KPMG is one of the audit firms under probe by the Securities Commission over its alleged involvement in the 1MDB scandal. — Reuters pic

KUALA LUMPUR, Jan 26 — The Securities Commission Malaysia (SC) are investigating two of the world’s largest audit firms Deloitte and KPMG over their alleged involvement in the 1Malaysia Development Berhad (1MDB) corruption scandal according to South China Morning Post (SCMP).

Sources told SCMP that the commission is probing the firms to determine if they were aiding and abetting in the scandal, or merely negligent.

“The accountants must be held accountable”, a source close to the matter reportedly told SCMP yesterday.

SCMP also quoted Center to Combat Corruption and Cronyism (C4) executive director Cynthia Gabriel who said the firms were “a party” to the fraud and the personnel involved should be duly punished.

Gabriel had served on the 1MDB investigation committee set up by the Council of Eminent Persons in May last year.

The SC said that its review of the “conduct of auditors in relation to 1MDB audits is still ongoing” when asked for confirmation over the firms’ investigation.

Both the audit firm did not respond to repeated requests from SCMP for comment.

KPMG was the auditor of 1MDB for the financial years of 2010, 2011 and 2012 before they were replaced by Deloitte Malaysia for refusing to validate accounts worth US$2.32 billion (RM9.48 billion).

Deloitte joined in 2013 but resigned in February 2016 after the US Department of Justice's filed complaints seeking to recover over US$1.7 billion (RM7.01 billion) in assets traceable to funds allegedly misappropriated from 1MDB. They were replaced by Parker Randall.

In mid-2018, KPMG released a statement claiming that the books it had audited for 2010, 2011 and 2012 were not “true and fair” assessments of 1MDB’s funds and that it lacked full access to relevant documents that were only declassified when the new government took power.

SCMP also said the Malaysian Institute of Accountants (MIA) was currently looking into Deloitte and KPMG’s conduct but cannot hand down punishments sterner than a fine of up to RM5,000 or termination of membership.

“So far both (Deloitte and KPMG) have been cooperative, but remember this is a disciplinary tribunal for MIA members and not a court,” MIA chief executive officer Nurmazilah Mahzan told SCMP.