1Malaysia Development Berhad

1Malaysia Development Berhad (1MDB) is a strategic development company, wholly owned by

the Government of Malaysia. 1MDB was established to drive strategic initiatives for long-term
economic development for the country by forging global partnerships and promoting foreign
direct investment. 1MDB is currently involved several high-profile projects such as the Tun
Razak Exchange, Tun Razak Exchanges sister project Bandar Malaysia and the acquisition of
three Independent Power Producers.
1MDBs controversies have drawn concerns from various parties, especially on the
overall financial stature of the country and the ongoing effect it will have on the Ringgit as only
RM20 billion of the debt is backed by the Government. Some economists are debating whether
this debt contributes to the weakening Ringgit, apart from the fall in global oil prices. A falling
Bursa Malaysia and concerns about the rise in the cost of living just worsens the perception that
1MDB is yet another cause of woe. However, the actual relationship between both isnt very
clear.
Also, civil servants may need to heed the controversies surrounding 1MDB as one of its
subsidiaries has not been able to service a RM4 billion loan taken from Kumpulan Wang
Amanah Pencen (KWAP) which pays government pensions. Putrajaya is being forced to service
this debt through whatever means it needs to take.
Fortunately, IMDB re-evaluate the business model and structure. Three important
strategic steps have been taken to address the current issues. These included halting new
borrowings except to service or refinance current debts; and not to embark on new projects or
ventures but to focus on the two main projects-Tun Razak Exchange (TRX) and Bandar
Malaysia; and also ensure the initial public offering of IPP Edra Energy can take place soon.

Audit that would be performed by the Auditor General

Mr Najib, a reformist technocrat who leads the moderate Muslim Southeast Asian nation of 30m
people, had ordered the auditor-general to independently verify the accounts of 1 Malaysia
Development Berhad, or 1MDB. Prime minister had called 1MDB and its auditors, Deloitte,
before the cabinet. Deloitte had provided an overview of its engagement with 1MDB and
confirmed that the firm had audited and verified the companys accounts and having received
clarifications from 1MDB and Deloitte, cabinet expressed confidence that no wrongdoing has
been committed within 1MDB.
The department should be able to carry out a forensic audit based on a longer period. If
there are discrepancies in the statement, the management and board of directors will be held
accountable and may face court action. Forensic audit is an evaluation of a firm's or individual's
financial information as evidence in court. It can be done in order to prosecute a party for fraud,
embezzlement or financial claims.
Besides that, department would give priority to undertaking the audit of the governmentowned strategic development company in an independent and professional manner, gather
relevant information and was scrutinizing all documents as well as interviewing the relevant
people. The audit would involve calling up all quarters, including those who made the
allegations, the former 1MDB CEO and Prime Minister Datuk Seri Najib Tun Razak himself, if
this was necessary to aid the audit.
Moreover, auditing process would not only be confined to the accounts of 1MDB but also
include the assets, liabilities, corporate governance and equities. This is the way to know how the
company is being managed. Also, PAC has full powers under Standing Orders 77 to examine the
1MDB accounts for an immediate investigation into the 1MDB accounts.
All in all, the heat on 1MDB will continue to grow especially with media pressure.
Auditor General should try to review 1MDB business transactions from the year 2009 to current
year. Auditor General have to ensure the independent of audit report during the preparation
among auditors involved to show true and fair view of the report. It can be said that at the end of
the day, the Auditor-Generals task at unraveling 1MDBs books is not an easy one.