KUALA LUMPUR (THE STAR/ASIA NEWS NETWORK) - The Malaysian Institute of Accountants (MIA) is investigating KPMG and Deloitte, the two accounting firms involved in signing off the accounts of troubled state fund 1Malaysia Development Berhad (1MDB).
The investigations centre on whether the auditors had breached the Accountants Act when signing off on 1MDB's accounts between 2009 and 2014.
The MIA has the power to regulate the accounting profession in Malaysia.
"There are complaints lodged against KPMG and Deloitte and we are investigating the auditors in question. The complaints are on the auditors and it is ongoing," MIA's chief executive officer Nurmazilah Mahzan told StarBiz in an interview.
Ms Nurmazilah said it could not be determined at this stage when the investigations would be completed.
"The results of the investigations will be studied by a committee. The process is continuing but we have not got the final verdict yet. We cannot predict how long it will take at this point in time. If the auditors are found guilty or if there is a basis to these complaints then we have to wait for the judgment of the disciplinary committee," she added.
MIA's executive director for surveillance and enforcement Muhammad Redzuan Abdullah said the investigations were at the disciplinary committee level now and had started since mid-2016.
Scandal-riddled 1MDB accumulated debts of RM42 billion (S$14 billion) over the five years between 2009 and 2014, and has had four auditors since its inception. They are Parker Randall, Ernst & Young, KPMG and Deloitte.
1MDB appointed Ernst & Young as its auditor when it was set up in mid-2009. However, Ernst & Young resigned in 2010 without signing off the accounts.
KPMG stepped in to take over from Ernst & Young and signed off the accounts for the financial years ended March 31 in 2010, 2011 and 2012. The accounts were signed off without any qualification from the auditors.
Deloitte took over the auditing in December 2013 after 1MDB contended that KPMG could not "conclude" its 2013 accounts.
1MDB had also said in May 2015 that Deloitte had signed off 1MDB's accounts for 2013 and 2014. When questions arose as to why KPMG could not conclude the accounts for 2013, 1MDB stated in 2015 that Deloitte had signed off the accounts without any qualification.
Nevertheless, resignations by Ernst & Young and KPMG as auditors then had raised questions over the fund. In the accounting world, a firm rarely leaves a job half-done, especially more so when it involves big and prominent clients such as 1MDB.
After KPMG left, 1MDB obtained an extension of six months to submit its accounts for end-March 2013.
It was reported then that KPMG had relinquished its role as auditor. Deloitte then came in and managed to close the books within the extended period of six months.
Earlier reports quoting sources said the primary reason why KPMG could not give an opinion on 1MDB's accounts was because it was not able to make a fair assessment of the value of the assets backing the fund's US$2.3 billion (S$3.2 billion) investment placed with a Hong Kong-based asset management company.
Subsequently Deloitte managed to complete the books wherein the fair value of the investments was put at RM7.18 billion, based on the assessment done by a third party engaged by the fund administrator.
Recent reports said KPMG, which had signed off on three unqualified audit reports for 1MDB, had informed its board of directors that the audited financial statements did not reflect a true and fair view of the company.
It was reported that Deloitte in 2016 also said its audit reports on 1MDB's financial statements issued on March 28, 2014, and Nov 5, 2014, for the financial years ending 2013 and 2014 should no longer be relied upon.
