KUALA LUMPUR (May 20): The defence in Datuk Seri Najib Razak’s 1Malaysia Development Bhd (1MDB) trial will continue with the cross-examination of the sovereign fund’s former CEO, Datuk Shahrol Azral Ibrahim Halmi.

Yesterday, the ninth prosecution witness was grilled by senior counsel Tan Sri Muhammad Shafee Abdullah over the events that transpired in 2010, which led to the termination of Ernst & Young (EY)’s appointment as the auditor for 1MDB.

The change in auditor mainly revolved around the disagreements between 1MDB’s management and EY in terms of the valuation of the fund’s investment in the joint venture with PetroSaudi International Ltd (PSI), 1MDB PSI Ltd.

EY had requested for further documentation regarding the investment, before signing off on 1MDB’s accounts, which Shahrol could not acquire, despite requesting the additional information from then PSI directors Patrick Mahony and Tarek Obaid.

As EY was considered “too rigid” in its assessment, Shahrol said the board of 1MDB decided to end its engagement with the firm and appointed KPMG instead.

KPMG had signed off on the accounts, following the conversion of the recognition of 1MDB’s investment in the joint venture from equity to Murabaha notes.

Muhammad Shafee had suggested that the change in auditor was a way for Shahrol to sweep “everything under the carpet”, instead of dealing with the issue that was highlighted by EY.

"I put it to you that instead of resolving the matter at that early stage in 2010, you, being the CEO, decided to sweep everything under the carpet by changing the auditor," said Muhammad Shafee.

"I disagree," said Shahrol.

Besides the cross-examination, the defence had also requested Justice Collin Lawrence Sequerah to allow more lawyers into the court, as the current standard operating procedure, due to the Covid-19 pandemic, only allows for two counsels each for the defence and the prosecution.

Collin said he could only allow one additional person for each side for now, adding that any other application will be dealt with later.

However, he told Muhammad Shafee that the defence should operate on the assumption that it has one additional member in the team.

The Edge is covering the trial live here.

Users of The Edge Markets app may tap here to access the live report.