What happened to complaints against 1MDB auditors, Pua asks MIA
Published:  Jul 18, 2016 4:40 AM
Updated: Jul 19, 2016 4:12 AM

DAP lawmaker Tony Pua has called on Malaysian Institute of Accountants (MIA) president Mohammad Faiz Azmi to explain the "snail's pace" in dealing with his complaints against the auditors of 1MDB: KPMG and Deloitte Malaysia.

Pua said he had alleged that both firms intentionally and/or negligently failed to conduct sufficient and necessary due diligence and audit of 1MDB, which resulted in the filing of fraudulent 1MDB annual financial statements.

Malaysiakini is contacting MIA for its response on this matter.

"My complaint against KPMG was for its failure to take into consideration the material disclosures of the transactions which took place in 1MDB's then US$1 billion investment to form an aborted joint venture with Petrosaudi International Limited in 2009-2010.

"Of the above sum, Bank Negara has confirmed to the Public Accounts Committee (PAC) that US$700 million was siphoned to an unrelated company, Good Star Limited, whose ultimate beneficiary was Low Taek Jho, or more popularly known as Jho Low," Pua said in a statement today.

He said KPMG signed off the March 2010 financial audit within three weeks after its appointment in September 2010, following 1MDB's sacking of its original auditors Ernst & Young.

Ernst & Young had refused to sign off 1MDB's financial statement due to irregularities in the transactions with Petrosaudi, said Pua.

Most crucially, he alleged, KPMG also intentionally and/or negligently failed to report that 1MDB's sale of its shares in the joint venture with Petrosaudi and their conversion into a loan took place after the March 2010 financial year.

As a result, he said, 1MDB was able to report artificially inflated profits and failed to disclose highly dubious key transactions within 1MDB and Petrosaudi Limited.

Deloitte Malaysia then took over from KPMG after 1MDB sacked the KPMG in December 2013, noted Pua.

KPMG refused to sign March 2013 accounts

He said KPMG had refused to sign off the March 2013 accounts because it was unable to verify the authenticity of 1MDB's US$2.318 billion investment in a dodgy investment fund parked in Cayman Islands.

Pua said he accused Deloitte Malaysia of intentionally and/or negligently failing to conduct sufficient and necessary due diligence and audit of the cash flow and liquidity risk 1MDB.

"Deloitte endorsed 1MDB as a concern on Nov 5, 2014, after which 1MDB immediately failed to repay a RM2 billion loan at the end of November 2014.

"This was because Deloitte Malaysia has failed to perform a thorough authentication and verification of 1MDB's investment in the Cayman Islands, which turned out to be fraudulent.

"Of the US$2.318 billion investment, US$1.15 billion has 'disappeared' into the now exposed fake Aabar Investment PJS Limited, which was incorporated in the British Virgin Islands.

"The balance of US$940 million was supposedly kept in BSI Bank, Singapore. However, the sum appears to have disappeared altogether, after the Singapore authorities shut down the bank for facilitating money laundering," he added.

In addition, Pua said, Deloitte Malaysia failed in its audit of 1MDB's financial statements for March 2013 and 2014 when it did not  properly expense the stock options which 1MDB had granted to Aabar.

"The failure to account for the stock options granted, worth at least US$993 million (RM4 billion) meant 1MDB over reported profits of RM778 million in 2013 and under reported loss of only RM669 million in 2014.

"As of today, 1MDB has yet to file its accounts for March 2015 while Deloitte remains their auditors," he added.

Pua said the two complaints were filed 14 months and 16 months ago respectively, but he has yet to hear from MIA.

"No action seems to have taken place. Investigations, if any, appear not to have achieved any outcome," he added.

Previously, Malaysiakini had contacted KPMG but the firm refused to comment on the matter whereas an email to Deloitte on Pua's complaint went unanswered.

The PAC report states that 1MDB's former auditors Ernst & Young (EY) and KPMG had been replaced after insisting on seeing documents on some of the state investment fund's dealings.

In particular, the PAC report said, KPMG had already decided to issue a qualified audit report for 1MDB's 2013 financial report, but the audit firm was suddenly replaced by Deloitte.

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