Global audit giant Ernst & Young (EY) is dragged down by the bankruptcy scandal of German online payment company Wirecard
The issue is due to its deficiencies in accounts verification.
Lawsuits have already been filed against the consultancy behind the bankruptcy this week from the electronic payment provider, which employs 6,000 people.
The German shareholders association SdK has filed a criminal action against two current auditors and a former auditor of EY in Germany.
Wirecard, a company listed on the Frankfurt Stock Exchange and went bankrupt on Thursday, she is suspected of having inflated her accounts with dummy funds in Philippines for an amount of 1,900 million euros.
– “Scandal without equivalent” –
The German Finance Minister, Olaf Scholz, described it as “scandal without equivalent in the financial world” and assured that the controls in the electronic payments sector will be tightened.
Nobody, not even auditors nor the German financial gendarme (Bafin), detected what was happening.
A Wirecard logo on the facade of the headquarters of the German online payments company, on June 24, 2020 in Aschheim, near Munich.
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And that since 2015 there were rumors in the press about irregularities in the Wirecard economic model.
Furthermore, at the beginning of 2019, the British economic newspaper Financial Times published an investigation into fraud suspicions in Asia. This week, she accused EY of not doing her job properly.
According to the newspaper, EY did not request crucial bank information from a bank of Singapore, where Wirecard claimed to have up to € 1 billion in cash.
Verifying bank deposits “is one of the easiest tasks” for a accounting auditor and it is carried out according to a “highly regulated procedure”, also accuses the SdK association on EY.
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 Germany, the Dutch Investors Association European Investors (VEB) has urged EY to a friendly agreement and otherwise threatens a complaint, reports the German newspaper Handelsblatt.
Wirecard scandal puts EY in a very difficult position
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The audit cabinet, which refused to approve the company’s balance sheet for 2019, recognized “clear indications of a large-scale fraud, which involves 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 accounts of the Bavarian group since 2009, is the target of criticism. He is accused of failing to inform the public of problems on Wirecard earlier.
– The precedent Arthur Andersen –
The Japanese conglomerate Softbank He plans to sue EY for his role in the scandal, according to the weekly Der Spiegel.
Softbank bought Wirecard convertible bonds in the amount of € 900 million in 2019, believing 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 supervised by the accounting cabinet Arthur AndersenHe falsified his 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, Yahoo Finance said.
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