Audit firm KPMG Malaysia defended its audit of state investment firm 1Malaysia Development Bhd (1MDB) following claims that it had helped cover suspect dealings.

Whistleblower website Sarawak Report had alleged KPMG was complicit in covering up that 1MDB’s joint venture with PetroSaudi had a “dubious existing debt of US$700 million” citing leaked emails that purportedly points to the auditor’s involvement as early as March, 2010.

KPMG in an email to Malaysiakini however said, “KPMG Malaysia was appointed as auditors for 1MDB in September 2010. 

“KPMG Malaysia was the auditor for the financial years ended 31 March 2010 to 31 March 2012. 

“The audit of 1MDB was conducted in accordance with international standards on auditing. KPMG will cooperate with the relevant Malaysian authorities investigating this matter.

“Due to continuing client confidentiality obligations, KPMG is unable to comment further at this point in time.”

In the email dated March 22, 2010 that Sarawak Report had leaked, 1MDB chief investment officer Nik Faisal Ariff Kamil was allegedly seen making reference to auditors wanting a change in a clause in transaction documents in order to clear the audit.

“This email itself provides very strong evidence that KPMG not only abetted 1MDB in covering up the joint venture, they even advised 1MDB on how to execute the cover up transaction agreements to their satisfaction,” Petaling Jaya Utara MP Tony Pua commented in a statement last weekend.

HQ stays mum

Sarawak Report meanwhile expressed surprise that KPMG Global had steered clear of commenting on the expose concerning it's Malaysian franchisee.

In an article on Tuesday, the website said Sydney-based Malaysian investigative financial journalist Ganesh Sahathevan had asked KPMG Global chairperson John Veihmeyer to give his response to Sarawak Report 's allegations.

Sahathevan had asked whether KPMG Global had been aware of any of the transactions relating to 1MDB outlined in the expose.

In a curt reply by KPMG Global's top lawyer, the firm said it provided "no client services" to its global affiliates and "no member firm has any authority to obligate or bind KPMG International".

"KPMG International does not have any relationship with, or connection to, 1MDB," read the reply.

"Malaysians and others, who had assumed that accreditation by KPMG represented some form of guarantee of high standards; quality control; centralised monitoring and disciplinary process to ensure high standards of accountancy practice must therefore stand disappointed," said Sarawak Report .

"Name bearers get to carry the brand, but without any form of accountability whatsoever," it added, saying this was a "stark contrast" to the "guarantee of quality that their brand lends to its affiliates across the world".

"Were it to be more widely recognised that KPMG Global exerts so little quality control over its branches, the reputation on which this ‘cooperative' relies might very well lose a lot of its lustre," it added.

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