KUALA LUMPUR, July 19 — The federal government should remove KPMG as the auditor for any firms under its control given the latter’s refusal to settle a US$5.6 billion lawsuit related to 1MDB, said Damansara MP Tony Pua.

Pua noted that the government was forced to sue dozens of KPMG partners earlier this month after failing to reach a settlement despite prolonged discussions over their role in auditing the state investment firm in its early years.

The DAP lawmaker pointed out that Deloitte Malaysia, another 1MDB auditor, has accepted some responsibility for its audit of the 1MDB from 2013 to 2015, for which it has also agreed to pay the government US$80 million in compensation.

"Since KPMG has refused to settle the matter with the government, and the government has finally taken an official stand to sue the auditors in court for compensation and damages, the next step the Ministry of Finance must take is for it to remove KPMG as the auditor for any company where the government has direct shareholder control.

"In addition, KPMG Malaysia must be excluded from participating in government tenders until the above matter has been resolved in the courts,” Pua said in a statement today.

Pua was a member of Parliament’s Public Accounts Committee when it investigated the 1MDB scandal.

Last week, the government reportedly sued 44 past and present KPMG partners over their firm’s role as the auditor of the controversial 1MDB for the 2010 to 2012 financial years.

The firm issued a statement to the Reuters news agency to say it was disappointed with the government’s lawsuit, which is also said it would contest "rigorously”.

The lawsuit alleged that US$3.2 billion was misappropriated from 1MDB in the years that KPMG had been responsible for closing its books, out of the estimated US$5.6 billion allegedly misappropriated.

However, the government said it intended to claim the full amount from KPMG as it alleged that the misappropriation would not have occurred had the auditor identified the fraud warning signs at the state investment firm.

Aside from KPMG, the Malaysian government also has ongoing lawsuits against Deutsche Bank, JP Morgan and Coutts & Co All seek to claim losses suffered by 1MDB due to a global corruption scandal.