Auditor-general must be highly competent, professional, says analyst

In June, a royal commission of inquiry revealed that the national audit department's financial statements for Tabung Haji in 2017 should have shown a net loss of approximately RM1.4 billion, rather than the RM3.4 billion profit initially reported. Analyst Ahmad Zaharuddin Sani Ahmad Sabri emphasized the critical need for a highly competent, professional, and independent individual to head the national audit department to effectively address financial risks and governance weaknesses.

Sabri posited that the audit episode at the Lembaga Tabung Haji (TH) underscored the significance of professional judgment at the highest echelons when auditors uncover issues that could impact the institution's financial standing. He questioned whether auditors had the necessary competence, independence, and courage to take action when they identify wrongdoing.

The royal commission of inquiry (RCI) ultimately found that TH's 2017 financial statements should not have received an unqualified audit opinion due to issues related to the impairment policy and RM227.81 million in investment impairment. TH was also supposed to have incurred a net loss of about RM1.4 billion under Malaysian Financial Reporting Standards, contrary to the RM3.4 billion profit reported.

Former auditor-general Madinah Mohamad defended her decision to issue a qualified opinion, stating that a qualified opinion could have eroded depositor confidence and had severe implications for TH. Sabri proposed a two-tier audit system for government-linked companies (GLCs), strategic government-linked investment companies (GLICs), and other high-risk entities, suggesting that these entities should undergo scrutiny by independent professional audit firms in addition to the national audit department.

He also advocated for the introduction of an annual report on GLC ownership, to be presented in Parliament, detailing government holdings, company values and performances, ownership objectives, returns to the government, and allowing regular parliamentary scrutiny of performance and risks. Sabri stressed that the public had a right to know how public funds were allocated, who made decisions, who benefited, what returns were generated, and early warning signs indicating a problematic investment or project.

He maintained that relying on individual courage was insufficient; instead, such traits should be integrated into rules and institutional structures.