Jessica Fino 30 Jan 2019 11:51am

Deloitte fined in Malaysia over 1MDB scandal

Big Four firm Deloitte has been fined and reprimanded by the Malaysian regulator over its role in the 1Malaysia Development Burhad (1MDB) fund

The news comes just days after the regulator confirmed it was investigating Deloitte and KPMG over their roles in the 1MDB fund.

The Securities Commission said today it was fining Deloitte RM2.2m (£409,000) for four breaches related to its audit work at Bandar Malaysia Sdn Bhd and its holding company 1MDB Real Estate in 2015 and 2016.

Deloitte was accused of failing to report irregularities in a bond sale that may have had a material effect on 1MBD’s capacity to repay creditors.

The regulator said these breaches committed by Deloitte were “serious in nature”, as it failed to discharge its statutory obligations despite stating in its report that it was unable to obtain sufficient appropriate audit evidence to determine whether the advances to 1MDB from the proceeds of the Sukuk Murabahah Programme could be recovered.

Deloitte said in 2015 and 2016’s reports that “the ongoing investigations of 1MDB indicate the existence of material uncertainty, which may cast significant doubt about the group’s and the company’s ability to continue as a going concern”.

The Malaysia government investment fund, established by former prime minister Najib Razak, has been under investigation for its links with corruption, after £3.4bn of funds allegedly went missing.

The Malaysian Institute of Accountants announced in August that it was also investigating Deloitte and KPMG in a bid to determine if either of them was in breach of the Accountants Act when they signed off the accounts for 1MDB between 2009 and 2014.

Deloitte resigned from the role in 2016, becoming the third auditor to leave the organisation, and EY was fired in 2010 for raising questions similar to KPMG’s.

The firm said in a statement, "Deloitte PLT respects the role of the SC to regulate and safeguard the Malaysian capital market and takes its responsibilities as an audit firm seriously. We are, however, disappointed with the decision and are in consultation with legal counsel as to the making of an application to the SC for a review.”