Fraud and Internal Control

FINANCIAL ACCOUNTING

Universitas Al Azhar Indonesia

Fraud Case Analysis of PT. Wakita Karya

Profile

Impact Case

PT Waskita
Karya

Parties
Settlement
Involved

Analysis of
Legal

Universitas Al Azhar Indonesia

1 Profile

PT. Waskita Karya (Persero) Tbk was established on January 1, 1961. The company is
in charge of the Construction, Industrial, Realty and Trade Services business. Share
ownership by the Government of the Republic of Indonesia is 67.33% and the Community
is 32.77%.

The company's shares were listed on the Indonesia Stock Exchange on September
19, 2012 under the WSKT stock code. This company is also a BUMN company which has
the biggest Market Cap among other BUMN companies.

Back

Universitas Al Azhar Indonesia

 Next
2 Cases

Waskita Karya's financial report manipulation since mid-August 2009. Various terms are used
for this fraud, such as manipulation of financial statements, overstate, mark-ups, mark-ups, excess
profit recording, conducted by 3 Directors of PT Waskita Karya and 2 Public Accounting Firms (KAP).
The Ministry of State Owned Enterprises deactivated two directors of PT Waskita Karya related to
the case of excess recording in the 2004-2008 financial statements when they will conduct an IPO in
2008. (Infokorupsi.com: 2009). The case of asset abuses in PT Waskita Karya Persero was raised
when there was a change of directors.

The alternate President Director does not simply accept the old management's financial
statements and then asks another third party to conduct an in-depth audit of a particular account.
The contract was terminated by the Batang Hari Regional Government because it was deemed
signed by an unauthorized party, there was a case of replacement of the regent. As an illustration of
how much cash material the alleged value of asset bubbles in 2005. In 2005 the value of PT Waskita
Karya Persero's assets was Rp. 1.6 trillion, and the value allegedly inflated by management in 2005
was Rp. 5 billion or as much as 0. 3% of the value of the asset. In PT Waskita Karya's financial
statements, it was recorded that in 2008 it earned a profit of Rp 163.4 billion and in 2009 it earned a
profit of Rp 307.1 billion.

Universitas Al Azhar Indonesia

 Next
2 …… The next cases

In the 2008 financial statements, it was disclosed that there were misstatements or asset
bubbles in 2005 amounting to Rp 5 billion. The value of Rp 5 billion consists of two ongoing projects,
the first project is the renovation project of the Riau Governor's Office. The project began in 2004 and
has been 100% complete, the contract value of Rp. 13.8 billion. But at the end of 2005 there were
additional work worth less than Rp 3 billion. As of the end of 2008, the balance still appeared in the
company's balance sheet as a gross bill to the employer. The second project is the Bulian Jambi
Sports Center development project. The contract value is Rp. 33,998,000,000 and PT Waskita Karya
Persero recognized contract revenue from the progress of Rp. 2 billion. The balance was outstanding
until the end of 2008. The contract was terminated by the Batang Hari Regional Government because
it was deemed signed by an unauthorized party, there was a case of replacement of the regent. As an
illustration of how much cash material the alleged value of asset swelling in 2005. In 2005 the value
of PT Waskita Karya Persero's assets was Rp1.6 trillion, and the value allegedly inflated by
management in 2005 was Rp5 billion or equal to 0.3% of the value of these assets. In PT Waskita
Karya's financial statements, it was recorded that in 2008 it earned an income of Rp 163.4 billion and
in 2009 obtained a profit of Rp 307.1 billion.

Universitas Al Azhar Indonesia

2 …… The next cases

Based on these data the profit figures obtained by PT Waskita Karya are still relatively small
when compared to other similar companies. So PT Waskita Karya must continue to reform its
management so that it will produce better performance, one example is restructuring. This company
has good prospects in the future if the company improves the company's performance so that it can
optimize the company's resources.

Back

Universitas Al Azhar Indonesia

3 Parties Involved

3 Directors of PT Waskita Karya, namely:

• Umar T.A
• Bambang Marsono
• Kiming Marsono

Kantor Akuntan Publik :

 The Accounting Firm Helianto was the financial accounting auditor of PT Waskita Karya in 2003 –
2005
 The Accounting Firm Ishak, Saleh, Soewondo and colleagues conducted audits of financial
statements in 2006 and 2007

Back

Universitas Al Azhar Indonesia

4 Analysis of the Legal Perspective

The State Ministry of BUMN has deactivated two directors and one former Waskita director
related to the case of excess recording in the 2004-2007 financial statements. Two Waskita Directors
who have been deactivated include Bambang Marsono and Umar Triatman.
 
While one former Waskita director who was deactivated was Kiming Marsono who now serves
as President Director of PT Nindya Karya. Decree of the Minister of Finance of the Republic of
Indonesia in deactivated public accounting firms involved in the PT Waskita Karya fraud case.

