Did Deloitte fail to exercise professional skepticism in the 1MDB audit?

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Deloitte's 1MDB Audit Under Scrutiny for Alleged Lack of Professional Skepticism

DAP lawmaker Tony Pua has urged the Malaysian Institute of Accountants (MIA) to investigate Deloitte for its audit of 1Malaysia Development Berhad (1MDB), alleging a failure to exercise professional skepticism. Pua contends that significant financial red flags within 1MDB, including substantial assets of indeterminate value and weak governance, should have prompted Deloitte to scrutinize transactions more rigorously. This call follows Pua's earlier criticisms that Deloitte's audit reports did not adequately reflect 1MDB's precarious financial situation.
Allegations of Insufficient Scrutiny in 1MDB's Financials

Tony Pua has formally requested the Malaysian Institute of Accountants to examine Deloitte's role in auditing 1MDB's accounts. The basis of this request lies in the principle of "professional skepticism" as outlined in International Standards on Auditing. Pua specifically highlighted that 1MDB held RM13.4 billion in assets whose value could not be properly determined, coupled with poor governance and financial controls, which he argued should have been sufficient cause for auditors to maintain a high degree of suspicion and thoroughness throughout their examination.
Previous Criticisms Regarding Liquidity Assessments

This is not the first time Pua has voiced concerns about the depth of Deloitte's audit work on 1MDB. He previously pointed out an instance where Deloitte reported that the state investment fund possessed sufficient liquidity to meet its cash flow needs, even in the same month that 1MDB was facing significant cash flow problems. This discrepancy, Pua argued, demonstrated a potential lack of thoroughness in the audit process.
1MDB's Financial Difficulties and Loan Default Concerns

The context for Pua's allegations includes 1MDB's documented financial struggles. The company was reportedly forced to seek extensions on a RM2 billion loan that was initially due in November. Furthermore, 1MDB had to enlist the assistance of tycoon Tan Sri T. Ananda Krishnan to avoid defaulting on its loan obligations in February, a situation that prompted the Second Finance Minister to acknowledge the company was experiencing cash-flow problems.

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Did Deloitte fail to exercise professional skepticism in the 1MDB audit?

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