KUALA LUMPUR: Datuk Seri Najib Tun Razak (pic) "instructed” KPMG Malaysia to sign off its audit report of 1Malaysia Development Berhad (1MDB) for 2013 in a meeting at the former prime minister's residence here, the High Court heard.

       The meeting was held on Dec 15, 2013 and was with 1MDB, KPMG Malaysia managing partner Datuk Johari Idris, 56, said.

       It was held to inform Najib of the issues faced by KPMG, which meant that the company’s audit report could not be released, he said in court on Thursday (April 21).

       KPMG also wanted to hear from Najib, who was finance minister at the time, whether or not he knew about a US$2.3bil investment in Brazen Sky in the Cayman Islands.

       "Before the meeting ended, Najib said he wanted to see the 1MDB account signed off by KPMG on or before Dec 31, 2013 but I did not give any response to him,” said the 14th prosecution witness.

       Questioned by deputy public prosecutor T. Deepa Nair about his reaction (to Najib's wish to see the report signed by KPMG), Johari replied: "It was like an 'arahan' (instruction) to me.”

       ALSO READ: Najib never pressured KPMG to sign off on 2013 1MDB audit report, says Shafee

       Johari said that in the meeting, Najib also stated that he (Najib) was aware of 1MDB's investment in Brazen Sky, but said that 1MDB could not disclose the details of the investment as it was confidential.

       "Najib also asked why KPMG was still suspicious about the underlying assets. He also asked me if I could accept the explanation, and whether the (explanation) was sufficient on behalf of KPMG to issue an audit report (which was unconditional).

       "However, I stated that I needed evidence to complete the audit process in accordance with the provisions of the International Standard of Auditing (ISA) and Financial Reporting Standard (FRS), where the rules are also enshrined in the Companies Act 1965.

       "I said that if KPMG was unable to complete the 1MDB investment audit process, then we would add a disclaimer of opinion report on 1MDB's account,” he said when reading his witness statement during Najib's trial on the misappropriation of RM2.3bil from 1MDB funds.

       Johari said Najib also expressed concern over the delay in preparing the accounts, and he wanted to know the status of 1MDB's audit besides asking why KPMG could not accept the confirmation made by BSI Bank, as it was the custodian bank of the investment in Brazen Sky, a subsidiary of 1MDB.

       "I have stated that BSI Bank did not provide complete details to KPMG to complete the audit of underlying assets. Without the information, KPMG could not conduct audit procedures to confirm that the assessment was correct,” he said.

       Johari also confirmed that Najib said he had been informed that Bridge Partners (a private investment firm) was unable to provide the required information, due to legal provisions and trade secrets of the fund.

       "Najib then asked me how 1MDB could get the information. Tan Sri Che Lodin Wok Kamaruddin (former director of 1MDB) then asked KPMG to be fair and not ask for something that 1MDB could not provide.

       "I have once again stated that 1MDB accounts need to be prepared based on the principles of FRS and the Companies Act.

       "If 1MDB does not comply with the accounting standard, it means that 1MDB does not comply with the law. As the fund information is important for 1MDB's audit, without such information it will result in limited scope on behalf of KPMG; it will cause KPMG to issue a conditional audit report in the form of a ‘Disclaimer of Opinion’,” he said.

       He said Najib then asked 1MDB management to work with Bridge Partners to provide the information needed by KPMG to assist in the auditing process.

       Johari said Najib also asked KPMG to go to Hong Kong to complete the audit process and wanted the audit to be done professionally and consistent with good governance.

       According to the witness, Najib said several people were aware of the meeting and asked KPMG to act professionally and maintain the confidentiality of the client.

       "I stated that KPMG would carry out its duties professionally. Any matter or discussion about 1MDB was only known to the engagement team, which was then led by KPMG representative Ahmad Nasri Abdul Wahab and the chain of command only, and no other party would have knowledge about 1MDB,” he said.

       Najib, 68, is facing four charges of using his position to obtain bribes totalling RM2.3bil from 1MDB funds and 21 charges of money laundering involving the same amount.

       The trial before judge Datuk Collin Lawrence Sequerah continues on May 9. – Bernama