The fallout from the Wirecard scandal continues to reverberate through the financial world, with the German arm of one of the Big Four accounting firms, EY, being fined and barred from auditing certain kinds of companies for two years.
The fine, imposed by Germany’s APAS accounting oversight body, amounts to $544,630 for a breach of professional duty in auditing Wirecard from 2016 to 2018.
In addition, the companies involved must pay their reparations to straighten the balance. This decision can be appealed in court even though it doesn’t bar companies from servicing their existing clients.
Wirecard, a payments company, filed for bankruptcy protection in 2020 after $2.1 billion in cash balances on the company’s books that could not be verified.
The fraud cost banks $3.38 billion in loans and write-downs, with its former CEO, Markus Braun, currently on trial on charges of defrauding creditors.
EY’s entanglement with Wirecard
EY acted as the auditor for Wirecard in the past.
What was considered a massive fraud had happened right under the nose of the regulatory framework provided by EY and the Federal Financial Supervisory Authority.
Further investigation led to the realization that EY had missed opportunities to uncover the fraud by dismissing the nature of transactions.
Although it mentioned that it had not been provided with details of the APAS investigation, they pressed on their cooperation with the investigation to prove their innocence.
The company said, “we regret that the collusive fraud at Wirecard was not discovered, and we have learned important lessons from this matter.”
The case exposed flaws in German financial oversight and embarrassed then-Chancellor Angela Merkel, who had lobbied for the company during a visit to China. The trial of Wirecard’s accountant and the head of a subsidiary based in Dubai, United Arab Emirates, is ongoing in Munich.
This latest development underscores the need for greater accountability and transparency in financial practices and auditing.
The repercussions of the Wirecard scandal will likely be felt for some time as companies and regulators strive to rebuild trust and ensure that such a debacle does not happen again.
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