May 31 fixed to hear 1MDB auditor’s court action against accounting body

May 31 fixed to hear 1MDB auditor’s court action against accounting body
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KUALA LUMPUR (Jan 29): The High Court has fixed May 31 for the hearing of a judicial review initiated by a 1Malaysia Development Bhd (1MDB) auditor against the Malaysian Institute of Accountants (MIA). 

Ng Yee Hong, the auditor of the sovereign wealth fund in 2013 and 2014, was referred to MIA’s disciplinary committee by the body’s investigation committee for singing off 1MDB’s accounts despite there being discrepancies. 

The Deloitte PLT partner is now seeking to quash the investigation committee’s recommendation to refer him to appear before the disciplinary committee to answer charges of irregularities in the 1MDB audit.

Deputy registrar Norazlin Othman set the hearing date for the judicial review during case management today. 

A judicial review enables the applicant to challenge the exercise of power, often by a public body, through the courts. 

In its finding, MIA’s investigation committee said Ng had allegedly failed to comply with the requirements of paragraphs (14) and (17) of MIA’s International Standard on Auditing (ISA) 560 (Subsequent Events).

The two paragraphs deal with failure to take appropriate action and preventing reliance of an auditor’s report.

Among the events that took place after the financial statements were signed off were 1MDB’s failure to make successive loan repayments, 1MDB’s failure to redeem investments in the remaining unit at a segregated portfolio company fund in Cayman Islands, and 1MDB’s aborted plan to list its energy subsidiary Edra on the stock market.

Ng said he had explained to the investigation committee on June 18 last year that the complaint against him lodged by an MIA officer and the committee’s own conduct were “highly questionable”.

Ng said three months after the proceedings last year, the investigation committee said he needed to answer charges before the disciplinary committee but did not explain how they came to that decision.

“There is no basis and no authority granted to the said MIA officer to lodge a complaint against me,” he claimed.

Deloitte in 2016 quit as 1MDB’s auditors. 1MDB subsequently said the audit reports issued by Deloitte in connection with the 2013 and 2014 financial statements of 1MDB should no longer be relied upon.

Deloitte took over the auditing of 1MDB accounts from KPMG, which decided to issue a qualified audit report for 1MDB’s 2013 financial statements. KPMG was replaced in December 2013 before issuing its audit report.

KPMG was reportedly dismissed after a difference of opinion on the fair value (FV) of 1MDB’s investment in Bridge GLobal SPC through Brazen Sky Ltd.

Deloitte verified the accounts for the 2013 and 2014 financial years, with an unqualified opinion without any qualification or emphasis of matter.

Deloitte’s auditing standards, however, have been questioned since 2015 as 1MDB struggled to pay its matured debt obligations and service its interests.

On Dec 24 last year, Deloitte failed to set aside the RM2.2 million fine imposed on the firm by the Securities Commission Malaysia (SC) over its failure to report breaches linked to the RM2.4 billion sukuk issued by Bandar Malaysia Sdn Bhd (BMSB), a company linked to 1MDB.

Deloitte filed a judicial review to challenge the imposition of the RM2.2 million fine for its failure to report the breaches.

The SC announced on Jan 30, 2019 that it had imposed administrative sanctions on the audit firm for four purported breaches of provisions involving reporting to the commission and to the trustee of the RM2.4 billion sukuk programme.

The SC slapped a RM2 million fine on Deloitte for failing to discharge its statutory obligations, including not immediately reporting irregularities it found. It also fined the audit firm an additional RM200,000 for not submitting a copy of the financial statements to the trustee within the legally stipulated time.

The SC previously said the fines were in relation to the RM2.4 billion sukuk murabahah programme issued by BMSB in 2014.

Deloitte was the statutory auditor of BMSB and 1MDB Real Estate Sdn Bhd for the financial year ended March 31, 2015 (FY15) and FY16.

S Kanagaraju