Back

Universitas Al Azhar Indonesia

5 Settlement

Manipulating financial statements is one of the criminal acts that can harm many people but
it will also tarnish the good name of the company. Manipulating a financial statement will certainly
involve a public accountant. Auditing conducted by the Public Accountant is expected to increase
the level of reliability of the company's financial statements rather than actually helping the
company to commit fraud or to help cover up fraud occurring within the company. In this case it
also involved internal and external auditors at PT Waskita Karya. The State Ministry of State Owned
Enterprises has deactivated two directors and one former Waskita director related to the case of
excess records in the 2004-2007 financial statements. This is a criminal case that must be resolved in
court in order to get legal sanctions. SOE Minister Sofyan Djalil has also sent a letter to the Minister
of Finance Sri Mulyani Indrawati regarding sanctions to public accountants suspected of being
involved in the evaluation of Waskita's financial statements. Based on a letter submitted by the
Minister of BUMN, the Minister of Finance finally decided to freeze several KAP involved in fraud at
PT Waskita Karya.

Back

Universitas Al Azhar Indonesia

 Next
6 Impact

 Dropping the image of BUMN which so far we consider that BUMN has implemented quite good
management.
 Reducing the confidence of investors who will buy shares of PT Waskita Karya, and make investors
rethink to maintain the shares planted in PT Waskita.
 Increasing the length of a line of Indonesian companies that commit fraud, and this lowers
Indonesia's image in company management.
 Negative views of people towards the collaboration between the auditor and the company being
audited. Though not all auditors do that and many auditors maintain integrity and other
provisions.

Universitas Al Azhar Indonesia

Analisys & Internal Control
Primary Components
Control Environment
Key Issues / Area of Investigation Corrective Action
Formulation of occupational standards The implementation of Good Corporate
is less structured and implementation Governance (GCG) in BUMN must be
has not been maximized. implemented as a corporate culture.

1 There is a systematic collaboration The government must conduct periodic

Risk Assessment between the auditing KAP and Waskita assessments & tests for KAP regarding the
management. credibility of its institutions.

Misuse occurred by Waskita's Board of Setting clear standards regarding who is

Control Activities Directors due to the absence of control suitable for functional or structural
2 positions or certain positions that are
activities for the Directors. considered strategic and critical.
Information on the financial statements
3 and audit results do not show the Every financial report and audit results
Information & Communications actual situation and minimal must inform the facts (transparant) and
communication when changing can be accounted for (accountability).
directors (hand over).
The occurrence of fraud due to Waskita
4 and KAP management which has "free" Regularly reviewing and evaluating the
Monitoring
movement shows the weakness of company's internal control system.
government monitoring.

Universitas Al Azhar Indonesia

Principles of Internal Control Activities

Apart from the five elements mentioned above, the principles of internal control are very
important in the company's efforts to overcome the risks faced, although each company will be
different and vary in its application.

Establishment of
Responsibility

Segregation of Duties

Documentation Procedures

Physical Controls

Independent Internal
Verification

Human Resource Controls

Principles of Internal Control Activities

Universitas Al Azhar Indonesia

Analysis Principles of Internal Control Activities
Primary Components Key Issues / Area of Investigation Corrective Action
Substitution of Waskita Directors and
Establishment of Responsibility Misuse of position by Waskita Directors deactivating KAPs involved and replaced by
and public accountants. more professional ones with clear
1 responsibilities.
Public Accountants violate the It is better to conduct a financial audit so
Segregation of Duties professional ethics in carrying out their that it can be done by a minimum of 2 KAP
duties. so that there is a comparison.
2
Weak internal oversight by the ministry Physical checks of documents are carried
Documentation Procedures of BUMN over the recording of out periodically by the Ministry of BUMN
documents and their validation.
3
It is better for the results of reporting the
Physical Controls The markup of asset values ​is evidence physical check of assets to be determined
of a lack of physical check controls. periodically and at least known by the
authorities of the Ministry of BUMN.
4
There is no verification from external An independent team must be formed by a
Independent Internal Verification institutions that are credible in an credible SOE ministry to re-check after an
accountable and professional manner. audit by the KAP.
5 Accountants involved both internally HR management needs to track employee
and externally have clear evidence of
Human Resource Controls the 'failure' of their respective HR education and certification to ensure that
management in exercising control over employees meet the requirements to fill
strategic positions.
HR.
6

Universitas Al Azhar Indonesia

 THANK YOU

Presented by :

Heru
Hermawan

Tasya
Kelompok 1 Siti Nuriah
Wahyuni

Tapa
Kurnia
Cahyani

Universitas Al Azhar Indonesia