KUALA LUMPUR: The opposition wants 1Malaysia Development Bhd’s (1MDB) former auditor KPMG to declare its role in the “PetroSaudi scandal”, and if there has been omission and negligence, intentional or otherwise, in its audit of 1MDB.

KPMG was 1MDB’s auditor between 2010 and 2012.

In a statement yesterday, DAP national publicity secretary Tony Pua said failure to do so would necessitate an investigation into the audit firm’s conduct by the Malaysian Institute of Accountants as the statutory body established under the Accountants Act 1967 to regulate the accountancy profession in the country.

Citing latest documents disclosed by United Kingdom-based whistleblower website Sarawak Report, Pua said there appeared to be a discrepancy in the date a Murabaha Financing Agreement (MFA) was signed.

“In a ‘Notice of Drawing’ documents dated July 23 and Sept 8, 2010, the notices referred specifically to the ‘Murabaha Financing Agreement dated June 14, 2010 between 1MDB PetroSaudi Ltd and 1MDB’,” Pua said.

“If the Murabaha loan agreement was only signed on June 14, 2010, why is it that the 1MDB financial statements for (the financial year ended) March 2010 already claimed that the 1MDB shares in the (1MDB and PetroSaudi) joint venture (JV) have been converted into Murabaha notes on the last day of the financial year, that is March 31, 2010?” he asked.

“Further to the [exposure of the] documents, there was also an email in May 2010 from Patrick Mahony to the ‘Project Uganda’ team, which included officials from PetroSaudi and 1MDB, which discussed the various agreements involved in the transaction: the “Murabaha Loan Agreement”, the “PetroSaudi Letter of Guarantee” and the “Letter of Agreement between PetroSaudi and 1MDB”.

“These emails raise the suspicion that the entire share conversion exercise by 1MDB in the JV into a loan was an afterthought, well past the March 2010 financial year-end,” said Pua.

A financial statement has shown that 1MDB sold its 40% stake in 1MDB PetroSaudi Ltd for US$1.2 billion (RM4.14 billion) and subsequently signed the MFA with 1MDB PetroSaudi on March 31, 2010.

However, the “Notice of Drawing” documents showed that the MFA was signed on June 14, 2010, three months after the financial year ended. Pua argued that KPMG, which audited 1MDB’s account between 2010 and 2012, and signed off 1MDB’s financial statement ending March 31, 2010 on Oct 4 the same year, should have seen the content of the 1MDB’s JV agreements with PetroSaudi and all the relevant documents to arrive at its conclusion in the report.

“The auditors surely would have seen these documents — the fact that the agreement was only signed on June 14, 2010. In fact, the entire Murabaha discussion was after the financial year March 31.

“How is it that they can sign off an account to state that the Murabaha agreement was signed and took place on March 31?” asked Pua.

Pua claimed that the whole Murabaha Note exercise was to cover the 1MDB PetroSaudi transaction which saw US$700 million cash channelled to a company, Good Star Ltd, controlled by businessman Low Taek Jho or better known as Jho Low.

By converting to the Murabaha Notes, the JV agreement details no longer needed to be reported in the March 31, 2010 financial report, including that US$700 million was taken out from 1MDB PetroSaudi, he added.

The Edge Financial Daily understands that the office of KPMG’s managing partner had issued a gag order on March 3, 2015, forbidding its employees from saying anything about 1MDB. In the circular, KPMG also gave its assurance that there was no reason to believe anything was wrong at the company and no reason to doubt its audit findings.

Institute for Democracy and Economic Affairs (Ideas) chief executive Wan Saiful Wan Jan said it is time for the government and the public to scrutinise the government’s discretionary powers in setting up government-linked companies and state-owned enterprises that have extremely weak checks and balances, and no examination whatsoever from Parliament.

“1MDB is wholly owned by the government and has received funds of more than RM3 billion to date from the Ministry of Finance. Greater accountability needs to be embedded into the structure of government, especially when taxpayers’ money is involved,” he said in a statement yesterday.

This article first appeared in The Edge Financial Daily, on March 6, 2015.