SC confirms investigation on KPMG and Deloitte’s roles in 1MDB

KUALA LUMPUR: The Securities Commission (SC) has today confirmed it is investigating Deloitte and KPMG on their roles as auditors of 1Malaysia Development Bhd (1MDB).

In an email reply to queries seeking for confirmation, an SC spokesperson said: “The SC’s review of the conduct of auditors in relation to 1MDB audits is still ongoing.

“Once the review is completed, the SC and the Audit Oversight Board will assess the findings and consider the appropriate next course of action,” the spokesperson added.

It was reported that SC was assessing if these two audit firms were “aiding and abetting in the 1MDB scandal or merely negligent.”

Ernst & Young was 1MDB’s first auditor. It was sacked in 2010 without signing off the fund’s accounts.

KPMG replaced Ernst & Young and performed audits on 1MDB’s books in the years 2010, 2011 and 2012. Again, the 1MDB’s accounts were signed off, without any qualifications.

Deloitte took over for the years 2013 and 2014. The firm quit in 2015 after the US Department of Justice initiated legal action against 1MDB. Deloitte had signed off the 1MDB accounts without any qualification.

Since 2015, 1MDB has not filed any financial statements.

In mid-2018, KPMG released a statement claiming that the books it had audited for 2010, 2011 and 2012 were “not true and fair assessments of 1MDB’s funds.”

KPMG justified its position saying it lacked full access to relevant documents that were only declassified after the new government took power.

Deloitte quit after the US Department of Justice filed lawsuits to recover assets acquired with misappropriated 1MDB funds, saying that its audit reports should no longer be relied upon.

Apart from the SC, the Malaysian Institute of Accountants (MIA) has reportedly said it is investigating both Deloitte and KPMG on whether they had breached the Accountants Act when signing off 1MDB’s accounts between 2009 and 2014.

The MIA has the power to regulate the accounting profession in Malaysia.

All in, 1MDB which had accumulated debts of RM42 billion over five years between 2009 and 2014, has had four auditors since its inception. They are Parker Randall, Ernst & Young, KPMG and Deloitte.