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State Enterprises Minister Sofyan Djalil on Thursday vowed firm action against executives and auditors of state-owned construction company PT Waskita Karya for allegedly cooking its books over a four-year period.

The revelation has jeopardized the firm’s planned initial public offering, with the ministry saying Rp 400 billion will need to be injected to cover the overstatements.

Sofyan acknowledged that Waskita had reported net profit of about Rp 200 billion ($19.8 million) in its 2004-2007 reports, but that these were found to have been falsified.

“Waskita needs internal discipline. The company has actually booked losses for four years but it reported that it booked profits,” he said.

Sofyan said the irregularity was discovered in mid-2008. Believing that Waskita was in good health, the government decided to prepare it for an initial public offering in 2011. While the State Ministry for State Enterprises was tidying up the company’s books for the IPO, it was discovered that the firm had actually been losing money.

In September, the House of Representatives granted Waskita a permit to sell as much as 35 percent of its equity to raise Rp 600 billion.

According to State Enterprises Ministry data, Waskita posted a net profit of Rp 52.68 billion in 2004, Rp 50.28 billion in 2005, Rp 54.85 billion in 2006 and Rp 34.1 billion in 2007. It was yet to publish its 2008 financial report.

Sofyan said Waskita had used “the wrong accounting system” since 2004, resulting in annual profit being recorded. Waskita repeatedly reported total revenue expected from multi-year construction projects in its annual reports, even though only a portion of the total revenue expected from these projects were received during any one year, the minister said. In reality, the company was accumulating hundreds of billions of rupiah in losses.

State-owned asset management company PT Perusahaan Pengelolaan Aset (PPA), which was appointed to probe the matter, found that Waskita had actually run up a deficit of about Rp 400 billion.

“Those who are responsible for the matter will get sanctions, including job terminations,” Sofyan said.

The directors of Waskita were reported to have received bonuses during the period, which Sofyan said his office would demand be returned, even if the directors were not involved in the financial irregularities. He also vowed to take those responsible to court.

Waskita management could not be reached for comment.

Meanwhile, Sofyan said PPA would be designated as the source of the Rp 400 billion lifeline to help Waskita return to a sound financial footing. “We hope that within two years the company will be in better financial position,” he said.

Sofyan also called on the Ministry of Finance to review the auditors of the company’s financial reports, with a view to possibly bringing them to account as well.

“If we find that the auditor knew about it but did not do anything, we will ask the Finance Ministry to revoke the auditor’s license,” he said.