Question

Can you give me a suggestion for internal control measures to prevent similar incidents in the future 1MDB (1Malaysia Development Berhad scandal)

Answer 1

Case Study;

1Malaysia Development berhad scandal

Analysis:

In the given case a Prime minister (Najib Razak) was accused of channelling over RM 2.67 billion from 1 Malaysia development berhad (a govertment strategic development company ) to his personal bank account .

Lack of Internal Control of 1MDB

· Company was not having registered Address

· Company have not appointed any auditor

· 1MDB was in debt of 42 billion

· After appointing auditor the company frequently changed the auditor for 3 times in 2015

· Company requested to extent the date for filling company return for 6 months in 2015

· Lack of transparency in financial transaction and profit earned

· The management of the fund acted without the board's approval and misled auditors.

Suggestion for internal control measure

· Internal control measure is the responsibility of the management of the company to ensure its planning and effective implementation in order to get the financial statements free from material misstatements

· Well the company should have a Audit committee, who’s responsibility is appoint and guide the auditors regarding his roles and responsibility

· Such committee should be independent and should ensure proper internal control are maintained in the organisation

· The management should follow the guidance on various laws should file the return in the given time period.

· There should be an approving authority for ever kind of financial inflow and outflow of funds.

· There should be proper communication between those charge with government and management and auditors

· Every departmental head should follow the proper channel and decision making process before approving any transactions and communicate the same to the management and committee.