian tsunami, and the 2009, 2010, and 2014 Bangkok political protests.

In 1995 he was a Walkley Award finalist, the highest awards in Australian journalism, for his coverage of the 1995 Zaire (now Democratic Republic of Congo) Ebola outbreak.

Prior to AEC News Today he was the deputy editor and Thailand and Greater Mekong Sub-region editor for The Establishment Post, predecessor of Asean Today.

In the mid-80s and early 90s he owned JLF Promotions, the largest above and below the line marketing and PR firm servicing the high-technology industry in Australia. It was sold in 1995.

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