KUALA LUMPUR - Malaysian Deputy Prime Minister Muhyiddin Yassin said on Friday public funds should not be used to bail out troubled state investment fund 1MDB and its board of directors should be held responsible if investigations reveal any negligence or impropriety, Malaysian media reported.

"The board of directors should take responsibility and prepare to face legal action should investigations show negligence or misappropriation in 1MDB transactions," Muhyiddin said in a statement according to The Star.

The DPM's statement came two days after Prime Minister Najib Razak said he had instructed the Auditor-General to independently verify the accounts of 1MDB, or 1Malaysia Development Bhd.

The fund is undergoing a strategic review after years of controversy over its debt, late financial reports and late loan payments. It is widely reported to be struggling to pay off more than US$11 billion (S$15.03 billion) in debt, raising fears it could collapse and wreak havoc on Malaysia's financial system.

The political opposition has been demanding that Najib and 1MDB clarify the fund's dealings and whether money was siphoned off to benefit those close to the premier, Reuters reported.

Transparency International on Tuesday also called for an investigation, said Reuters. The anti-graft watchdog made specific mention of a media report last weekend alleging US$700 million was diverted from a shadowy 2009 deal between 1MDB and a little-known Saudi energy firm, PetroSaudi.

Muhyiddin said in his statement the Auditor-General should not take too long to complete the audit of 1MDB, The Star reported. He also said the Public Accounts Committee (PAC) can start their own probe into the state investment vehicle, reported the Malaysian Insider.

"I believe that an audit that is transparent, independent and comprehensive is essential to clear the name of this Government-owned investment fund to dismiss any accusations of wrongdoing and misappropriation of funds," the DPM said.