Report: Securities Commission Probing Audit Giants KPMG, Deloitt over 1MDB

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KPMG and Deloitte the latest among international firms being probed by Malaysian authorities.

The Securities Commission Malaysia (SC) are investigating two of the world’s largest audit firms, KPMG and Deloitte, over their alleged involvement in the 1Malaysia Development Berhad (1MDB) corruption scandal according to South China Morning Post (SCMP).

Sources told the Hong Kong daily that the commission is probing the firms to determine if they were aiding and abetting in the scandal, or merely negligent.

“The accountants must be held accountable”, a source close to the matter reportedly told SCMP yesterday.

SCMP also quoted Centre to Combat Corruption and Cronyism (C4) executive director Cynthia Gabriel who said the firms were “a party” to the fraud and the personnel involved should be duly punished.

Gabriel had served on the 1MDB investigation committee set up by the Council of Eminent Persons in May last year.

It was reported that the SC did not name the two firms but confirmed that a review of the “conduct of auditors in relation to 1MDB audits is still ongoing”.

Ernst & Young, 1MDB’s first auditor, was sacked in 2010 and replaced by KPMG, which performed the audit for 2010, 2011 and 2012.

Following their refusal to validate accounts worth US$2.32 billion (RM9.48 billion), KPMG was replaced by Deloitte for the years 2013 and 2014.

Deloitte resigned in February 2016 after the US Department of Justice initiated legal action against 1MDB, seeking to recover over US$1.7 billion (RM7.01 billion) in assets traceable to funds allegedly misappropriated from 1MDB.

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Deloitte was replaced by Parker Randall.

In mid-2018, KPMG released a statement claiming that the books it had audited for 2010, 2011 and 2012 were not “true and fair” assessments of 1MDB’s funds and that the company lacked full access to relevant documents that were only declassified after Pakatan Harapan took power.

According to The Malaysian Insight, its sources said they believe KPMG may be negotiating a deal with Malaysian authorities.

SCMP also said the Malaysian Institute of Accountants (MIA) was currently looking into KPMG and Deloitte’s conduct but cannot hand down punishments sterner than a fine of up to RM5,000 or termination of membership.


“So far both (KPMG and Deloitte) have been cooperative but remember this is a disciplinary tribunal for MIA members and not a court,” MIA chief executive officer Nurmazilah Mahzan told SCMP.

1MDB has not filed financial statements since 2015. The Pakatan Harapan administration has yet to name new auditors since assuming federal power, amid conflicting reports that either PwC has been chosen or KPMG reappointed.

The investigation into KPMG and Deloitte comes after Putrajaya filed charges against global bank Goldman Sachs for its role in the multibillion-dollar scandal and raided its law firm in Malaysia.

Goldman Sachs was responsible for arranging several bonds for 1MDB, with the investment bank earning itself about US$600 million in the process.

It has since apologised for its role in the 1MDB scandal, with Malaysian authorities pursuing the bank for compensation.