THE DESIGN OF BUSINESS PROCESS BASED ON SOX SECTION 404: A CASE STUDY AT PT TELEKOMUNIKASI INDONESIA INTERNATIONAL FINAL REPORT By Wendhyarta Pradana 19007127
Undergraduate Program of Management Study School of Business and Management Institut Teknologi Bandung July 2010 i
THE DESIGN OF BUSINESS PROCESS BASED ON SOX SECTION 404: A CASE STUDY AT PT TELEKOMUNIKASI INDONESIA INTERNATIONAL WENDHYARTA PRADANA 19007127 Date of Final Examination: August 4th, 2010 Date of Graduation: October 23rd, 2010 Advisor: Prof. Togar M. Simatupang Undergraduate Program of Management Study, Institut Teknologi Bandung, 2010
ABSTRACT Every company that listed and traded it shares in New York Stock Exchange are required to apply the rules of SOA (Sarbanes Oxley Act or SOX). The main requirement for PT TII as a subsidiary of PT Telkom and as a member of the Telkom Group is a profit of PT TII larger 5% than consolidated income group. Viewing the current developments of the telecommunications business, the current PT TII earnings growth cannot be accurately predicted. Therefore, at any time PT TII can generated profit more than 5% of the consolidated income group, so the PT TII should begin preparing to implement SOX rules because if the earnings of PT TII already over 5% then PT TII must trade its shares on the New York Stock Exchange and must apply the rules of SOX at full scale. One step in implementing the rules of SOX is to review the feasibility of the companyʹs financial reports. Regulation of SOX that review report of the financial feasibility is SOX section 404. SOX section 404 describe about the internal control over financial report (ICOFR) which is a method of internal controls over financial reporting feasibility and fairness. At the level of Transactional Level Control (TLC) which is part of SOX section specialized to the mapping of business process applied risk and control variables in every activity that affects the companyʹs financial statements. This report analyzes the six of business processes that have been mapped by PT TII, the six business processes are ʺSettlementʺ, ʺValidation and Parameter Update Requestʺ, ʺBilling Validation Resultsʺ, ʺFundingʺ, ʺCash Expenditures and Bankʺ, and ʺImprest Fund ʺ. This sixth business processes will be compared with SOX section 404 rules, then the results will generate whether the PT TII had begun to adopt rules of SOX on the business process or no. The results of this report containing results from a comparison of business processes that have been made by PT TII with SOX regulations and also solutions to every problem that occurs from the process of business processes mapping that will be very useful for PT TII in their readiness in implementing the companyʹs SOX regulatory compliance phase starting from business processes. ii
Keywords: business process, regulation of SOX, risk and control
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THE DESIGN OF BUSINESS PROCESS BASE ON SOX SECTION 404: A CASE STUDY AT PT TELEKOMUNIKASI INDONESIA INTERNATIONAL WENDHYARTA PRADANA 19007127 Tanggal Ujian Akhir: 3 Agustus 2010 Tanggal Wisuda: 23 Oktober 2010 Pembimbing: Prof. Togar M. Simatupang Program Studi Sarjana Manajemen, Institut Teknologi Bandung, 2010
ABSTRAK Setiap perusahaan yang mencantumkan dan memperdagangkan sahamnya di New York Stock Exchange (NYSE) wajib menerapkan aturan SOA (Sarbane Oxley Act atau SOX). Syarat utama bagi PT TII sebagai anak perusahaan PT Telkom dan sebagai anggota dari TELKOM Group adalah laba dari PT TII lebih besar 5% dari laba konsolidasi grup. Melihat perkembangan bisnis telekomunikasi saat ini, arus pertumbuhan laba PT TII tidak dapat diprediksi secara akurat. Oleh karena itu, sewaktu waktu laba PT TII dapat lebih 5% dari laba konsolidasi grup, maka PT TII harus segera mulai mempersiapkan diri untuk menerapkan aturan SOX karena jika laba PT TII sudah melebihi 5% maka PT TII harus memperdagangkan sahamnya di New York Stock Exchange dan harus menerapkan aturan SOX. Salah satu langkah dalam mengimplementasikan aturan SOX adalah dengan meninjau kelayakan laporan keuangan perusahaan. Regulasi SOX yang meninjau kelayakan financial report adalah SOX section 404. SOX section 404 berbicara tentang internal control over financial report (ICOFR) yang merupakan metode pengendalian internal terhadap kelayakan dan kewajaran financial report. Pada level Transactional Level Control (TLC) yang merupakan bagian dari SOX section 404, mengkhususkan kepada pembuatan bisnis proses yang menerapkan variabel risiko dan kontrol pada setiap aktifitas yang berpengaruh kepada laporan keuangan perusahaan. Laporan ini menganalisis enam bisnis proses yang telah dipetakan oleh PT TII, keenam bisnis proses tersebut adalah “Settlement”, “Parameter Update Request and Validation”, “Billing Validation Results”, ʺFundingʺ, ʺCash Expenditures and Bankʺ, dan ʺImprest Fundʺ. Keenam bisnis proses ini akan dibandingkan dengan aturan SOX section 404, kemudian akan diketahui apakah PT TII sudah mulai mengadopsi aturan SOX pada bisnis prosesnya atau belum. Hasil dari laporan ini berupa hasil dari perbandingan bisnis proses yang telah dibuat oleh PT TII dengan aturan SOX dan solusi untuk setiap problem yang iv
terjadi dari proses pemetaan bisnis proses yang akan sangat berguna bagi PT TII dalam melihat kesiapan perusahaan dalam menerapkan regulasi SOX dimulai dari tahap kesesuaian bisnis proses. Kata kunci: bisnis proses, regulasi SOX, risiko dan kontrol
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VALIDATION PAGE THE DESIGN OF BUSINESS PROCESS BASE ON SOX SECTION 404: A CASE STUDY AT PT TELEKOMUNIKASI INDONESIA INTERNATIONAL Wendhyarta Pradana ID: 19007127 Undergraduate Program of Management Study School of Business and Management Institut Teknologi Bandung 4 August 2010 Validated By Prof. Togar M. Simatupang NIP: 132052380 vi
FOREWORD My deepest gratitude to The Greatest Allah SWT that has been blessing me many favor for the final project achievement titled “Case Study of Implementation SOX Regulation Section 404 in The Making of Business Processes on PT TII”. Also thanks to all people that giving me a huge moral support and giving me enlightenment at the beginning to the end of the research, especially thanks for:
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My dad, Sofwani and my mom, Tri Ismiati for their never ending blessing, caring, and for their patience.
