Home Media statements Paltry fine for 1MDB auditors just a rap on the knuckles

Paltry fine for 1MDB auditors just a rap on the knuckles

Source: theedgemarkets.com

Join us on Telegram and Instagram for the latest.

Aliran is taken aback by the paltry RM2.2m fine imposed by the Securities Commission against Deloitte for four breaches related to 1MDB.

We are even more flabbergasted that Deloitte is consulting its lawyers on whether to apply to the Securities Commission for a review.

The Securities Commission had described the breaches as “serious in nature”. Deloitte, it said, had “failed to discharge its statutory obligations” despite the firm having issued a qualified auditor’s report, indicating it had reservations on material issues.

The breaches were in relation to a 2014 issue of RM2.4bn under a “sukuk murabahah” scheme to raise funds by Bandar Malaysia Sdn Bhd, a 1MDB unit.

In the context of the massive losses suffered by 1MDB, which has cost the Malaysian public dearly, the fine of RM2.2m is a pittance.

If anything, the Securities Commission should have taken sterner action against Deloitte. At the very least, the partners responsible for overseeing the audit and signing the accounts should be prosecuted and have their licences revoked.

Investigations into 1MDB’s earlier auditor, KPMG, should stepped up. KPMG signed off on 1MDB’s financial statements for 2010, 2011 and 2012 – only to say much later that its auditor’s reports should not be relied upon as it did not have full access to relevant documents at the time of the audits.

The Malaysian Institute of Accountants should also be taken to task for foot-dragging. Just last week, its CEO was reported as saying the MIA was still deliberating over the inquiry into the audit firms. Still deliberating?

Why has the MIA not gone public by now with any findings on the role of the audit firms which failed spectacularly to highlight the 1MDB debacle? The MIA’s own failure makes a mockery of self-regulating the audit profession. How can it be trusted to be objective? In any event, its disciplinary powers are grossly inadequate to deal with such major cases. It reportedly can only impose a fine of up to RM5,000 or terminate membership.

Three of the so-called ‘Big Four’ audit firms who were 1MDB auditors did not exactly cover themselves with glory through their failure to expose the 1MDB debacle. As expert auditors with access to the 1MDB top management and the firm’s financial records, these external auditors should have been at the forefront of exposing the scandal. Instead, it was left to investigative journalists with no audit experience to uncover and piece together the truth – while the audit firms raked in huge audit fees.

What this episode tell us is that vested interests weigh heavily and often override the public interest and the common good. Money and audit fee incomes, it would seem, reigned supreme over all other considerations. In the end, the mutual back-scratching or unaccountability of audit firms has cost the Malaysian public big-time.

It is time for a serious revamp of the audit profession in Malaysia to ensure that external auditors are truly independent and do their jobs properly, without being influenced by high fee incomes. A new system must hold them accountable for any shoddy, incompetent work or worse, abetment with their clients in coming up with misleading audit reports to cover up any ‘creative accounting’ or fraud.

In the meantime, what has happened to Parker Randall, the obscure firm which replaced Deloitte in early 2017? It reportedly began work in 2018 on the audits for the 2015, 2016 and 2017 financial years but so far no financial statements have been filed, even for 2015.

Aliran executive committee

Thanks for dropping by! The views expressed in Aliran's media statements and the NGO statements we have endorsed reflect Aliran's official stand. Views and opinions expressed in other pieces published here do not necessarily reflect Aliran's official position.

Our voluntary writers work hard to keep these articles free for all to read. But we do need funds to support our struggle for Justice, Freedom and Solidarity. To maintain our editorial independence, we do not carry any advertisements; nor do we accept funding from dubious sources. If everyone reading this was to make a donation, our fundraising target for the year would be achieved within a week. So please consider making a donation to Persatuan Aliran Kesedaran Negara, CIMB Bank account number 8004240948.
Notify of
1 Comment
Oldest Most Voted
Inline Feedbacks
View all comments
Would love your thoughts, please comment.x