KUALA LUMPUR (April 20): Deloitte was the only large auditing firm willing to take over as auditor of 1Malaysia Development Bhd (1MDB) in 2013 when the veracity of its financial statements was called into question, the High Court was told Wednesday (April 20).
Testifying in the 1MDB-Tanore trial, the sovereign wealth fund's former chief financial officer (CFO) Azmi Tahir said Deloitte was the only one of the 'big four' left and he therefore suggested the firm to then 1MDB chief executive officer (CEO) Mohd Hazem Abdul Rahman.
"I gave him some names because we already had three of the big four," he said, referring to Ernst & Young (EY), PwC and KPMG.
"There was only Deloitte left and otherwise it was BDO and a few others that are second tier. [I told him] Deloitte might be prepared to be considered," he said.
Under cross-examination by former prime minister Datuk Seri Najib Razak's lawyer Wan Aizuddin Wan Mohamed, Azmi said he remembered calling BDO as he knew someone there but thought the firm was unlikely to consider taking on the sovereign wealth fund as 1MDB "was already in the news".
The 12th prosecution witness also clarified that fugitive-financier Low Taek Jho, better known as Jho Low, was not involved in the process of looking for a new auditor.
"We were scrambling on our own trying to find [a new] auditor. The [financial statement] was already overdue and you can imagine the amount of work they (the auditors) would need to do.
"[I can't] imagine how long [that would take as] at that time 1MDB was so famous in the news," he said, reiterating that some auditors may not have wanted to take on the work for 1MDB.
1MDB’s 2013 financial statements were delayed because KPMG was not fully satisfied with 1MDB’s explanations relating to its US$2.3 billion in investments made through Brazen Sky Ltd in an unknown fund called Bridge Global SPC.
The KPMG auditors demanded that they be provided with sufficient information on the underlying assets and valuation of assets before they could sign off on 1MDB’s financial statement for the fiscal year ended March 2013.
However, 1MDB terminated KPMG, and replaced it with Deloitte.
Azmi: Not sure source of auditor change
Azmi, 49, was also asked if the proposal for a change of auditors came from the management.
He said he didn't know who had proposed the change and reiterated he was merely informed to make the change.
Wan Aizuddin: Hazem said you had to look for a new auditor?
Azmi: It was not obvious but KPMG might not sign off. He (Hazem) just told me we had to look for a new auditor sometime after this meeting (Dec 15).
Wan Aizuddin then suggested that the change of auditor was a "bottom-up process" which originated from management then moved to the board and the shareholder.
"I don't know because it could also be that [the] decision came from 'upstairs'," Azmi replied.
Azmi also testified about the Dec 15, 2013 meeting at Najib's residence with KPMG's managing partner Datuk Johan Idris — a meeting the audit firm had insisted on because it was not satisfied with the documents and information provided by 1MDB. As the Minister of Finance Inc was the sole shareholder of 1MDB, and Najib also held the finance portfolio, he was the representative shareholder of 1MDB.
Although there were several KPMG representatives present, only Johan was allowed to enter the house for the meeting.
Besides Najib, Hazem and Azmi, former 1MDB chairman Tan Sri Che Lodin Wok Kamaruddin was also present.
Azmi said he could not recall who it was that had instructed that the other representatives not be allowed to join the meeting. Wan Aizuddin then suggested that it was Low, but Azmi replied in the negative, adding that he also couldn't recall if Low was present at the meeting.
Najib has been charged with four counts of abuse of power in enriching himself with RM2.3 billion of 1MDB funds, and 21 counts of money laundering of the same amount.
He faces up to 20 years' imprisonment if convicted.
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