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My counselor, Mr. Togar M Simatupang for the most valuable time of giving me valuable advice comments, and critics. Hopefully success with your daily activity.
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Mrs. Widya Rickarda as Quality Manager Officer of PT Telekomunikasi Indonesia International for the patience and the consultation.
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Mr. Chandra as Quality Manager Senior Officer of PT Telekomunikasi Indonesia International for the education of business process.
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Nur Annisa my beloved girlfriend for her caring and patience.
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My roommates during internship program in Mbah Jingkrak, Jakarta. Ifad Ardin, Dally R., Hendra W.P., and Bhre Sandhya K. Thanks for accompany me in every hard & tough situation during internship.
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All SBM 2010 friends for give me the incredible life experience.
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Last but not least, the employees of PT Telekomunikasi Indonesia International, Mr. Adam, Mr. Chandra for helping me gathering the data. Bandung, July 26th 2010
Wendhyarta Pradana vii
LIST OF CONTENTS ABSTRACT ................................................................................................................... ii ABSTRAK ..................................................................................................................... iv VALIDATION PAGE ................................................................................................. vi FOREWORD ............................................................................................................... vii LIST OF CONTENTS ............................................................................................... viii LIST OF FIGURES ........................................................................................................ x LIST OF TABLES ........................................................................................................ xi LIST OF APPENDICES ............................................................................................. xii CHAPTER I INTRODUCTION .................................................................................. 1 1.1 Background ............................................................................................................ 1 1.2 Problem Identification ......................................................................................... 4 1.3 Main Objectives ..................................................................................................... 4 1.4 Problem Boundaries ............................................................................................. 5 1.5 Problem Approach ............................................................................................... 5 CHAPTER II THEORETICAL FOUNDATION ...................................................... 7 2.1 Business Process Management ........................................................................... 7 2.2 SOX theory section 404, Internal Control over Financial Reporting (ICOFR) ...................................................................................................................... 10 CHAPTER III SEQUENCE OF EVENTS AND DATA ........................................ 15 3.1 Initial Study ......................................................................................................... 15 3.2 Problem identification ........................................................................................ 15 3.3 Theoretical Foundation ...................................................................................... 15 3.4 Data Gathering .................................................................................................... 15 3.5 Processing Data and Analysis ........................................................................... 16 3.6 Discussion ............................................................................................................ 16 viii
3.7 Conclusion ........................................................................................................... 16 CHAPTER IV DATA GATHERING AND ANALYSIS ...................................... 19 4.1 Company Background ....................................................................................... 19 4.2 Business Model of PT Telekomunikasi Indonesia International ................. 23 4.3 Data Analysis ...................................................................................................... 26 4.4 Discussion ............................................................................................................ 49 CHAPTER V CONCLUSION ................................................................................... 57 5.1 Conclusion ........................................................................................................... 57 5.2 Implementation Plan ......................................................................................... 58 5.3 Future Research .................................................................................................. 64 REFERENCES .............................................................................................................. 66
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LIST OF FIGURES Figure 3‐1 Roadmap ..................................................................................................... 18 Figure 4‐1 Business Model .......................................................................................... 23 Figure 4‐2 SOX Business Process ............................................................................... 27 Figure 4‐3 Business Process Level 0 ........................................................................... 30 Figure 4‐4 Business Process Level 1 ........................................................................... 32 Figure 4‐5 Organization Structure ............................................................................. 33 Figure 4‐6 Director Decision 1 .................................................................................... 35 Figure 4‐7 Director Decision 2 .................................................................................... 36 Figure 4‐8 Business Process Settlement ..................................................................... 38 Figure 4‐9 Business Process Parameter Update Request and Validation ............ 40 Figure 4‐10 Business Process Billing Validation Results ........................................ 42 Figure 4‐11 Business Process Funding ...................................................................... 43 Figure 4‐12 Business Process Expenditure of Cash and Bank ............................... 45 Figure 4‐13 Business Process Imprest Fund ............................................................. 47 Figure 5‐1 Business Process Treasury ........................................................................ 60 Figure 5‐2 Business Process Network & Service ...................................................... 62
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LIST OF TABLES Table 4‐1 The comparing of Business Process and SOX requirements ................ 51 Table 5‐1 Implementation Plan .................................................................................. 64
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LIST OF APPENDICES
APPENDIX A DEFINING THE DETAILED SCOPE FOR SOX SECTION 404... 67 APPENDIX B COSO FRAMEWORK ........................................................................ 91
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