This article first appeared in The Edge Malaysia Weekly on July 29, 2024 - August 4, 2024

The amendments to the Audit Act 1957 are long overdue. The changes to the law essentially mean that any entity that raises funds via Government Guarantee (GG) will have its books scrutinised by the National Audit Department (NAD).

In a move that will increase accountability and transparency of companies handling public funds, the amendments, which have gone through Dewan Negara, will be gazetted soon.

More importantly, the amendments leave no room for discretion. The law requires that NAD look at the books of any entity that has raised funds through a GG.

For instance, in the 1Malaysia Development Bhd (1MDB) financial scandal, the then prime minister Datuk Seri Najib Razak signed off letters in 2009 to exempt the government-owned entity from being audited by the NAD. The law should now cover this loophole.

1MDB’s books were, however, audited by two of the big four auditing firms.

But there are distinct differences between an audit undertaken by the NAD and private firms. Apart from the financials, the NAD audit looks at the viability and progress of projects undertaken with funds given by the government.

More importantly, it also covers areas of corporate governance and highlights investments that have gone wrong or that are dubious.

When there are serious problems, the NAD tends not to mince its words in its report, which was why the audit on 1MDB that started in March 2015 and completed a year later was made a classified document.

The audit report was only declassified in 2018, after a change in government and Najib was ousted as prime minister.

Another reason why the NAD report is more effective is because it garners public attention. Every time the Auditor-General’s report is released it makes headlines and keeps ministers on their toes, albeit mostly only temporarily.

What continues to be lacking is the resolve to rectify shortcomings highlighted by the Auditor-General.

Hence, amending the law is good. But more can and should be done to ensure that the Auditor-General’s Report is taken seriously given the frequent lack of accountability in the mismanagement of funds or projects.

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