ICSM Business News: auditor EY gets kicked out of Germany over Wirecard scandal and heavily fined

_{Tongue in cheek graphic by Harry Mottram}

By Harry Mottram. In 2020 it was revealed that the German finance firm Wirecard had £2 billion missing from its accounts creating a collapse in its share price, the closing of the business and the arrest of the former CEO. The fall-out for the scandal which saw criminal investigations into the firm has continued with the auditing firm EY being handed a half million Euro fine and banned from Germany for two years by the country’s watchdog APAS. EY was the auditor of Wirecard.

Ian Carrotte of ICSM said: “This is a vary serious case as any firm must have total faith in a company that audits its accounts. We have seen a string of stories of companies like Thomas Cook and Carillion where auditors gave them a clean bill of health only for the business to collapse soon afterwards owing millions of pounds to creditors.”

Reuters reported that: “APAS said in a statement that it had imposed sanctions on Wirecard's auditing company and five individual auditors, without referring to EY by name. Wirecard's annual report names EY as the auditor for that period. Wirecard filed for insolvency in June 2020, owing creditors almost $4 billion, after disclosing a 1.9 billion euro hole in its accounts that EY said was the result of a sophisticated global fraud. The company, founded in 1999, began by processing payments for gambling and pornography websites before becoming a fintech star and a member of Germany's blue chip DAX index. APAS found breaches of duty by the auditor in connection with the scandal, it said.”

The company based in Munich was founded in 1999 as a payment processor and financial services provider but suspicions grew over its practices after the Financial Times began to investigate malpractices. The firm reacted badly and attempted to prevent reporters from doing their job who revealed there was a gap between the firm’s short-term assets and liabilities in 2015. However it took another five years of investigations by the FT and the help of a whistle-blower to expose the massive fraud which saw Wirecard massively inflate the company’s value.

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