Global audit giant Ernst & Young (EY) looks its own way dragged down by the bankruptcy scandal of the German online payment company Wirecard, for their deficiencies in the verification of the accounts.
Lawsuits have already been filed against the consultancy following the bankruptcy this week of the electronic payment provider, which employs 6,000 people.
German shareholders association SdK has filed a criminal action against two current auditors and one EY examiner in Germany.
Wirecard, a company listed on the Frankfurt stock exchange and filed for bankruptcy on Thursday, she is suspected of having inflated her accounts with shell funds in the Philippines in the amount of € 1.9 billion.
“Scandal without equivalent”
Finance Minister Olaf Scholz called it a “scandal with no equivalent in the financial world” and assured that controls in the electronic payments sector will be tightened.
No one, neither the auditors nor the German financial gendarme (Bafin), detected what was happening.
And that since 2015 there were rumors in the press about irregularities in Wirecard’s economic model.
Furthermore, at the beginning of 2019, the British economic newspaper Financial Times published an investigation into suspected fraud in Asia.
This week, the Financial Times accused EY of not doing its job properly.
According to the newspaper, EY did not request crucial bank information from a Singapore bank, where Wirecard claimed to have up to € 1 billion in cash.
Verification of bank deposits “is one of the easiest tasks” for an accounting auditor and is performed according to a “highly regulated procedure,” the SdK association on EY also charges.
In early June, the Berlin law firm Schirp & Partner filed a lawsuit against EY. He accuses her of violating “an auditor’s control obligations”.
Wirecard shares have plunged 98% in the past ten days. The Schirp cabinet urges shareholders to file a class action lawsuit against EY.
Demands outside Germany
Outside of Germany, the Dutch investor association European Investors (VEB) has urged EY to a friendly settlement and otherwise threatens a complaint, reports the German newspaper Handelsblatt.
The audit cabinet, which refused to approve the company’s balance sheet for 2019, recognized “clear indications of a large-scale fraud, involving various parts of the world and various institutions, with a will to deceive.”
The problem is that this statement could turn against him. EY, in charge of approving the Bavarian group’s accounts since 2009, is the target of criticism. He is accused of not having previously informed the public of the problems on Wirecard.
The precedent Arthur Andersen
Japanese conglomerate Softbank plans to sue EY for its role in the scandal, according to weekly Der Spiegel.
Softbank bought Wirecard convertible bonds in the amount of 900 million euros in 2019, believing that it was investing in a reliable company.
Asked by AFP, EY said that so far it has not received any complaint.
Some compare the Wirecard case to the fall of Enron in the early 2000s.
The American energy group, whose accounts were overseen by the Arthur Andersen accounting office, misrepresented its balance before sinking.
Arthur Andersen was charged and convicted of obstruction of justice, precipitating the downfall of the then-fifth largest audit company in the world.
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