C4: Did Deloitte assist facilitation of grand corruption by 1MDB?

The audit firm urged to issue amended audit opinions on 1MDB and not simply wash its hands on the matter.

KUALA LUMPUR: The Center to Combat Corruption & Cronyism (C4) has doubts that any of the attributes listed in Deloitte’s Code of Ethics and Professional Conduct were demonstrated in its audit of 1MDB.

“The Code summarizes behavioural expectations of its partners, executive directors, principals, directors and employees,” noted C4 Executive Director Cynthia Gabriel in a statement.

She highlighted several aspects from the Code:

On professional behaviour: “We foster a culture of appropriate professional skepticism and personal accountability which supports clients and drives quality in the services we provide.”

On objectivity: “We do not allow bias, conflict of interest, or inappropriate influence of others to override our professional judgments and responsibilities.”

On anti-corruption: “We support efforts to eradicate corruption and financial crime.”

On whistle-blowing: “It is necessary to report any signs of negligence, abuses or dangers that might result in serious personal, commercial or social damage. If our superiors do not act to curtail or mitigate such negligence, abuses or dangers, it may be necessary to ‘blow the whistle’ to help correct the problems or reduce the risk.”

Questions arise, said Gabriel. “So what influenced Deloitte to sign those financial statements in the first place? Did it knowingly sign off on the financial statements?”

“Did it assist the facilitation of grand corruption by 1MDB?”

As the alleged fraudulent activities occurred during the financial years for which Deloitte signed, and although these activities were discovered subsequent to the corresponding year-ends, she urged Deloitte to issue amended audit opinions. “They should not wash their hands on the matter.”

“Malaysians have been massively defrauded and cheated and at the very least a corrected honest audit is in great need now.”

C4 was commenting on the resignation of Deloitte as 1MDB auditors with a cautionary advice that 1MDB’s 2013 and 2014 financial statements, which it signed, “should no longer be relied upon”. “This is an incredibly potent development following the lawsuits of the US Department of Justice (DoJ) claiming massive embezzlement and aggravated stealing of public funds.”

Deloitte’s reasoning on Thursday was that if the information in the DoJ complaint had been known during the 2013 and 2014 audits, it would have impacted the financial statements and audit reports it signed for those years.

“It was unconvincing to say the least,” stressed Gabriel. “Carefully orchestrated fraud may involve deliberate efforts to conceal, such as omission of transaction records or intentional misrepresentation being made to the auditor.”

The question that still remains, summed up the C4 statement, was what persuasive work did Deloitte perform during the 2013 and 2014 audits.

“Such work should comfort Deloitte on the balances relating to the existence and valuation of alleged investments.”