KUALA LUMPUR, May 19 — Datuk Seri Najib Razak should not use a private audit of 1Malaysia Development Bhd (1MDB) to absolve the firm ahead of ongoing investigations just as he told critics not to prejudge the outcome of the probes, a federal lawmaker said today.

According to Petaling Jaya Utara MP Tony Pua, the fact that auditing firm Deloitte had signed off on 1MDB’s accounts was not a guarantee that the finances of the state-owned firm was in order or that no “wrongdoings, embezzlement and misappropriations” had occurred.

Pua, who is a member of the Public Accounts Committee (PAC) that will begin its scrutiny of 1MDB today, pointed out that more than a quarter of the firm’s RM51.4 billion in assets were classified by Deloitte as “Level 3” assets whose valuation are derived at least partially from non-transparent measures.

“In other words, the auditors have put on record that they are unable to vouch for the veracity and accuracy of these numbers which were supplied by the 1MDB management.  

“Therefore even a mere 20 per cent shortfall in the above ‘Level 3’ asset valuation would trigger a severe liquidity crisis by 1MDB, as we witness today,” Pua said in a statement.

Challenging Najib’s assertion yesterday that auditors would not have finalised 1MDB’s accounts if any amount of funds were missing, Pua pointed out that accounting and auditing firms were not impeccable or immune to trickery.

Citing the 2001 Enron scandal that involved the collusion by Arthur Andersen — one of the “Big Five” accounting firms that was dissolved as a result — Pua said it was misleading and disingenuous to claim that Deloitte’s audit puts 1MDB’s finances and financial practices beyond reproach.

Among others, the PAC member pointed out that 1MDB encountered difficulty in meeting a RM2-billion loan payment at the end of November last year, the same month that its private auditors signed off on its accounts after missing the October 31 deadline.

Pua ventured on to say that a 1MDB with its finances in order would not need a RM950-million emergency line of credit from Putrajaya to help it overcome what Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah had then described as liquidity issues.

“Therefore, the prime minister must stop misleading the people of Malaysia with half-truths and lies by claiming that being audited by Deloitte is proof that 1MDB is in the pink of health,” Pua said.

Yesterday, Najib told former Umno lawmakers during a meeting at the Putra World Trade Centre that auditors would not have closed 1MDB’s accounts if any money is unaccounted for, insisting it was not possible for RM42 billion to disappear.

“Auditors will not sign if even RM1 million is missing,” Najib said.

Critics such as former prime minister Tun Dr Mahathir Mohamad are demanding that Najib resign as the head of the government over an alleged failure to dispel allegations surrounding his administration, including 1MDB’s debts, among others.

In March, Najib ordered the Auditor-General and PAC to investigate 1MDB, amid growing demands for explanations over the state investment firm’s allegedly opaque investment decisions and for amassing a RM42 billion debt pile.

The AG said a preliminary report on its audit of 1MDB will be ready next month, while the PAC will start its investigation into the firm today.

1MDB was incorporated in 2009, after the prime minister announced the decision to turn the Terengganu Investment Authority state fund into a federal agency.

Since then, 1MDB has been dogged by negative publicity over its finances and debt, and most recently cash flow problems that saw it struggle to meet a RM2 billion loan payment.