WSJ: Auditor only closed 1MDB’s books after UAE firm guaranteed US$2.32b in Caymans

Incorporated in 2009, 1MDB has used three different auditors: Ernst & Young, KPMG, and its current audit firm Deloitte. — Reuters pic
Incorporated in 2009, 1MDB has used three different auditors: Ernst & Young, KPMG, and its current audit firm Deloitte. — Reuters pic

KUALA LUMPUR, Sept 9 — An audit firm only signed off on 1Malaysia Development Berhad accounts after Middle Eastern firm Aabar Investments helped guaranteed the US$2.32 billion (RM9.99 billion) held by the state-owned firm in the Cayman Islands, the Wall Street Journal (WSJ) reported today.

Citing the Auditor-General’s draft report on its investigation into the firm, the WSJ reported that this disclosure was made by a representative of Deloitte Touche Tohmatsu Ltd, 1MDB’s current auditors.

The disclosure was made during a closed-door inquiry during the Public Accounts Committee’s (PAC) investigation into 1MDB, the WSJ said, citing transcripts of the hearing session.

Deloitte was appointed after 1MDB had in late 2013 terminated the services of another auditing firm, KPMG LLP.

The removal of KPMG took place after it allegedly refused to finalise its audit on 1MDB’s financial accounts without more information on a US$2.32 billion sum which 1MDB said it had invested in a Cayman Islands account, the WSJ reported.

Aabar’s guarantee of the US$2.32 billion was never made public, WSJ said, also noting that Deloitte later endorsed 1MDB’s accounts.

Both KPMG and Deloitte declined to respond, the WSJ said.

Incorporated in 2009, 1MDB has used three different auditors: Ernst & Young, KPMG, and its current audit firm Deloitte.

Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah previously asserted that it was normal practice for firms to switch auditors every three years.

In June, the PAC said it was told that Ernst & Young’s services were terminated in 2010, while KPMG’s services were said to have been terminated in December 2013.

The PAC started its probe on 1MDB in May, but this was suspended following the abrupt Cabinet reshuffle in late July that saw the committee’s chairman Datuk Nur Jazlan Mohamed and three other Barisan Nasional (BN) members appointed as deputy ministers.

The PAC was due to hear 1MDB’s current chief executive Arul Kanda Kandasamy and his predecessor Datuk Shahrul Ibrahim Halmi on August 4 and 5.

It was also expected to recall the three audit firms and several 1MDB executives and directors of its subsidiaries for further questioning in September to answer discrepancies raised by the Auditor-General’s interim report on 1MDB.

But the PAC hearings will only resume after a new PAC chairman and new members are selected when Parliament resumes next month.

The Auditor-General’s interim report on 1MDB was only presented to the PAC and was not made public. The Auditor-General’s final report is expected to be released within this year.

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