As controversy grows, PAC member puts 1MDB auditors on the spot
(Malay mail Online) – Accounting firm Deloitte must come forth and account for its audit of 1Malaysia Development Bhd (1MDB), a member of the Public Accounts Committee (PAC) said today as suspicions continue to linger over the state of the firm’s finances.
Petaling Jaya Utara MP Tony Pua, who is part of the PAC investigating 1MDB, said the onus was now on Deloitte to explain how 1MDB encountered cash flow problems dire enough that it struggled to make an interest payment in the same month the auditor reported the strategic investment firm had sufficient liquidity to “cover its cash flow needs.”
He pointed out that 1MDB was forced to seek extensions to a RM2 billion interest payment initially due last November, and needed a personal loan from tycoon Tan Sri T. Ananda Krishnan to avoid becoming delinquent in February.
The episode had then prompted Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah to describe 1MDB as experiencing cash-flow problems.
“It beggars belief that a firm of Deloitte’s standing was so wrong and negligent over a multi-billion ringgit state-owned firm which has resulted in massive losses for the Malaysian tax-payers.
“As an allegedly reputable international audit and accounting firm, it must come clean and protect its image of auditor independence and compliance with ethical standards in discharging their professional responsibilities,” he said in a statement today.
Beyond the purported loan from Ananda Krishan, Pua said 1MDB also needed an emergency line of credit worth RM950 million from the government and was also forced to sell capital assets in order to generate the cash needed to service its debts.
He said Deloitte must now make every effort to re-examine its audit to present a true and representative account of 1MDB’s financial health.
Pua also told Deloitte that its audit of 1MDB was being cited by Putrajaya to dispel allegations of wrongdoing and abuse involving the firm, and that the auditing firm was at risk of having its reputation tainted and becoming the “butt of jokes in the financial circles”.
Already under investigation by the Auditor-General and the PAC, suspicions over 1MDB grew after the Finance Ministry confirmed that the US$1.103 billion (RM3.973 billion) the firm was supposed to have “redeemed” from the Cayman Islands was being held in the form of “units” instead of cash as it previously claimed.
The discrepancy moved former prime minister Tun Dr Mahathir Mohamad to accused Prime Minister Datuk Seri Najib Razak, who is also finance minister, of lying about the funds, and to demand a criminal probe over the revelation.
The Finance Ministry yesterday responded to say that Najib’s previous parliamentary reply describing the US$1.103 billion as cash had been prepared by a ministry official based on 1MDB’s information.
Dr Mahathir is demanding Najib’s resignation as prime minister owing to the latter’s alleged inability to satisfactorily answer allegations regarding 1MDB and other controversies linked to his administration.
