Deloitte seeks review of SC's RM2.2m fines linked to 1MDB Sukuk

  • 1MDB
  • Thursday, 31 Jan 2019

KUALA LUMPUR: Audit firm Deloitte PLT Deloitte is consulting with its legal  counsel to apply to the Securities Commission for a review of the RM2.2mil fine for breaches related to 1Malaysia Development Bhd (1MDB).

“Deloitte PLT respects the role of the SC to regulate and safeguard the Malaysian capital market and takes its responsibilities as an audit firm seriously. We are, however, disappointed with the decision,” according to its statement quoted by Bloomberg.

On Wednesday, the SC slapped audit firm Deloitte PLT with a RM2.2mil fine for breaches related to 1MDB, which was the first time the regulator has taken action against an audit firm for a case related to 1MDB.

The SC said Deloitte had committed four breaches, which the commission described as “serious in nature” because it had “failed to discharge its statutory obligations” despite filing a qualified auditor’s report and stating twice that 1MDB was under investigation.

The breaches were in relation to the RM2.4bil sukuk murabahah programme issued by Bandar Malaysia Sdn Bhd, a unit of 1MDB, in 2014.

Deloitte is one of the big four international accounting companies. The firm acted as auditor for the units, Bandar Malaysia and 1MDB Real Estate, for financial years 2015 and 2016.

1MDB Real Estate provided collateral for the RM2.4bil Islamic bond issued in 2014.

The SC said that Deloitte had failed to report irregularities that may have had a material impact on the issuer’s ability to repay sukuk holders.

In Deloitte’s 2015 and 2016 reports for 1MDB Real Estate, it stated that “the ongoing investigations of 1MDB indicate the existence of material uncertainty which may cast significant doubt about the group’s and the company’s ability to continue as a going concern”.

It also stated that Deloitte was unable to obtain sufficient appropriate audit evidence to determine whether the advances to 1MDB from among others, the proceeds of the sukuk programme, could be recovered.

On Sunday, Reuters reported that Deloitte had audited 1MDB’s financial statements for 2013 and 2014, before it resigned as the fund’s auditor in early 2016.

It had taken over after 1MDB fired its earlier auditors, KPMG and Ernst & Young, authorities said.

After the United States Justice Department filed civil lawsuits against 1MDB, Deloitte said the statements it had audited should no longer be relied upon.

In June 2018, 1MDB said KPMG had informed the fund that 1MDB’s financial statements for the financial years ending March 2010, 2011 and 2012 audited by KPMG did not provide a true and fair assessment of the company.

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