“To keep investors and markets happy, accounts of big companies need to be audited by one of the “Big Four” – Ernst & Young (EY), KPMG, Deloitte and Pricewaterhouse Coopers (PwC) (Wright & Hope, 2018, Billion Dollar Whale, Page 145). Refusing to sign off on the accounts (qualifying the accounts), KPMG was dumped, just as 1MDB had fired Ernst & Young before it. Eager to build its business in Malaysia, Deloitte signed on (ibid, page 272). Like KPMG, Deloitte’s Tan had issues with the accounting of the Cayman Islands investment. To get around the problem, Low turned again to Mohamed Al Husseiny, asking for Aabar to guarantee the offshore money….It should have been a red flag for Deloitte, given the letters it had received alleging financial fraud at 1MDB, not to mention the fact that 1MDB already had ended its relationship with two major auditors. But a piece of paper (letter of guarantee) from Aabar appeared to be good enough for Tan (Deloitte) to get comfortable with the investment (the existence and recoverability of 1MDB’s Caymans Islands investment). (ibid, page 273). Required: Based on what you have learned in Week 1 (without going the exact details written on the “Billion Dollar Whale” book), 

(a) Who are the interested users of 1MDB’s audited financial statements and why are they interested? Who are the auditors liable to? 

(b) Can the auditors (e.g. EY/KPMG) refuse to sign on the accounts as “true & fair”? Why? 

(c) The Malaysian public has been condemning the Big Four firms that have accepted and undertaken the audit of 1MDB. They are not able to uncover the fraud but look as though they helped to explain 1MDB accounting issues publicly to help deflect any negative media stories (on 1MDB). Discuss the role of the auditors and what are expected of them in the statutory audit of financial statements versus their duties and obligations under approved auditing standards. How do auditors close such gap?