KUALA LUMPUR – The high court here today was told that Datuk Seri Najib Razak had “instructed” KPMG Malaysia to sign off its 2013 audit report of 1Malaysia Development Berhad (1MDB), during the firm’s meeting with the company, held at the former prime minister’s residence in Langgak Duta on December 15, 2013.
KPMG Malaysia managing partner, Datuk Johan Idris, 56, said the meeting was held to inform Najib of the issues faced by the firm, which meant that 1MDB’s audit report could not be released, and KPMG also wanted to hear from Najib, who was the finance minister at the time, on whether he himself knew about the US$2.3 billion (RM9.9 billion) investment in Brazen Sky in the Cayman Islands.
“Before the meeting ended, Najib stated that he wanted to see the 1MDB account signed off by KPMG on or before December 31, 2013, but I did not give any response to him,” said the 14th prosecution witness.
When questioned by deputy public prosecutor, T. Deepa Nair, about Najib’s desire to see 1MDB’s accounts signed off by KPMG, the witness replied “it was like an ‘arahan’ (instruction) to me.”
Johan said that, in the meeting, Najib also stated that he was aware of 1MDB’s investment in Brazen Sky, but he said that the company could not disclose the details of the investment as it was confidential.
“Najib also questioned why KPMG was still suspicious about the underlying assets. He also asked me if I could accept the explanation, and whether the (explanation) was sufficient on behalf of KPMG to issue an audit report (which was unconditional).
“However, I stated that I needed evidence to complete the audit process in accordance with the provisions of the International Standard of Auditing and Financial Reporting Standard (FRS), where the FRS rules are also enshrined in the Companies Act 1965.
“I said that if KPMG was unable to complete the 1MDB investment audit process, then we would add a disclaimer of opinion report on 1MDB’s account,” he said when reading his witness statement during Najib’s trial on the misappropriation of 1MDB funds.
Johan said that Najib also expressed concern over the delay in preparing the accounts, and he wanted to know the status of 1MDB’s audit, besides asking why KPMG could not accept the confirmation made by BSI Bank, as it was the custodian bank of the investment in Brazen Sky, a subsidiary of 1MDB.
“I have stated that BSI Bank did not provide complete details to KPMG to complete the audit of underlying assets. Without the information, KPMG could not conduct audit procedures to confirm that the assessment is correct,” he said.
Johan also confirmed that Najib stated that he had been informed that Bridge Partners (a private investment firm) was unable to provide the required information, due to legal provisions and trade secrets of the fund.
“Najib then asked me how 1MDB could get the information. Tan Sri Che Lodin Wok Kamaruddin (former director of 1MDB) then asked KPMG to be fair and not ask for something that 1MDB could not provide.
“I have once again stated that 1MDB accounts need to be prepared based on the principles of FRS and the Companies Act.
“If 1MDB does not comply with the accounting standard, it means that 1MDB does not comply with the law. As the fund information is important for 1MDB’s audit, without such information it will result in limited scope on behalf of KPMG; it will cause KPMG to issue a conditional audit report in the form of a ‘Disclaimer of Opinion’,” he said.
He said that Najib then asked 1MDB management to work with Bridge Partners to provide the information needed by KPMG to assist in the auditing process.
Johan said that Najib also asked KPMG to go to Hong Kong to complete the audit process and wanted the audit to be done professionally and consistent with good governance.
According to the witness, Najib said that several people were aware of the meeting and asked KPMG to act professionally and maintain the confidentiality of the client.
“I stated that KPMG has and will carry out its duties professionally. Any matter or discussion about 1MDB was only known to the engagement team, which was then led by KPMG representative, Ahmad Nasri Abdul Wahab and the chain of command only, and no other party would have knowledge about 1MDB,” he said.
Najib, 68, is facing four charges, involving using his position to obtain bribes amounting to RM2.3 billion from 1MDB funds, and 21 charges of money laundering involving the same amount.
The trial, before Judge Datuk Collin Lawrence Sequerah, continues on May 9. – Bernama, April 21, 2022
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