1MDB’s auditor Deloitte Malaysia should act responsibly and lodge a police report if has been misled, in light of recent revelations in The Wall Street Journal ( WSJ ).
Petaling Jaya Utara MP Tony Pua said the recent articles that highlighted discrepancies in payments from 1MDB to International Petroleum Investment Corporation (IPIC) cannot be ignored by the audit firm.
Although Deloitte is not responsible for any fraud that occurs in 1MDB, said Pua, the International Standards of Auditing (ISA) adopted by the Malaysian Institute of Accountants (MIA) dictates, “the auditor shall maintain professional scepticism throughout the audit”.
“Given the overwhelming criticisms and public scrutiny of 1MDB in the past year, there is absolutely no basis for Deloitte to claim ignorance and hence the lack of scepticism with regards to the 1MDB financial statements prepared by the management,” he said.
Pua said 1MDB’s responses to the latest two WSJ reports have not answered the fundamental question of why the amounts said to have been paid to IPIC are not reflected in the latter’s accounts.
“As such, the question that needs to be asked is if 1MDB’s auditors, Deloitte Malaysia have been wilfully misled 1MDB or have they been unprofessionally negligent, or both, over its audit of 1MDB’s options granted to IPIC and/or the latter’s subsidiary, Aabar.
“Did Deloitte Malaysia vet the options termination agreement cited by 1MDB, verify the amount which is needed to be paid and confirm with IPIC as to the amount which have been paid by 1MDB?” asked Pua.
He said even if the auditor had already signed off on the audits, it has a responsibility to act if it discovers belatedly that it had been misled in light of the WSJ articles.
“(If so), then it is the responsibility for Deloitte to file police reports against those who have provided the fraudulent information given that a crime could have taken place.”
'Not in IPIC's books'
WSJ reported on Sept 18 that almost US$1 billion allegedly paid to IPIC by 1MDB was not reflected in IPIC's financial statements.
The US$1 billion was supposed to be used to buy back 1MDB's options, which had been granted to IPIC in 2012 to acquire up to 49 percent of its two energy subsidiaries.
The options granted to IPIC were part of the condition for a guarantee by IPIC for US$3.5 billion of 1MDB bonds.
Pua said 1MDB’s March 2014 financial statement audited by Deloitte claimed the US$1.22 billion redeemed from the Cayman Islands investment was in part used to pay for the Aabar Investment PJS options.
However, he said, the US$993 million payment was not reflected anywhere in IPIC’s financial statements for the year ending Dec 2014.
“Instead the statements disclosed that 1MDB still owes and additional US$481 million to IPIC for the termination of the said options,” said Pua.
"(1MDB) failed to explain the 'missing' billion dollars. Instead the executives tried to obfuscate the matter," he said.
1MDB had condemned the US financial daily's report as erroneous and explained, "pursuant to the payment made by 1MDB, the options were in fact terminated".
Pua however pointed out WSJ never asked about the termination of the options over the energy assets.
Instead, he said, their questions were where the US$1 billion had gone to, if 1MDB had indeed paid the amount to terminate the options, and why IPIC's accounts do not show receipt of any such payment.
Related reports
WSJ: IPIC didn't get US$1.4b collateral from 1MDB
WSJ: Another US$1b payment from 1MDB to IPIC missing
