.JPG "Datuk Seri Najib Razak arrives at the Kuala Lumpur High Court April 20, 2022. u00e2u20acu201d Picture by Hari Anggarann")
KUALA LUMPUR, April 20 — The government-owned 1Malaysia Development Berhad (1MDB) was scrambling to find a new auditor that could sign off on the company’s audited financial statements for the financial year ending March 2013, as its existing auditor KPMG was still refusing to sign off by December 2013 due to insufficient information provided, the High Court heard today.
Azmi Tahir, a former chief financial officer of 1MDB, said this while testifying as the 12th prosecution witness in the trial against former prime minister Datuk Seri Najib Razak over the misappropriation of more than RM2 billion of 1MDB funds.
KPMG was the auditor for 1MDB in 2013, with Azmi saying that the normal timeline when the audited financial statements were due to be signed off was within six months of the end of the financial year in March 2013. This meant that it would normally be signed off by September 2013.
But as KPMG continued to ask for information to verify the value and the assets backing a purported US$2.318 billion overseas investment by 1MDB during the audit process, Azmi today repeatedly said that 1MDB personnel were not able to obtain all the information requested due to obstacles and that KPMG remained unsatisfied with the information that 1MDB could provide.
Finally on December 15, 2013, KPMG met with then prime minister Najib in the latter’s house to ask about the US$2.318 billion investment.
At that point in time, KPMG still had not signed the long-overdue audited financial statement for 1MDB, and Najib had in that December 15 meeting expressed his hope that KPMG would close the audit by December 31, 2013.
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Today, Azmi said that then 1MDB CEO Mohd Hazem Abd Rahman had called him to his office and told him “we need to look for another auditor”, and said this happened some time after the December 15 meeting.
Asked by Najib’s lawyer Wan Aizuddin Wan Mohammed whether Hazem had said why they needed to search for another auditor, Azmi said he was only told to look for one.
“It wasn’t obvious, but KPMG might not sign off — along those lines — but I don’t remember whether at that point in time, he told me we will change, he just said we need to look for a new auditor,” Azmi said.
Asked by Wan Aizuddin if he was involved in the selection of the next auditor for 1MDB, Azmi said he gave some names to Mohd Hazem as prospective audit firms.
“I gave him some names, because we already had three of the Big Four, only Deloitte left, the rest were second-tier. I remember calling BDO, because I knew someone there, so I called them, but it appeared unlikely they were going to consider.
“At that point in time, 1MDB was already in the news. The other one left was Deloitte, so that’s who I talked to,” Azmi explained.
Asked if he had eventually suggested it should be Deloitte to be 1MDB’s new auditor, Azmi said “I didn’t put it that way, it’s just that Deloitte might be prepared to consider, that’s all. I don’t remember the other names, but as I said, there was only one Big Four left.”
The Big Four or top four audit firms are Ernst & Young, KPMG, Deloitte and PricewaterhouseCoopers (PwC), while BDO was a second-tier audit firm named by Azmi.
The auditor for 1MDB was initially Ernst & Young which then left without signing off on the 2010 financial statements, with KPMG then taking over, and finally with Deloitte KassimChan then taking over as the third audit firm. PwC was appointed in 2018 to be 1MDB’s auditor.
Azmi said that Low Taek Jho — better known as Jho Low and viewed by Azmi as Najib’s representative then — had not given any input to him or contacted him such as via emails on the selection of a new auditor for 1MDB to replace KPMG, saying: “No, because, we were scrambling on our own to find an auditor.”
Wan Aizuddin: Scrambling on your own because of the timeline?
Azmi: Yes, because it was already overdue, you can imagine a new auditor comes on board, the amount of work they would need to do. I can’t imagine how long it would take, there was immense pressure, at that time 1MDB was so famous in the news, some auditors might not want to act for us.
As Wan Aizuddin suggested several times that the proposal to change 1MDB’s auditor came from the 1MDB management, Azmi repeatedly said he did not know who suggested the proposal.
Having been asked to look for another auditor under his purview as CFO, Azmi confirmed the reason for the change in auditors was due to the unresolved impasse or deadlock between 1MDB and KPMG where 1MDB had its reasons for not being able to provide the requested information and KPMG being unable to accept the information supplied.
Najib’s 1MDB trial before High Court judge Datuk Collin Lawrence Sequerah resumes tomorrow, with Najib’s lead defence lawyer Tan Sri Muhammad Shafee Abdullah expected to cross-examine Azmi.
The prosecution told the court that KPMG’s managing partner Datuk Johan Idris is also expected to be testifying tomorrow as a prosecution witness.
Previously, former 1MDB CEO Hazem had as the 10th prosecution witness explained that he had proposed for KPMG to be removed as 1MDB’s auditor after it refused to sign off on the 2013 financial statements amid insufficient information, stating: “Well, basically KPMG did not want to close it, and (I was) being pressured by the prime minister directly to find a way to solve this, and the only way to solve this is to replace with a new auditor.”
Hazem had said that pressure came directly from then prime minister Najib with the latter calling directly to ask about the update on the audit closure, and said he was not in a position to disobey Najib.
1MDB on December 31, 2013 approved the removal of KPMG as its auditor, and replaced it with Deloitte.
