“We fully respect the decision and will follow it up to the best of our ability. Garuda Indonesia will also communicate and ask for advice from decisionmakers in regard to what the company can do to adhere to the decision,” said Garuda Indonesia president director Ari Askhara as quoted by the airline’s press release on Sunday.

The government’s orders would not affect the airline’s financial condition as cash flow would remain positive, he was quoted as saying by Antara. His statements came after the government ordered the airline to restate its 2018 financial statement and annual report last Friday, within the next 14 days, while the OJK fined it Rp 100 million (US$7,080). The order follows a recent joint investigation by the OJK, which found false information in Garuda’s financial statement.

The investigation was opened following reports of Garuda commissioners Chairul Tanjung and Dony Oskaria refusing to approve the company’s financial statement owing to discrepancies.

In an objection letter issued to the management on April 2 obtained by The Jakarta Post, Chairul and Dony said the inclusion of the potential income of $239.94 million it would receive from a 15-year contract awarded to PT Mahata Aero Teknologi to provide onboard Wi-Fi services and inflight entertainment in airplanes operated by its subsidiaries Citilink Indonesia and Sriwijaya Air was inappropriate.

The objection was based on the fact that Garuda had yet to receive any payment from the 15-year contract.

“The contract also did not mention a clear terms of payment,” the letter read. “The two companies, in fact, were still negotiating the payment procedures.”

Garuda initially defended itself, saying that the ministry and the OJK had different interpretations of the report and that it had not violated any rules of accounting standards.

However, in an earlier statement issued to the press, the company claimed the decision was deemed “premature” and emphasized that it had not manipulated its statement.

Nonetheless, OJK deputy commissioner for capital market monitoring division Fakhri Hilmi said on Friday that the company must pay a fine of Rp 100 million for the violation.

The fine, he continued, was also applied to each member of the board of directors that signed the annual report, along with a collective fine of the same amount for the members of the board of directors and commissioners that signed the report.

To make matters worse, the Indonesia Stock Exchange (IDX) also announced that the company would be fined Rp 250 million by the bourse and would be required to submit a revised first quarter financial report as the initial report contained the said transaction with Mahata, which had been proven to be misleading.

The Finance Ministry also found that the auditor, Kasner Sirumapea, and public accounting firm Tanubrata Sutanto Fahmi Bambang and partners (member of BDO International Ltd.) violated auditing standards and failed to apply good internal quality control standards.

The ministry’s secretary-general, Hadiyanto, said it would slap both the auditor and the public accounting firm with sanctions.

“We’re freezing Kasner’s auditing permit for 12 months and also issuing a written warning to the firm for the violation,” he said, adding that the accounting firm must submit proof that it had improved its internal supervision in the next three months.

Fakhri added that the OJK would freeze Kasner’s auditor membership for a year.

He also said the authority and ministry had stopped the investigation. He, however, said that the joint probe would continue if signs of financial manipulation and fraud were discovered.

Institute for Development of Economics and Finance (Indef) economist Bhima Yudhistira said that if Garuda was to restate its financial statement, the company could book losses in 2018 instead of the $5.02 million consolidated profit it recorded last year.

The conclusion was backed by the commissioner’s objection letter, which stated that the company should have booked a loss of $244.96 million last year if potential revenues from Mahata were not included.

Bhima also said the sanctions on the company and public accounting firm were inadequate. He argued that the government should conduct further probes to determine whether there was any intentional fraud that could be considered a criminal offense.

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