A DAP lawmaker has filed a complaint against international auditor Deloitte for failing to raise the alarm over 1Malaysia Development Bhd (1MDB) financial situation, resulting in its continued borrowings and subsequent inability to repay its debt.

The complaint was filed with the Malaysian Institute of Accountants (MIA) in Kuala Lumpur this afternoon.

"Deloitte Malaysia intentionally and/or negligently failed to conduct sufficient and necessary due diligence and audit of the cash flow and liquidity risks of 1MDB.

"Deloitte signed off and endorsed 1MDB as (having no problems) on Nov 5, 2014, despite the company facing an imminent liquidity crisis as exposed before the end of that month, when it was unable to repay an RM2 billion debt," Tony Pua said.

The Petaling Jaya Utara MP ( centre in photo ) added that the complaint was filed to also debunk attempts by 1MDB and Prime Minister Najib Abdul Razak to use Deloitte's name to claim everything was above board in the debt-ridden company.

Malaysiakini has emailed Deloitte on the matter and is now awaiting its response.

Deloitte should have been more diligent

Pua said Deloitte should have taken greater due diligence, particularly with regard to 1MDB's Level 3 assets, the actual value of which are vague and cannot be determined by normal market value.

He said heavy public interest in 1MDB as well as the resignation of the two previous 1MDB auditors, Ernst and Young and KPMG, should have raised red flags for Deloitte to take extra care.

"Level 3 assets constitute a large portion of 1MDB's total assets, which was 27.1 percent in 2013 and 26.1 percent in 2014.

"Given the size of the Level 3 assets, any discrepancies in valuation will have a massive impact on the financial status of 1MDB," Pua said.

An example of this is the confusing explanations the Malaysian public are now seeing on 1MDB's investment in Cayman Islands, which have turned out to be “paper assets” transferred to a Singapore bank.

It all helped in 1MDB's facade of viability

Pua said Deloitte should have scrutinised whether the Level 3 assets are indeed assets or whether fraud is involved.

"In 1MDB's case, the valuation of the very substantial RM13.4 billion of assets cannot be properly determined as a result of poor corporate governance and financial controls (in Cayman Islands), which should have raised sufficient suspicion for the auditors to exercise professional scepticism throughout the audit," he said.

Deloitte's failure to raise all these issues had allowed 1MDB to maintain a "facade of its financial strength and viability".

"As a result, 1MDB continued to accumulate a total of RM41.9 billion in debt as at March 31, 2014, and the company is now unable to service even the interest payments for its loans," Pua said.

Deloitte served as 1MDB's auditor for 2013 and 2014.

In March, Pua also lodged a complaint against KPMG, which audited 1MDB's accounts between 2010 and 2012.

This was over allegations that KPMG backdated 1MDB's deal with PetroSaudi to hide information from its financial report.

Pua said MIA informed him today that it was still investigating KPMG on the matter and was awaiting the response from the auditor.

KPMG has insisted that its audit is according to procedure but declined to comment further, citing client confidentiality.

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