1MDB Case Study: Analysis of Corporate Governance and Failure

The 1MDB case study examines the failure of corporate governance within the company, highlighting unethical practices and financial mismanagement. The assignment delves into the actions of the board of directors, who approved payments to the Prime Minister, and the subsequent involvement of the Prime Minister's office. It explores how the company's management colluded, leading to significant financial losses and legal issues, including charges related to anti-laundering and anti-terrorism financing. The case study emphasizes the importance of independent management and the detrimental effects of government influence on corporate decision-making. The analysis includes references to relevant literature, such as Firth & Wong (2012) and DeZoort & Harrison (2018), to support the findings and conclusions regarding the business failure and its implications for stakeholders.

LEGAL LIABILITY OF AUDITORS 1
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This case shows a business failure of the 1MDB company. The current development of corporate
governance must be practised by businesses (DeZoort & Harrison, 2018, pg. 858). The main aim of
corporate performance is to balance the interest of all the stakeholders in the company like the
suppliers, employees and others. However, with this company, the wealth maximisation interest of the
shareholders was not safeguarded but instead the interest of other parties considered for instance the
board of directors of the company approved RM 49.9 million to be paid to the prime minister of
Malaysia by the virtue of his office. The managers of the company collude with the prime minister to
obtain RM 90 million which is surpassing RM 49 million which is not ethical under the corporate
governance. The other aim of Corporate governance in a company is to steer the company forward by
utilising long term value and attaining prudent management which has not been adhered to by the
company and its interested parties for instance, The Royal Malaysia police confiscated an unknown of
money and jewellery from the Najib Luxurious Condo in Pavilion Residences (Firth & Wong, 2012, Pg.
58). The police issue a certification of apprehension against the Job low and his father who are the
defendants of the charges of Anti-laundering and Anti-Terrorism Financing Act. In my view, this is
business failure to a greater extent in that the management which is separate and independent fail to
prevent involvement of the government through the office of the prime minister in the company affairs
which made the company to be financially wound up. The board of directors were influenced to make
decisions that are favourable to the government which is a single party interested in the affairs of the
company.

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REFERENCES.
Firth, M., Mo, P.L. and Wong, R.M., 2012. Auditors’ organizational form, legal liability, and reporting
conservatism: Evidence from China. Contemporary Accounting Research, 29(1), pp.57-93.
DeZoort, F.T. and Harrison, P.D., 2018. Understanding auditors’ sense of responsibility for
detecting fraud within organizations. Journal of Business Ethics, 149(4), pp.857-874.