Sunday, January 08, 2017

Be it “Parker Randall” or “Afrizan Tarmili Khairul Azhar”, will new 1MDB auditors act as “independent auditors” in an objective, professional and timely manner?

Scandal-ridden 1MDB has finally appointed new auditors to replace Deloitte Malaysia who resigned since the middle of last year.  Deloitte is the 3rd audit firm which have resigned in 6 years, following Ernst & Young and KPMG.  The new 1MDB chairman, who is also the Treasurer-General, announced that “Parker Randall” appointed to the task two days ago.

A little storm was created as “Parker Randall” in Malaysia is essentially Malaysian audit firm, “Afrizan Tarmili Khairul Azhar” (aftaas) with 4 partners, based in Sri Rampai, Kuala Lumpur.

As the corporate profile downloaded from the firm’s website stated, aftaas is “a member of Parker Randall International” which is an “international association of independent audit and accounting firms”.

As highlighted by Malaysiakini, each member firm of Parker Randall in each country is a separate and independent legal entity. Malaysiakini also pointed out that the 2011 ranking on the largest law and accounting firm networks ranked Parker Randall at 56 among 60.  Parker Randall also did not make the list for accountancy publication Accountancy Age's 'Top 100' survey for 2016.

However, what is ultimately most important for Malaysians isn’t the question of whether it is Parker Randall or Afrizan Tarmili Khairul Azhar carrying out the 1MDB audit.  What is of utmost importance is whether the newly appointed firm will carry out their responsibilities as “independent auditors”, and I emphasize “independent”, in an objective, professional and timely manner.

For a start, this is the perfect opportunity for aftaas to prove that they can do a better job than global giants, KPMG and Deloitte who have failed miserably in their audit of 1MDB by signing off financial statements which were at best misleading, at worst completely fraudulent.

Both KPMG and Deloitte failed to detect even a single dollar of misappropriation from 1MDB in the five financial years ending March 2010 to 2014.  We have since discovered, with confirmation from both Bank Negara Malaysia, the Switzerland Attorney-General as well as the Department of Justice of the United States that at least US$5 billion has been siphoned from 1MDB into private off-shore firms owned by Low Taek Jho, fraudulent entities masquerading as legitimate Abu Dhabi companies as well as dodgy investment funds which acted as money laundering conduits.

The Parliamentary Public Accounts Committee has also similarly provided evidence of the complicity of the 1MDB top management who signed dubious agreements and provided false information to the Board of Directors as well as the regulating agencies.

The previous auditors were so badly and disgracefully duped that Deloitte found it necessary to announce the withdrawal of their recognition of 1MDB’s March 2013 and 2014 audited accounts which they had previously signed off without any qualification.  Deloitte said that the above accounts “should no longer be relied upon”.

Hence, regardless of what the 1MDB directors and management might think, it is important for Parker Randall and/or aftaas to carry out a thorough audit of all the questionable transactions of the past where billions of dollars have been misappropriated.

Therefore, the first task by aftaas is simply to review and restate 1MDB’s 2013 and 2014 financial statements which have been withdrawn by Deloitte.  The Companies Act requires the annual submission of financial statements endorsed by an appointed external auditor to the Registrar of Companies.  It is the statutory requirement for the independent auditor to carry out the above task and Directors who fail to ensure that the above are duly completed in a timely matter may be punishable by up to 5 years’ jail or thirty thousand ringgit.

Following that, with the “right” opening balance determined, then aftaas can proceed to conduct the audit for March 2015 and 2016 which are both already overdue.

If aftaas fails to perform the above review and audit, they can be assured that not only their market reputation will be left in tatters in Malaysia, their international affiliation, Parker Randall – whose credibility 1MDB is banking on – will be similarly disgraced internationally and dragged through the mud.

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