Trio seek judicial review over MIA probe into their roles in 1MDB audit

KUALA LUMPUR (Jan 14): Deloitte PLT partner Mark Evelyn Thomson and two former auditors of the firm have launched a legal challenge against the Malaysian Institute of Accountants (MIA) over its probe into their roles in the 1MDB audit for 2013 and 2014.

Thomson, together with Tan Theng Hooi and Cheong Thoong Farn, have filed an application for judicial review against MIA and the institute’s investigation and disciplinary committees. The trio had been referred to the two committees in September last year over alleged breaches in the 1MDB audit.

In the application filed at the High Court through their legal firm, Weng & Co, the three men are seeking to quash the decision by the investigating committee to refer them to the disciplinary committee.

A case management was held before High Court deputy registrar Norazlin Othman yesterday.

According to the cause papers sighted by The Edge, the trio who were part of the 1MDB audit in various capacities, had allegedly failed to comply with the requirements of paragraphs (14) and (17) of MIA’s International Standard of Auditing (ISA) 560 Subsequent Events.

The two paragraphs deal with failure to take appropriate action and preventing reliance of an auditor’s report.

The trio had on June 18, 2020, during a hearing before the MIA investigating committee, informed the committee that they should be dismissed based on the doctrine of res judicata (claim preclusion).

Res judicata is the Latin term for "a matter decided" and refers to either of two concepts in both civil law and common law legal systems: a case in which there has been a final judgment and is no longer subject to appeal; and the legal doctrine meant to bar (or preclude) relitigation of a claim between the same parties.

Thomson, Tan and Cheong, in their application, claim that the complaints against them by the investigating committee amounted to an abuse of process and were made in bad faith.

Deloitte had in 2016 quit as 1MDB’s auditors. 1MDB subsequently said the audit reports issued by Deloitte in connection with the 2013 and 2014 financial statements of 1MDB should no longer be relied upon.

Deloitte took over the auditing of 1MDB accounts from KPMG, which had decided to issue a qualified audit report for 1MDB’s 2013 financial statements. KPMG was replaced in December 2013, before issuing its audit report.

KPMG was reportedly dismissed after a difference of opinion on the fair value of 1MDB’s investment in Bridge GLobal SPC through Brazen Sky Ltd.

Deloitte verified the accounts for the 2013 and 2014 financial years, with an unqualified opinion without any qualification or emphasis of matter.

Deloitte’s auditing standards, however, have been questioned since 2015, as 1MDB struggled to pay its matured debt obligations and service its interests.

On Dec 24 last year, Deloitte failed to set aside the RM2.2 million imposed on the firm by the Securities Commission Malaysia (SC) over its failure to report breaches linked to the RM2.4 billion sukuk issued by Bandar Malaysia Sdn Bhd, which is linked to 1MDB.

Deloitte had filed a judicial review to challenge the imposition of the RM2.2 million fine for its failure to report the breaches.

The SC had announced on Jan 30, 2019 that it had imposed administrative sanctions on the audit firm for four purported breaches of provisions involving reporting to the commission and to the trustee of the RM2.4 billion sukuk programme.

The SC had slapped a RM2 million fine on Deloitte for failing to discharge its statutory obligations including not immediately reporting irregularities it found. It also fined the audit firm an additional RM200,000 for not submitting a copy of the financial statements to the trustee within the legally stipulated time.

The SC previously said the fines were in relation to the RM2.4 billion sukuk murabahah programme issued by BMSB, a subsidiary of 1Malaysia Development Bhd (1MDB), in 2014.

Deloitte was the statutory auditor of BMSB and 1MDB Real Estate Sdn Bhd for the financial year ended March 31, 2015 (FY15) and FY16.

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