Malaysia’s new finance minister today appointed the accounting firm PwC to audit the finances of 1MDB, a scandal-hit state wealth fund—but he never really had much choice. It’s the only remaining “Big Four” accounting firm that isn’t tainted by the allegations of corruption engulfing 1MDB, the news site Malaysiakini reported.
The Big Four comprise the Dutch enterprise KPMG, and the British firms Deloitte, EY, and PwC, which collectively audit most of the world’s biggest companies. Here’s what happened to the earlier auditors:
EY got the ball rolling in 2010 when it was fired before signing off on any annual reports. It was conducting an audit and raised questions about unspecified investments, according to the Wall Street Journal (paywall). The wealth fund sacked the firm before the 2010 annual reports were approved.
The buck was passed to KPMG, which audited 1MDB between 2010 and 2012, and signed off on three annual reports. It was fired (paywall) when it asked for information about assets 1MDB held in the Cayman Islands, according to the Financial Times.
Deloitte then took over from KPMG and vouched for two further annual reports. But it quit in 2016 (paywall) after the US Justice Department filed lawsuits to recover more than $1 billion in assets that were allegedly obtained with misappropriated 1MDB money. The assets included royalties from The Wolf of Wall Street movie, a Monet, and the Park Lane hotel in New York. It is the biggest kleptocracy case ever prosecuted by the US Justice Department, then attorney general Loretta Lynch said.
The cloud of corruption allegations around 1MDB helped drive Malaysia to vote in an opposition coalition to form a new government—the first transfer of power since independence in 1957—in a watershed election two weeks ago. Former prime minister Najib Razak was chairman of 1MDB’s advisory board. He is now being investigated for corruption and money-laundering.
The new government has been looking into 1MDB’s sources of funding. The new finance minister, Lim Guan Eng, has revealed that the government has covered RM7 billion (US$1.8 billion) worth of 1MDB’s debt since last April, with another RM143 million due in a week. Lim says 1MDB’s debts were deceptively settled by the previous government. Part of those billions may have come from Malaysia’s central bank, the Wall Street Journal reported today (paywall).
With billions owed and a new government investigating it, 1MDB may have met its final auditor in PwC.