GLOBAL audit companies Deloitte and KPMG are being investigated over their involvement in the 1Malaysia Development Bhd scandal, reports the South China Morning Post.

The report, quoting sources, said Securities Commission Malaysia is determining whether the firms “were aiding and abetting in this scandal, or merely negligent”.

“The accountants must be held accountable,” it quoted a source as saying.

The report said KPMG signed off on 1MDB’s accounts in 2010, 2011 and 2012, and Deloitte did the same in the following two years after it was reported that KPMG was sacked for seeking more information on 1MDB assets.

Deloitte quit after the US Department of Justice filed suits to recover assets allegedly acquired with misappropriated 1MDB funds and said the state investor’s audit reports were no longer reliable.

1MDB has not filed its accounts since 2015, despite the appointment of Parker Randall.

SCMP quoted anti-graft activist Cynthia Gabriel, who serves on a committee tasked with assisting Malaysia’s probe into 1MDB, as saying the audit firms involved were “a party to the fraud”.

“The personnel involved should be duly punished. Evidence of wrongdoing has been produced – the Auditor-General’s Report, the Public Accounts Committee’s report. In fact, KPMG is working to nullify the (1MDB) audit reports for 2011 and 2012.”

Last year, KPMG said the books it audited in 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 declassified only after Pakatan Harapan took power.

Sources said they believe KPMG may be negotiating a deal with Malaysian authorities.

The Securities Commission has refused to provide details, only saying its review of the “conduct of auditors in relation to 1MDB audits is ongoing”, said the report.

SCMP said the Malaysian Institute of Accountants is looking into Deloitte and KPMG’s conduct, and cannot hand down punishments more than a RM5,000 fine or terminate their memberships.

The new government has yet to reveal who the current 1MDB auditor is, amid conflicting reports that either PwC has been chosen or KPMG reappointed, it added.

The investigation into Deloitte and KPMG 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.

The dragnet has also caught former prime minister Najib Razak, who faces a slew of corruption and abuse of power charges, and sent wanted Penang-born businessman Low Taek Jho, believed to be at the heart of the scandal, into hiding. – January 26, 2019.