BY: Wong Chun Wai
IT looks like Malaysians would have to start learning about accounting terms from now on if they want to make sense of the many news reports on the controversial 1MDB issue.
The accusations and figures bandied around, purportedly involving billions of ringgit, have been mind-blowing to most Malaysians. It is simply beyond the grasp of most ordinary Malaysians who will never get to see that kind of money in their lifetime. After all, a recent report quoting the Employees Provident Fund revealed that 75% of its 14 million contributors, meaning those who are currently employed, earn less than RM2,000 a month.
Until now, the only time we hear of forensic is when we watch those popular TV police programmes showing investigators removing blood and hair samples at the scene where a crime has taken place.
Now we are hearing about forensic auditing, whereby the Auditor-General and a panel comprising staff from the Attorney-General’s Chambers, the Malaysian AntiCorruption Agency and the police have been entrusted to investigate and give us the answers.
It must not be forgotten that this is on the order of the Prime Minister.
But the task force would need trained personnel with a strong accounting background, and not just any accountant but those equipped with forensic auditing skills. Those with legal and police experience won’t be good enough for this case.
That means going beyond looking at the numbers when examining the state of the company’s finances. They have to effectively reconstruct the books to look at what lurks beneath, just like what the police forensic team would do when they reconstruct a crime scene, where every piece of evidence has to come together to show them the real picture.
One report defined forensic auditing as the application of accounting methods to the tracking and collection of forensic evidence, usually for investigation and prosecution of criminal acts such as embezzlement or fraud.
With 1MDB, there have been allegations of criminal fraud, but these remain mere allegations. Pointing fingers is the easy part. Furthermore, what has been revealed so far relates mainly to an email trail among various individuals.
The purported exchange of email, as well as the content, will be vigorously challenged in any court of law.
From a layperson’s point of view, he will wonder if the name or names of a person or individuals implicated will actually show up on any document. Or will the perpetrators, if any, be smart enough to make sure their names won’t be there?
Certainly, one would be curious to also see the actual paper trail – documents and agreements which may be far too complex for the ordinary person to comprehend.
The task force will have to gather all such evidence first, before they use their forensic skills to determine if any criminal act, or acts, has or have been carried out. Of course, for most of us, all we want to know is who then is responsible.
Whether the 1MDB is a strategic development company or a sovereign fund, the fact remains that it is a wholly owned government entity and public money is involved.
A RM950mil standby credit has been granted to the company by the government. You can call it “facility” or “standby credit” but in simple language it is a loan. And the bottom line is that the money is public money.
The comprehensive audit of this high-powered task force would also need to look at the work done by the external auditors, considering that the company has had three different auditors in five years.
Deloitte, the current external auditor which was engaged by the fund in December 2013, is its third auditor. It replaced KPMG, which had taken over from Ernst & Young.
The reasons for KPMG’s departure remain unclear although 1MDB has contended that the auditor left on the grounds that it could not complete the accounts. KPMG has so far remained silent on the matter.
Malaysians are right to demand for answers and the Prime Minister has rightly called for a full investigation.
The composition of the task force itself, comprising wholly of government officers, may not satisfy the sceptics.
But let us give Auditor-General Tan Sri Ambrin Buang, who has proven himself to be a man of high integrity, the support to carry out the difficult task ahead. He will have to report his findings to Parliament in the end.
As my colleague, specialist editor N. Shanmugam wrote, “Amrin has to do a good job not only on paper. But he must also be seen as having done a good job, considering the various reports that have emerged.”
Another person who would figure prominently once the investigations are underway would be Public Accounts Committee chairman Datuk Nur Jazlan, an accountant who is also seen as another person of high integrity. His fellow Barisan Nasional MPs sometimes say he is “more opposition than the opposition”.
The PAC would need the Auditor-General’s Report as a basis to begin its own investigation into 1MDB, which has raked up RM42bil in debts since 2009.
The PAC chaired by Nur Jazlan, with DAP’s Dr Tan Seng Giaw as deputy, includes five Pakatan Rakyat MPs and six from the Barisan.
The PAC, by parliament tradition, has sufficient clout to call up any witness to get to the bottom of any financial issue involving public funds. The members will surely want to maintain its integrity when it starts its own probe.
Speed is of the essence but the task force and Auditor-General must do a thorough investigation and leave no stone unturned.
It would be better for 1MDB and the political leadership for things to clear up as soon as possible. Otherwise, the controversy will continue, especially in cyberspace where nothing is sacred and lies and halftruths will escape legal action. The Prime Minister has already filed a suit against an opposition MP.
Beyond the financial matters, the issue has become murky and tricky because the 1MDB controversy is also being used to settle political scores.
It’s a minefield out there when not enough is known accurately, or beyond what has been reported and whispered. These allegations may be unsubstantiated but if they remain unrebutted, then there would be serious implications. It is not a very smart way for the authorities to handle this delicate situation.
There is a need for 1MDB to answer these allegations head-on so that Malaysians can decide. Mere denials would not be good enough as Malaysians expect strong answers.
If it is merely bad business decisions or management incompetency, then we should ask for a management audit. Let’s keep an open mind.
The truth needs to be told and the truth will emerge eventually. But meanwhile, let the Auditor-General and task force carry out their work.
Source – The Star Newspaper 15 March 2015