KUALA LUMPUR (April 21): Former prime minister Datuk Seri Najib Razak's request that the long-delayed 2013 financial statements of 1Malaysia Development Bhd (1MDB) be signed off was more like an "instruction", KPMG managing partner Datuk Johan Idris said on Thursday (April 21).

Testifying as the 14th prosecution witness in the 1MDB-Tanore trial, Johan referred to a meeting on the night of Dec 15, 2013 with Najib over the US$2.3 billion in investments made through Brazen Sky Ltd in an unknown fund called Bridge Global SPC. He said the meeting was held with Najib in the latter's capacity as finance minister as the Minister of Finance Inc was the sole shareholder of 1MDB.

"Before the meeting ended, Najib stated that he would like to see the 1MDB [2013] accounts signed [off] by KPMG on or before Dec 31, 2013, but I did not give any response to him," said Johan when reading his witness statement.

At this juncture, he was interjected by Deputy Public Prosecutor Deepa Nair Thevaharan, who asked what Najib's reaction was at that time.

"It was like an 'arahan' (instruction) to me," Johan replied.

The witness explained that he went to Najib's residence in Jalan Langgak Duta with partner Foong Mun Kong and former KPMG managing partner Mohamed Raslan Abdul Rahman, but only Johan was allowed into the private residence.

Upon entering, Johan saw former 1MDB chairman Tan Sri Lodin Wok Kamaruddin, and former 1MDB chief executive officer Mohd Hazem Ab Rahman and former 1MDB chief financial officer Azmi Tahir.

Johan added that KPMG wanted to obtain "evidence on the existence, accuracy, completeness and valuation of the investment" and to conduct an audit of the investments in Brazen Sky to complete the audit process as required under the International Standard of Auditing and Financial Reporting Standard.

However, Najib informed Johan that he was aware of 1MDB's investments in Brazen Sky and that 1MDB could not disclose specific details regarding the investments because they were considered as "confidential".

"[But] I did not understand why 1MDB refused to disclose the information on the underlying assets which were said to be confidential," Johan said in his witness statement.

He also told the High Court that KPMG had requested the information from 1MDB since April 2013 before the Dec 15, 2013 meeting.

During the Dec 15, 2013 meeting, Najib queried Johan on why KPMG was still suspicious about the underlying assets. Johan said he would need evidence in accordance with international auditing and financial standards and that KPMG would have to add a disclaimer of opinion over 1MDB's accounts if this was not provided.

Najib also questioned why KPMG could not rely on BSI Bank's information as it was the custodian bank of the investments, and an international bank.

Johan also said the information from the bank was incomplete, especially regarding the underlying assets.

Towards the end of the 45-minute meeting, Johan said, Najib asked KPMG to go to Hong Kong to resolve the issue, adding KPMG was to complete the audit professionally with good governance.

Following the meeting and KPMG's hesitancy to sign off on the financial statements, the audit firm received a letter from 1MDB informing that its services as 1MDB's external auditor were to be terminated immediately. No reasons were given although KPMG was informed that Deloitte would be replacing it.

In its reply via a letter dated Jan 6, 2014, KPMG enumerated the reasons why the financial accounts could not be signed off. It stated that it could not ascertain the value of the investments as "reliable and appropriate" despite numerous requests for information regarding Brazen Sky's investments in the Cayman Islands. The information given by BSI Bank was also inadequate as it failed to provide information on the underlying assets of the US$2.3 billion investments.

The US$2.3 billion investments in question were made via six promissory notes which turned out to be “worthless pieces of paper”.

During cross-examination by Najib's counsel Tan Sri Muhammad Shafee Abdullah, Johan said that in 2013, the management and the board had told him they were "under pressure by the shareholder" to resolve the issue.

"The management doesn't know. The board doesn't know (the details). They want us to sign (off the accounts)

"We have no alternative but to ask to see the shareholder (Najib). So that is what we did — to seek clarification if he knows anything the board does not know," he said.

He reiterated that the firm was merely doing its job professionally when applying international standards in valuing the assets.

However, Shafee then zeroed in on the Dec 15 meeting and referred to the minutes Johan had taken himself. He tried to establish that there was no pressure from the former premier.

Shafee: PM says he wants to have good governance and it is fair for KPMG to have this information, and you also replied that the audit would say who owns the funds... PM directed 1MDB management in front of you, correct?

Johan: Correct.

Shafee then asked if there was "any pressure" put by Najib in the instances that he had highlighted. Johan replied in the negative.

Shafee: [Did the PM say] Johan if you don't close you will be sacked?

Johan: [He said] we would like to see the accounts closed.

Shafee then asked if it would be fair for a shareholder to see a long overdue account closed by the date set.

"Until the end he didn't put pressure?" asked Shafee. There was no audible answer from Johan on this.

Johan also said that neither he nor 1MDB engagement partner Ahmad Nasri Abdul Wahab had met Low. He also said he was not aware that Low was "controlling" 1MDB.

Shafee: [Are you aware that he was] directing management on how to cover the crime?

Johan: Not aware.

Najib has been charged with four counts of abuse of power in enriching himself with RM2.3 billion of 1MDB funds and 21 counts of money laundering of the same amount. He could face a fine and up to 20 years' imprisonment if convicted.

The trial continues on May 9.

The Edge is covering the trial live here.

Users of The Edge Markets app may tap here to access the live report.