v> News from The Edge Financial Daily dated 22 November 2019:

PETALING JAYA (Nov 22): Malaysian netizens are hailing National Audit

Department (NAD) officer Nor Salwani Muhammad as a hero after media

coverage on the 1Malaysia Development Bhd (1MDB) audit tampering trial at

the Kuala Lumpur High Court yesterday described how she recorded a

meeting between 1MDB and government officials in 2016 and saved an

original copy of the 1MDB audit report.

Comments on articles by The Edge, Malaysiakini, Malay Mail, New Straits

Times, The Sun, The Star and Bernama shared through social media called her

a "hero", said her actions were "noble" and had "saved the country".

Many thanked her for "doing the right thing" and a few even called for her to

be given a Datukship.

Several commenters observed that her actions would be recorded in history.

At least one commenter on the Malaysiakini website believed she might have

put her life at risk, an allusion to allegations that AmBank founder Hussain

Ahmad and Senior Deputy Public Prosecutor Kevin Morais were murdered in

attempts to cover up the 1MDB scandal.

The 52-year-old Nor Salwani is the fifth prosecution witness in the trial of

former premier Datuk Seri Najib Abdul Razak and ex-1MDB president and

chief executive officer Arul Kanda Kandasamy over the tampering of the

1MDB audit report.

She was the coordinator of a team of 12 NAD officers, led by fellow officer

Saadatul Nafisah that prepared the original audit report. They were appointed

by then auditor-general Ambrin Buang on March 9, 2015, to audit the 1MDB

group of companies following an order from the cabinet.

Nor Salwani, then with the rank of deputy director of audit, was supposed to

attend a coordination meeting between top 1MDB and NAD officials on Feb

24, 2016, but shooed out at the last minute along with other lower ranking

officers.

Nor Salwani hid a voice recorder in a stationery case of Saadatul who attended

the meeting because Nor Salwani was supposed to minute the meeting, despite

not being allowed inside. The 2 hours and 45 minutes long audio recording

was tendered as evidence in the trial.

v> The meeting was chaired by then chief secretary to the government Ali Hamsa

who had told the court on the second day of the trial that it was convened

because Najib, who had seen a copy of the report before it was presented to

the Public Accounts Committee (PAC) of Parliament, was displeased with the

contents of the report.

Ali Hamsa said that Arul Kanda had in the meeting dismissed the matters

highlighted in the report as they "were not factual and were merely hearsay".

At the end of the meeting, it was agreed that all 60 copies of the original report

would be shredded and a modified copy with four issues removed would be

submitted to the PAC.

The Edge reported that Nor Salwani told the court that Ambrin looked sad and

upset after leaving the meeting room.

"I accompanied him as he went to a wash room to wash his face. I followed

Ambrin as he looked like he would fall, as he looked so fragile. Ambrin was

also mumbling something which I could hear clearly, 'what is the purpose of

the audit'," she said.

Nor Salwani said she retrieved the voice recorder and listened to the recording

with her team after the meeting.

"I played back the recording and we were shocked to hear what had been

decided at the meeting," she said in a New Straits Times report.

"Never before in my 21 years history of working there have we faced an event

like this, where the final audit report was asked to be 'digugurkan' (dropped)

and called for the report to be 'dilupuskan' (destroyed). This has never

happened before and for this reason, my team and I were shocked," she said in

a report by The Edge.

Nor Salwani secretly kept a copy of the original report which carried the

watermark "09" (the 60 original report copies were numbered from 01 to 60).

This document was also tendered as evidence in the trial.

"I kept the report to be given to the new auditor-general. With pure intention, I

had surrendered the report watermarked '09' to allow the new auditor-general

to get the whole picture about the audit findings," she said in a report

by Malaysiakini. She also informed the court that she had secretly kept a copy

just in case it was needed as a reference.

Nor Salwani is currently the director of NAD's governance sector.

(Source: The Edge Financial Daily online news dated 22 November, 2019)

v> Required:

(i) Compliance with fundamental principal in MIA by-law's code of

ethics and conduct can be threatened in a number of ways. Explain and

discuss THREE (3) possibilities of ethical threats to independence and

objectivity of 1MDB's auditor and for each threat identify two

examples. (6 marks)

(ii) As a fundamental principle, confidentiality serves the public interest

because it facilitates the free flow of information from the professional

accountant's client or employing organization to the professional

accountant or auditor. Describe activities a member should refrain

from with regards to the confidentiality of a client in order to comply

with the Code of Ethics. (3 marks)

(iii) Discuss and explain the points of consideration which Nor Salwani

Muhammad should decide whether to disclose confidential

information. (3 marks)

(iv) Describe THREE (3) circumstances where Nor Salwani Muhammad

is or may be required to disclose confidential information or when

such disclosure may be appropriate. (3 marks)

(v) Describe 1MDB auditor's responsibilities in relation to the prevention

and detection of fraud and error. (3 marks)

(vi) Three out of four word top international audit firms were appointed as

1MDB's auditors and subsequently resigned. Discuss the possible

consequences for an audit firm if an inappropriate audit opinion is

issued on the financial statements of 1MDB. (3 marks)

(vii) Design the quality control procedures an audit firm should implement

to reduce the risk of issuing an inappropriate audit opinion on the

financial statements of 1MDB. (4 marks)