Deloitte to face MIA disciplinary committee

KUALA LUMPUR (Nov 26) : The Malaysian Institute of Accountants (MIA) said it had completed its investigation into Messrs Deloitte over the latter’s role as the former auditor of scandal-plagued fund 1Malaysia Development Bhd (1MDB).

“With regard to the recent news in the media relating to [former] 1MDB auditor Messrs Deloitte, MIA wishes to confirm that MIA has done the investigation into Deloitte where the case has now been escalated for hearing at the disciplinary committee,” said MIA chief executive officer Dr Nurmazilah Mahzan in a statement yesterday.

MIA is a regulatory body looking at the professional conduct of accountants based on the provision of the Accountants Act 1967. It is investigating both Deloitte and KPMG on whether auditors had breached the Accountants Act when signing off 1MDB’s accounts between 2009 and 2014, following complaints lodged against the two. The investigation reportedly began in mid-2016.

Ernst & Young (EY) was 1MDB’s first auditor when it was set up in mid-2009. However, EY was sacked in 2010 after it refused to sign off on 1MDB’s 2010 accounts unless provided with certain documentation of the fund’s joint venture with PetroSaudi International.

KPMG took over and subsequently signed off the accounts for the financial years ended March 31 in 2010, 2011 and 2012. But KPMG was replaced in December 2013 during its audit of the financial statements for the year 2013, reportedly after a difference of opinion on the fair value of 1MDB’s investment in Bridge Global SPC through Brazen Sky Ltd.

KPMG decided to issue a qualified audit report for 1MDB’s 2013 financial statements, but was replaced by Deloitte before it could do so. On taking over, Deloitte verified the accounts for the financial years 2013 and 2014, without any qualification or emphasis of the matter.  Both KPMG and Deloitte have since stated their audited reports on 1MDB’s financial statements can no longer be relied on.

Deloitte made the announcement in 2016, when it said it would be quitting as 1MDB’s auditor, following a civil forfeiture complaint filed by the US Department of Justice on July 20 that year. It said the complaint contained information, which, if known at the time of its audits of 1MDB, would have impacted the financial statements and affected its audit reports.

In June this year, KPMG dismissed its own audit reports on 1MDB, saying it decided to do so after going through the declassified Auditor-General’s Report on 1MDB and other documents that it said were withheld from them by the fund’s previous management.  

1MDB announced Parker Randall as its new auditor in January 2017.

This article first appeared in The Edge Financial Daily, on Nov 26, 2018.

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