PCAOB announces $1m settlement with Indonesian EY member

14 February 2017 by Stephanie Wix

The Public Company Accounting Oversight Board (PCAOB) has announced that it has censured and imposed a $1m civil penalty on KAP Purwantono, Suherman & Surja an Indonesian member of EY global network.

The settlement was regarding audit failure, non-cooperation, and violations of Quality Control Standards. Two audit partners were sanctioned following the investigation over their roles in the failure, including a former practice director for EY’s Asia Pacific region, James Randall Leali, and a former engagement partner, Roy Iman Wirahardja.

The case involved the 2011 audit of an Indonesian telecommunications company. An EY partner, in the US, informed the engagement partner of the failures while performing a review required by PCAOB standards. Despite the review partners concerns, the practice director authorised the engagement partner to release the audit report.

The company failed to provide sufficient evidence to support the accounting for more than 4,000 leases for spaces on cellular towers. EY Indonesia then released its audit opinion without obtaining completed analysis.

Wirahardja was censured and fined $20,000, with a five year ban from any association with a PCAOB registered firm. Leali was also censured and fined $10,000, with a one year restriction. Neither admitted or denied the allegations.

PCAOB chairman, James R. Doty said: “Reliable audits are critical to providing investors a basis for confidence to participate in U.S. public capital markets. PCAOB standards and oversight are key protections for investors in U.S. securities.”

Dozens of new audit work papers were created improperly by members of the EY Indonesia engagement team shortly before the 2012 PCAOB audit inspection. EY Indonesia and the engagement partner did not cooperate with the Board's inspection and investigation.

"In their haste to issue audit reports for their client, the firm and two partners shirked their fundamental duty to obtain sufficient audit evidence," said Claudius B. Modesti, director of the PCAOB Division of Enforcement and Investigations.